Entrepreneurship:Theory and EvidenceGiovanni Battista Dagnino  University of Catania      June 8, 2011
Agenda- Insights from 2 Conferences in Sicily- Basic Data and Essential Indicators- Demistifying Entrepreneurship: Animal ...
SMS Special Conference   New Frontiers in  Entrepreneurship:Strategy, Governance    and Evolution  University of Catania  ...
StrategicManagemenUniversity of Catania     t  Society                             Institutions @ the Conference
New Frontiers inEntrepreneurship:Strategy Governanceand Evolution by Giambattista Dagnino, Rosario Faraci, David Audretsch...
www.taorminaprivateequity2008.net
Taormina, July 18 2008
I DATI DI BASECamera Commercio Milano 9 Gennaio 2009- 323 mila le nuove imprese avviate nei primi 9 mesi del 2008in Italia...
ESSENTIAL INDICATORS                  NEW FIRMS- Natality rate- Mortality Rate- Natality-Mortality = Net growth/decline- N...
ESSENTIAL INDICATORS            ESTABLISHED FIRMS- New Patents- Newly Funded R&D Projects- New R&D Centers Established- Nu...
Table 2 - Evolution of European BANsActivity                           1999     2000      2001    2002   2003   2004     2...
As Baumol eloquently remarks, the studyof business without an understanding ofentrepreneurship is like the study ofShakesp...
ANIMAL SPIRITS
ANIMAL SPIRITS     John Maynard Keynes (1883-1946)
Popular Wisdom
Popular Wisdom
Popular Press
Popular Wisdom: The Long-Jumper
Richard Branson         Renzo Rosso   Mario Moretti Polegato
Designers                          Marketing                              and                                and Store    ...
A. DELL’ACQUA         G. ARMANI   BURBERRYStyle   REFRESHING   WATERWORLD Spring/Summer 2005
The Rockefeller BrothersEmma             Adriano Olivetti                                  Bill Gates
MESSRS FIAT Early days              Valletta                           G. Agnelli sr.  Yesterday              Romiti      ...
Bernie Ecclestone in Formula 1                                     VALUE CREATED                            Extracted US $...
THE COIN’S FLIPSIDE
THE COIN’S FLIPSIDE                      ?
Two Extremes Views                   The emerging                       art of                  entrepreneuring           ...
Strategic EntrepreneurshipA new approach that involves simultaneous opportunity-seeking  and advantage-seeking behaviors a...
Strategic EntrepreneurshipStrategic entrepreneurship is the integrationof entrepreneurial (i.e., opportunity seekingaction...
Strategic EntrepreneurshipVenkataraman and Sarasvathy (2001) use a metaphorbased on William Shakespeare’s renown dramaRome...
Theories of Entrepreneurship    Schumpeterian Approach  Entrepreneurial Opportunities   Entrepreneurial Action and       H...
The Schumpeterian Approach   An entrepreneur is an individual who has a  definitive action-plan and strategy to realize a ...
The Schumpeterian Approach            Creative DestructionIn Schumpeters vision of capitalism, innovativeentry by entrepre...
Types of Innovation-Generating   Creative Destruction in an Industry- New markets or products- New equipment- New sources ...
Entrepreneurial OpportunitiesThe field of entrepreneurship concerns the scholarlyexamination of how, by whom, and with wha...
Entrepreneurial OpportunitiesThe problem with this approach is thatentrepreneurship involves the nexus of twophenomena:• t...
Entrepreneurial OpportunitiesSets of research questions aboutentrepreneurship:(3) why, when, and how opportunities for the...
Entrepreneurial OpportunitiesPeter Drucker (1985) has described threedifferent categories of opportunities:(3)the creation...
Entrepreneurial Opportunities- Disequilibrium (Schumpeter)- Discovery (Kirzner)- Asymmetries of Information and Beliefs- I...
Entrepreneurial Opportunities- Optimization and Mechanical Calculations                                (Baumol)- Counterfa...
Entrepreneurial Action        and Hypercompetition The Dynamics of EntrepreneurshipSuccessful Entrepreneurs and Intraprene...
Successful Entrepreneurs andIntrapreneurs Compete Against     Much Larger Rivals
Successful Entrepreneurs andIntrapreneurs Compete Against     Much Larger Rivals
Successful Entrepreneurs andIntrapreneurs Compete Against     Much Larger Rivals       How Do They Do it?
Successful Entrepreneurs and  Intrapreneurs Compete Against       Much Larger RivalsWhite Space and Attacking the Center o...
White Space Capitalizes on the FourDriving Forces of Hypercompetition                Fragmenting and Escalating           ...
Finding White SpaceJim Stengel, Head of Marketing at P&G:Follow Seven Principles• Really watch the consumer closely to  se...
