Entreprenuership_and_Intrapreneurship_as_Sources_of_Competitive_Advantage_in_a_Corporate_-Lit_Review

LITERATURE REVIEW According to Fisher (2009) a literature review is an account of what has been published on a topic by accredited scholars and researchers. It forms the foundation on which an article is built Its purpose is to assist to develop an insight into relevant previous research and trends that have emerged.The intention of this section will be to provide a general understanding of some of the theoretical knowledge that will be applied in this paper. 1 THE ECONOMIC NATURE OF ENTREPRENUERSHIP According to Schumpeter (1934) economic development can be directly attributed to the level of entrepreneurial activity in a country. Bird (1989) adds that Entrepreneurial businesses ensure growth in the economy. Although most entrepreneurs own their businesses, entrepreneurial behaviour is practiced in large corporations too. The success of leading economies of the world such as USA, Japan and England, has proven that the only growth sector in the economy is the SMME sector because large corporations lay off and downsize whilst SMME’s grow. However, the failure rate of new ventures is high, somewhere between 50 and 80 percent in all countries depending upon the measures used. Failure is not without consequence to our economy and society. Venture failure not only ties up assets in an unproductive state but also represents a missed opportunity to create wealth and jobs. 2 DEVELOPMENT OF ENTREPRENEURIAL THEORY The term "entrepreneur" was first introduced by the early 18th century French economist Richard Cantillon.Cantillon defines the entrepreneur as the "agent who buys means of production at certain prices in order to combine them" into a new product (Schumpeter, 1951).French economist J.B. Say added that entrepreneurs had to be leaders, one who brings other people together in order to build a single productive organism (Schumpeter, 1951).British economists such as Adam Smith, David Ricardo, and John Stuart Mill briefly touched on the concept of entrepreneurship. Mill stressed the significance of entrepreneurship for economic growth and claims that entrepreneurship required a special skill, (Schumpeter, 1951). ENTREPRENEURIAL DEVELOPMENT THEORY MODEL PERIOD TOPICS AUTHORS AND RESEARCHERS 1. What entrepreneurs do 1700- (1950) From an Economic Perspective Cantillon,Say,Schumpeter 2. Who entrepreneurs are 1960 – (1980) From a behaviorist perspective Weber,McClelland,Rotter,De Vries 3. What entrepreneurs do 1980 From a management science perspective (finance,marketing,operations,human resources) Drucker ,Mintzberg 4. What support is needed, by entrepreneurs (1985) From a social perspective, including economists, geographers and sociologists Gartner,Welsh,Bygrave,Reynold 5. What entrepreneurial activities are and what competencies are required to perform them 1990 - From an entrepreneurship perspective Timmons,Vesper,Brockhaus, Marshal Source: Fillion (1991) 3 ENTREPRENEURSHIP Timmons (2000) believes entrepreneurship is the process of creating or seizing an opportunity and pursuing it, regardless of the resources currently controlled. Watson (2000) adds that the distinguishing factors of entrepreneurs are mainly innovation, opportunity recognition and business growth. Hisrich and Peters (1998) see the entrepreneur as someone creating something new with value by devoting time and effort, assuming the risks accompanied by the creation and receiving the resulting rewards of monetary and personal satisfaction and independence. According to Lumpkin and Dess, (1996), the essence of entrepreneurship is creation. Wickham (2003) stresses that entrepreneurship is about “creating and managing vision and communicating that vision to other people.Through a vast literature review, the author realises that Entrepreneurship is fundamentally about identifying opportunities independently or within a corporate system that are profitable and are convertible into a new business or into a new way of doing things, the concepts of Innovation, Growth and Risk Taking create the backdrop of which the discipline is founded. 4 CHALLENGES AFFECTING ENTREPRENEURS AND SME’S IN ZIMBABWE In Zimbabwe, the SME sector has faced a variety of constraints that hinder its growth and development. The principal areas of concern affecting the development of the SME sector identified by various studies include: • Limited access and cost of finance. • Lack of marketing skills and market knowledge, inadequate management and entrepreneurial skills. • www.smesi.gov.zw Sources of Finance are the main challenge for most Zimbabweans and the current economic environment does not assist in mitigating this challenge. Most Zimbabweans have to save their money to start up a business and that process of saving usually is too long to keep a window of opportunity open. Sources of start-up finance by firm size Micro Small Medium Large Mean Own savings 90% 80% 58% 52% 71% Friends/relatives 13% 2% 7% 11% 8% bank loan 3% 14% 9% 9% 10% Other 13% 19% 22% 25% 19% Source: RPED panel data:RPED, First Report on the Zimbabwe Survey, Free University of Amsterdam, University of Zimbabwe and the World Bank, Amsterdam, November 1993 Hogeveen and Tekere (1994) examine the determinants of entrepreneurship and their results show that education and prior experience increase someone's likelihood of becoming an entrepreneur , while being black or a woman decreases it. What they show, rather, is that blacks, women, the uneducated, and the inexperienced are less likely to establish firms that employ a minimum of five people and to be in existence long enough to become part of the data that is compiled for research. 2.5 MANAGING GROWTH Churchill and Lewis developed a framework that incorporated five phases of development: existence, survival, success, take-off, and resource maturity. "Each phase is characterized by an index of size, diversity, and complexity and described by five management factors: managerial style, organizational structure, and extent of formal systems, major strategic goals, and the owner's involvement in the business" Churchill and Lewis, (1983). The framework emphasizes that the importance of different management and strategic issues evolves as the company enters each new stage of development. Growth is seen as the hallmark of success. Hitt et al (2002) adds that it brings the promises of expansion, new premises, greater profitability, and increase in employees and greater status for the owners in the community. Storey (1994) however says that for many business owners, growth is not an objective although most businesses would rather make people believe they want to grow. The need to grow a venture may be strongly attributed to the needs of the entrepreneur, mainly the need for Achievement, need for Personal growth and the need for Power. Wickham (1998) states that the entrepreneurial venture creates its own markets and only growth can achieve this creation. Setting growth strategies however creates challenges with regard to the strategies and resources and the risks to which it is exposed. Hogeveen and Tekere (1994) conclude that growth is not persistent: high growth in the past does not necessarily lead to high growth in the future. They find a negative linear relationship between firm size and firm growth. 