White Space Avoids Competition     $100 MM New Markets                      Identified Unfilled Consumer NeedSwiffer (and ...
Entrepreneurship is the Source of          Temporary AdvantageStability and Traditional Sustainable Advantage             ...
Temporary Advantage is the New   Source of Strategic DominanceLong-Term Advantage  Advantage                             T...
Sequences of Temporary AdvantagesMust be Planned by Entrepreneurial               Firms    AdvantageFour Virtually        ...
This Changes the Level of Turbulence                                                     Frequency of Disruption          ...
This Changes the How Firms Compete                           The Frequency of Change and Strategy                         ...
What is Your Dream?
Entrepreneurship:Theory and EvidenceGiovanni Battista Dagnino  University of Catania   dagnino@unict.it      May 28, 2012
Entrepreneurship 2012 pa.pdf
Entrepreneurship 2012 pa.pdf
Entrepreneurship 2012 pa.pdf
Entrepreneurship 2012 pa.pdf
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  1. 1. Entrepreneurship:Theory and EvidenceGiovanni Battista Dagnino University of Catania June 8, 2011
  2. 2. Agenda- Insights from 2 Conferences in Sicily- Basic Data and Essential Indicators- Demistifying Entrepreneurship: Animal Spirits- Popular Wisdom, Press and the Entrepreneur(s)- Strategic Entrepreneurship- Theories of Entrepreneurship
  3. 3. SMS Special Conference New Frontiers in Entrepreneurship:Strategy, Governance and Evolution University of Catania Catania, May 23-25 2007
  4. 4. StrategicManagemenUniversity of Catania t Society Institutions @ the Conference
  5. 5. New Frontiers inEntrepreneurship:Strategy Governanceand Evolution by Giambattista Dagnino, Rosario Faraci, David Audretsch e Bob HoskissonCatania, May 23-25 2007
  6. 6. www.taorminaprivateequity2008.net
  7. 7. Taormina, July 18 2008
  8. 8. I DATI DI BASECamera Commercio Milano 9 Gennaio 2009- 323 mila le nuove imprese avviate nei primi 9 mesi del 2008in Italia- Roma capofila con 24.530 nuove imprese (7,6%), seguita daMilano- la Lombardia è prima fra le regioni (16,5%), seguita dalLazio (10,3%) e dalla Campania (8,8%)- fra i comparti produttivi, primo è il commercio (20%),seconde le costruzioni (16%), cui conseguono i servizi alleimprese (8%) - l’agricoltura (8%) e il manifatturiero (7%)ricoprono rispettivamente la quarta e la quinta posizione
  9. 9. ESSENTIAL INDICATORS NEW FIRMS- Natality rate- Mortality Rate- Natality-Mortality = Net growth/decline- Natality/Mortality rate- Venture Capital Deals and B-Angels No./Deals- Incubators Figures and Special Laws Data
  10. 10. ESSENTIAL INDICATORS ESTABLISHED FIRMS- New Patents- Newly Funded R&D Projects- New R&D Centers Established- Number of New-Hired Researchers- Knowledge Spillovers and Spin-offs
  11. 11. Table 2 - Evolution of European BANsActivity 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Number of BANs 66 132 155 177 197 231* 228* 211* 236* 301* Number of angels 1.487 2.333 3.129 4.347 13.218 12.773 8.227 10.331 15.578 Number of deals 320 416 454 573 600 580 653 843 1.130 Deals/angel 0,22 0,18 0,15 0,13 0,05 0,05 0,08 0,08 0,07 Average amount of the 200.178 177.311 163.011 n/a n/a n/a n/a n/a n/a deals £ £ £Source: Elaborations on Eban(2005), (2008)* Data refer to Mid-Year
  12. 12. As Baumol eloquently remarks, the studyof business without an understanding ofentrepreneurship is like the study ofShakespeare in which "the Prince ofDenmark has been expunged from thediscussion of Hamlet“Demistifying Entrepreneurship….
  13. 13. ANIMAL SPIRITS
  14. 14. ANIMAL SPIRITS John Maynard Keynes (1883-1946)
  15. 15. Popular Wisdom
  16. 16. Popular Wisdom
  17. 17. Popular Press
  18. 18. Popular Wisdom: The Long-Jumper
  19. 19. Richard Branson Renzo Rosso Mario Moretti Polegato
  20. 20. Designers Marketing and and Store Strategists Managers TREND SETTERSRenzo Rosso (President OPINIONDiesel) “In Diesel we do LEADERSwhat we like and whatwe would like to wear” MARKETCompany Mission BULK Renzo Rosso (President Diesel) “Trendsetters are those people who have to look within the jacket to know which brand are they wearing, and that usually buy in second-hand shops, to be able to mix and match different pieces of what they like ” Personal interview, September 2000
  21. 21. A. DELL’ACQUA G. ARMANI BURBERRYStyle REFRESHING WATERWORLD Spring/Summer 2005
  22. 22. The Rockefeller BrothersEmma Adriano Olivetti Bill Gates
  23. 23. MESSRS FIAT Early days Valletta G. Agnelli sr. Yesterday Romiti G. Agnelli jr. Today J. Elkann Marchionne
  24. 24. Bernie Ecclestone in Formula 1 VALUE CREATED Extracted US $ 1.4 billion through a bond offering Sold 75% non controlling stake for Us $ 2.1 Billion (thus valuing the company in excess for 2.1/.75 and that is 2.8 billion) This is consistent with THE TIMES estimate that in 2002 said that his net worth was 2.9 billion pounds
  25. 25. THE COIN’S FLIPSIDE
  26. 26. THE COIN’S FLIPSIDE ?
  27. 27. Two Extremes Views The emerging art of entrepreneuring It’sRecurring Impossible to Eternal Teach!!Principles
  28. 28. Strategic EntrepreneurshipA new approach that involves simultaneous opportunity-seeking and advantage-seeking behaviors and results in superior firm performance. Small entrepreneurial ventures are effective in identifying opportunities, but are less successful in developingcompetitive advantages needed to appropriate value from thoseopportunities. In contrast, large established firms are relatively more effective in establishing competitive advantages, but are less able to identify new opportunities
  29. 29. Strategic EntrepreneurshipStrategic entrepreneurship is the integrationof entrepreneurial (i.e., opportunity seekingactions) and strategic (i.e., advantage-seeking actions) perspectives to design andimplement entrepreneurial strategies thatcreate wealthStrategic entrepreneurship is entrepreneurialaction that is taken with a strategicperspectiveMultidisciplinary roots……
  30. 30. Strategic EntrepreneurshipVenkataraman and Sarasvathy (2001) use a metaphorbased on William Shakespeare’s renown dramaRomeo and JulietThey suggest that strategic management researchthat does not integrate an entrepreneurial perspectiveis like ‘the balcony without Romeo’They argue that entrepreneurship research withoutintegration of a strategic perspective is like ‘Romeowithout a balcony’In the words of Venkataraman & Sarasvathy,entrepreneurial action is the ‘Romeo on the balcony’
  31. 31. Theories of Entrepreneurship Schumpeterian Approach Entrepreneurial Opportunities Entrepreneurial Action and Hypercompetition
  32. 32. The Schumpeterian Approach An entrepreneur is an individual who has a definitive action-plan and strategy to realize a business venture Creativity is the trait that evolves new and unique ideas and innovationIt requires seeing and conceptualizing things from newer and unexplored anglesInnovation is the ability to apply creative solutionsto problem to enhance organizational productivity It is imperative for the entrepreneur to apply innovation towards accomplishment of long-term business goals
  33. 33. The Schumpeterian Approach Creative DestructionIn Schumpeters vision of capitalism, innovativeentry by entrepreneurs was the force thatsustained long-term economic growth, even as itdestroyed the value of established companies thatenjoyed some degree of monopoly powerJust as older behemoths perceived to be juggernauts bytheir contemporaries (e.g., Montgomery Ward, Kmart,Sears) were eventually undone by nimbler and moreinnovative competitors, Wal-Mart faces the same threatJust as the cassette tape replaced the 8-track, only to bereplaced in turn by the compact disc, itself beingundercut by MP3 players, the seemingly dominant Wal-Mart may well find itself an antiquated company of thepast. This is the process of creative destruction
  34. 34. Types of Innovation-Generating Creative Destruction in an Industry- New markets or products- New equipment- New sources of labor and raw materials- New methods of organization or management- New methods of inventory management- New methods of transportation- New methods of communication (e.g., the Internet)- New methods of advertising and marketing- New financial instruments- New ways to lobby politicians or new legalstrategies (though many economists would arguethat this last is not a genuine example of creativedestruction!)