5.1 CHARACTERISTICS OF GROWING FIRMS Crijns & Ooghe (1997) state the following characteristics of growing organisations • Market Domination • Differentiation • Product Leadership • Flexibility • Innovation • Future oriented • Export • Related Growth 6 CORPORATE ENTREPRENEURSHIP Corporate Entrepreneurship is also more popularly known as Intrapreneurship. Taken broadly, Intrapreneurship refers to the process of innovation and progressive change within an organisation. This concept came about when North American business was striving to compete against increasing pressure from innovative overseas markets - particularly Japan. Pinchot (1985) invented the concept of Intrapreneuring and thus coined the word Intrapreneurship. It is no coincidence that this term bears a resemblance to Entrepreneurship because the two concepts are very similar. Intrapreneurship also covers activities in support of generating new businesses. Hisrich (1990) however adds that , these new businesses are both for and from within an existing firm. In Intrapreneurship, the Intrapreneur does not have to leave a firm in order to create a new enterprise. He or she is encouraged by the firm to do so within the company using the firm’s resources to varying degrees. Pinchot (2000) defined Intrapreneurs as “any of the dreamers who do. Those who take hands-on responsibility for creating innovation of any kind within an organisation. The Intrapreneur may be the creator or inventor but is always the dreamer who figures out how to turn an idea into a profitable reality.” The sense of personal ownership and need for accountability within both employees and leaders saw the growth of Intrapreneurship. Many organisations are now looking to innovation and creativity as distinctive business competencies for growth Niemen et al (2010). This innovation and creativity will be driven by the empowerment and energy of their employees, and a number of organisations are revisiting the idea of developing internal entrepreneurs – Intrapreneurs. Covin and Miles (1999). State that to deal with today’s environmental uncertainty, turbulence, and heterogeneity, successfully, one of the firms’ core competencies might be the effective use of corporate entrepreneurship.,Antoncic and Hisrich (2003) add that Corporate entrepreneurship can help to improve the corporation’s competitive position in domestic and international markets by renewing its capabilities of acquiring and using new competence. Ireland et al.( 2004) says that most research about corporate entrepreneurship and firm’s performance is based on Covin & Slevin’s (1991) concept of entrepreneurial orientation that consists of three dimensions or behaviours: innovativeness, pro‐activeness and risk taking. “Being entrepreneurial is about managing and exploiting risk, it’s about being creative and innovative, it’s about challenging the existing ways of doing things.” Peter Jones CBE entrepreneur and EnterpriseUK chairperson. http://www.enterpriseuk.org/ CORPORATE ENTREPRENEURIAL RESOURCES McGrath and MacMillan,(2000) argues that an appropriate set of resources is required to identify entrepreneurial opportunities with the greatest potential returns and to use a disciplined approach to exploit them. Thus, the tenets of the resource-based view are applicable to both entrepreneurial ventures and established firms. Hitt et al ( 2001) adds that the entrepreneurial and strategic actions linked to wealth creation are products of the firm’s resource. Ireland et al (2001) found that a new venture’s internal capabilities are an important predictor of its performance. Compared to tangible resources, intangible resources are more likely to contribute to a competitive advantage because they are socially complex and difficult for current and potential rivals to understand and imitate .Hitt et al., ( 2001) state that the essence of the new competitive landscape remains a dominant influence on firm success in the twenty-first century. Indeed, the landscape’s characteristics combine and interact to create an environment in which entrepreneurial actors (human resources) have the potential to • capture existing markets in some instances while creating new ones in others, • take market share from less aggressive and innovative competitors, and • take the customers, assets, and even the employees of staid existing firms (Hamel, 2000). Intrapreneurially inspired business managers are fast emerging as a critical source of competitive advantage. INNOVATION Schumpeter, (1961) states that Innovativeness is doing new things by recombining parts of what is already being done.Drucker (1985) defines innovation as a means by which entrepreneurs may exploit change in order to create new service and business opportunities. Lumpkin and Dess, (1996) say the essence of entrepreneurship is creation. Hamel, ( 2000) state that innovation, often the foundation of creations, is critical for any firm (large or small) to compete effectively in the twenty-first century’s landscape.. Innovation is about new resources, new customers, new markets, and/or new combinations of existing resources, customers, or markets. Shane and Venkataraman ( 2000) suggest that the variance in levels of knowledge across buyers and sellers presents entrepreneurial opportunities. Alert entrepreneurs and firms subsequently identify these opportunities and take strategic actions to exploit them. RISK AND RISK TAKING The entrepreneur is a bearer of uncertainty. Entrepreneurs usually are considered to bear risk while pursuing opportunities, and often are associated with creative and innovative actions. Schumpeter, (1951) Entrepreneurs are always confronted, either voluntarily or compulsorily, the challenges of uncertainties and potential financial and social losses while running their business.Entrepreneurs are risk takers because it is risk-taking spirit that encourages entrepreneurs to have their attention and actions contributed to the exploration of profit realization. Risk is a function of success for the intrapreneur. However with increased employee autonomy comes the associated risk (exposure) for management and increased risk (responsibility) for the employee to be accountable for their actions.