  35. 35. Entrepreneurial OpportunitiesThe field of entrepreneurship concerns the scholarlyexamination of how, by whom, and with whateffects opportunities to create future goods andservices are discovered, evaluated, and exploited(Venkataraman, 1997)Consequently, the field involves the study of sourcesof opportunities, the processes of discovery,evaluation, and exploitation of opportunities, andthe set of individuals who discover, evaluate, andexploit them (Shane and Venkataraman, 2000)
  36. 36. Entrepreneurial OpportunitiesThe problem with this approach is thatentrepreneurship involves the nexus of twophenomena:• the presence of lucrative opportunities and(b) the presence of enterprising individuals
  37. 37. Entrepreneurial OpportunitiesSets of research questions aboutentrepreneurship:(3) why, when, and how opportunities for thecreation of goods and services come into existence(2) why, when, and how some people and not other discover and exploit these opportunities; and(3) why, when, and how different modes of action are used to exploit entrepreneurial opportunities
  38. 38. Entrepreneurial OpportunitiesPeter Drucker (1985) has described threedifferent categories of opportunities:(3)the creation of new information, as occurs withthe invention of new technologies;(2) the exploitation of market inefficiencies thatresult from information asymmetry, as occursacross time and geography; and(3) the reaction to shifts in the relative costs and benefits of alternative uses for resources, as occurs with political, regulatory, or demographic changes
  39. 39. Entrepreneurial Opportunities- Disequilibrium (Schumpeter)- Discovery (Kirzner)- Asymmetries of Information and Beliefs- Intuition and Foresight- Duration of an Opportunity
  40. 40. Entrepreneurial Opportunities- Optimization and Mechanical Calculations (Baumol)- Counterfactual Thinking- Information Corridors- Cognitive Properties and Individual Differences (Simon & March)
  41. 41. Entrepreneurial Action and Hypercompetition The Dynamics of EntrepreneurshipSuccessful Entrepreneurs and Intrapreneurs Compete Against Much Larger RivalsEntrepreneurship and Temporary Advantages
  42. 42. Successful Entrepreneurs andIntrapreneurs Compete Against Much Larger Rivals
  43. 43. Successful Entrepreneurs andIntrapreneurs Compete Against Much Larger Rivals
  44. 44. Successful Entrepreneurs andIntrapreneurs Compete Against Much Larger Rivals How Do They Do it?
  45. 45. Successful Entrepreneurs and Intrapreneurs Compete Against Much Larger RivalsWhite Space and Attacking the Center of Gravity
  46. 46. White Space Capitalizes on the FourDriving Forces of Hypercompetition Fragmenting and Escalating Customer Demands Falling Entry n BarriersAccelerating e t itio p c omTechnological y per HChange Rising Deep Pockets
  47. 47. Finding White SpaceJim Stengel, Head of Marketing at P&G:Follow Seven Principles• Really watch the consumer closely to see what he does, not what he said• Identify an unmet need and consumer psychology behind it• Create truly category-building innovations, not just another flavor of ice cream• Look for partners to satisfy the consumer need if unable to leverage core technologies• Leverage your brands• Large launch, Leverage Distribution Muscle• Manage the pipeline
  48. 48. White Space Avoids Competition $100 MM New Markets Identified Unfilled Consumer NeedSwiffer (and Swiffer vac) Mopping with water is too much trouble Wiping up the small pile of dirt left behindFebreze Scentstories x Artificial smell of existing air(“Scent player” with fan freshenersand 5 alternating scents) Strong smell at the source only Same smell is monotonousCrest WhiteStrips xCoffee/smoking stains on teeth Dentist too expensiveTide with Downy x Forgetting to add softener to laundry cycleMr. Clean Auto Dry Carwash x Water spots spoil car shine after(nozzle filters out minerals causing spots) washing
  49. 49. Entrepreneurship is the Source of Temporary AdvantageStability and Traditional Sustainable Advantage PeriodCompetitive of AdvantageAdvantage Launch Slow Counter Attack Time Disruption and Unsustainable Advantage Short PeriodCompetitive of AdvantageAdvantage Launch Rapid Counter Attack or Disruption Time
  50. 50. Temporary Advantage is the New Source of Strategic DominanceLong-Term Advantage Advantage TimeA Series of Advantages Advantage Time
  51. 51. Sequences of Temporary AdvantagesMust be Planned by Entrepreneurial Firms AdvantageFour Virtually TimeSimultaneous DoingOrganizations Setting UpSet Your Time PlanningPacing Interval Envisioning
  52. 52. This Changes the Level of Turbulence Frequency of Disruption Low High Equilibrium Fluctuating Equilibrium Fluctuating Competence Equilibrium Turbulence Equilibrium Turbulence Neutral/ (Stability) (Near Enhancing Time Equilibrium) TimeType ofDisruption Punctuated Equilibrium Disequilibrium Punctuated Competence Equilibrium Turbulence Disequilibrium Turbulence Destroying (Periodic (Chaos) Time Disequilibrium) Time Turbulence is Disruption of the Status Quo
  53. 53. This Changes the How Firms Compete The Frequency of Change and Strategy Low High Fluctuating Competence Equilibrium Equilibrium Neutral/ Strong Barriers & Enhancing Leverage & Layer Monopoly Power Core Competencies Type ofDisruption Punctuated Disequilibrium Competence Equilibrium Destroying Hypercompetitive Strategy as Strategies Revolution The Nature of Change Changes the Nature of Competition
  54. 54. What is Your Dream?
  55. 55. Entrepreneurship:Theory and EvidenceGiovanni Battista Dagnino University of Catania dagnino@unict.it May 28, 2012

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