2. SCHOOL FOR HUMAN RESOURCE DEVELOPMENT (SHRD) Department of Entrepreneurship and Procurement HEE 2101 PHILOSOPHY OF ENTREPRENEURSHIP Prof. Henry M. Bwisa 0722858507 bwihem@yahoo.com www.professorbwisa.com

3. PURPOSE This course unit is aimed at providing the student with the meaning and historical background as well as the logic of the term entrepreneurship. COURSE UNIT OBJECTIVES At the end of this course unit the student should be able to: Define the term entrepreneurship Trace the historical development of the term entrepreneurship Comprehend the logic/philosophy of the term entrepreneurship Differentiate between schools of thought bon entrepreneurship PURPOSE AND OBJECTIVES OF UNIT 26/10/2016Henry M. Bwisa

4. Unit course description Definitions of entrepreneurship (as a process, as an activity, as a discipline), origin and evolution of entrepreneurship; meaning of philosophy, nature and philosophy of entrepreneurship: different schools of thought on entrepreneurship (classical economists, neoclassical economists, contemporary economists, sociologists, and psychologists), the Chicago school, the Schumpeterian school, the Austrian school. COURSE ASSESSMENT AND EVALUATION Class participation 10% Group presentation 20% CATs 20% End of semester exams 50% TOTAL100% 36/10/2016Henry M. Bwisa

5. 4 WEEKTOPIC 1 Definition of entrepreneurship; origin of entrepreneurship; evolution of entrepreneurship 2 Meaning of philosophy; nature of philosophy; philosophy of entrepreneurship 3 Schools of entrepreneurship (1) 4 Schools of entrepreneurship (2) Course outline 6/10/2016Henry M. Bwisa

6. Teaching method and instructional materials INSTRUCTIONAL METHODS Lectures and readings Group and individual assignments and discussions Field studies and observations Case studies INSTRUCTIONAL MATERIALS Boards, lecture notes, reading materials, case studies/successful stories, computer, and projector. 56/10/2016Henry M. Bwisa

7. References COURSE TEXTS Bwisa, H. M. (2011). Entrepreneurship theory and practice: A Kenyan perspective. Nairobi: JKF David Holt (2000). Entrepreneurship and New venture creation. Prentice-Hall Publishers Burch, J. (1986). Entrepreneurship. New York: John Wileys and sons Hisrich, R., (2005). Entrepreneurship. McGraw-Hill Kuratko, D. F.& Hodgetts, R M. (1998). Entrepreneurship – A Contemporary Approach. 4th Edition. New York, USA: The Dryden Press, Harcourt Brace College Publishers G. J. Warnock (1979). Philosophy of Economic Theory: Oxford readings in Philosophy. OUP 66/10/2016Henry M. Bwisa

8. Week 1 6/10/20167Henry M. Bwisa

9. ENTREPRENEURSHIP: Etymology of the Word Entrepreneur “…The word "entrepreneur" is a loanword from French. In French the verb "entreprendre" means "to undertake," with "entre" coming from the Latin word meaning "between," and "prendre" meaning "to take.".... Entreprenuer also sounds close to a sanskrit word anthaprerna which means self motivation.” One can sometimes learn a lot from the root etymologies of words. This one seems to boil it down to its essence quite well doesn't it? Entrepreneurs evidently “undertake” things and they are “self- motivated”. It’s quite an elegant word as well. Entrepreneur. Sounds better than under-taker (wikipedia) 6/10/20168 The word etymology is derived from the Greek etumos which means real or true. The ending ology suggests the study/science of something, as in biology or geology. And that is the etymology of etymology. It is the study of the origins of words; how they evolved. Henry M. Bwisa

10. 6/10/2016Henry M. Bwisa9 Entrepreneurship is a creative activity. It is the ability to create and build something from practically nothing. It is a knack of sensing opportunity where others see chaos, contradiction and confusion. Entrepreneurship is the attitude of mind to seek opportunities, take calculated risks and derive benefits by setting up a venture. It comprises of numerous activities involved in conception, creation and running an enterprise. According to Peter Drucker Entrepreneurship is defined as ‘a systematic innovation, which consists in the purposeful and organized search for changes, and it is the systematic analysis of the opportunities such changes might offer for economic and social innovation.’

11. The Development of Entrepreneurship Theory 18th Century Richard Cantillon: Coins term entrepreneur (“go-between” or “between taker”) Entrepreneur bears risks and plans, supervises, organizes, and owns factors of production 6/10/201610Henry M. Bwisa

12. The Development of Entrepreneurship Theory 19th Century Jean Baptiste Say: Proposed that profits from entrepreneurship were separate from profits of capital ownership Distinction made between those who supplied funds and earned interest and those who profited from managerial abilities 6/10/201611Henry M. Bwisa

13. The Development of Entrepreneurship Theory 20th Century Joseph Schumpeter: Described the entrepreneur as someone who is an innovator and someone who “creatively destructs” Peter Drucker: Described the entrepreneur as someone who maximizes opportunity 6/10/201612Henry M. Bwisa

14. 6/10/201613 Frank Knight 1921 Profiteering from bearing uncertainty and risk Schumpeter 1934 Cole - 1959 McClelland (1961) Stevenson, Roberts, and Grousbeck (1989) Carrying out of new combinations: new products & services, new sources of raw material, new methods of production, new markets, and new forms of organization. Purposeful activity to initiate and develop a profit-oriented business Moderate risk taking The pursuit of opportunity without regard to resources currently controlled Hart, Stevenson and Dial, 1995. Stevenson, Roberts, and Grousbeck (1989) The pursuit of opportunity without regard to resources currently controlled, but constrained by the founders’ previous choices and industry-related experiences. The pursuit of opportunity without regard to resources currently controlled Histrich and Peter (1998), The dynamic process of creating incremental wealth. Kuratko and Hodgetts (2004) Commonalities Dynamic process of vision, change, and creation Creativity and innovation o Resource gathering and the founding of an economic organization (wealth) o The chance for gain (or increase) under risk and uncertainty What is Entrepreneurship: an evolving concept? Henry M. Bwisa

15. Forms of entrepreneurship  Social Entrepreneurship o Creating social change through an enterprise o Enterprises include non-profit organizations and businesses set up with a social purpose o Examples – Grameen Bank, Sinapi Aba Trust, Teachers Fund Financial Services  Intrapreneurship o Formation of new idea within an existing organisation o Entrepreneurial concept belongs to the organisation and not the intrapreneur. o Financial rewards also go to the company (Intrapreneur’s reward is limited) o Examples – Google (3M), MET Insurance (MET2U) 6/10/201614Henry M. Bwisa

16. Forms of entrepreneurship cont’d  Extrapreneurship o Break off from existing company o New company may carry similar idea from parent company o May have financial and social support from parent company o New enterprise may be in the same business line as the existing company or a supplier to it 6/10/201615Henry M. Bwisa

17. Opportunity entrepreneurship vs. Necessity entrepreneurship o Opportunity entrepreneur develops an idea to exploit an existing opportunity o Necessity entrepreneurs result from lack of alternatives  Entrepreneur vs. Businessman o All entrepreneurs are businessmen but not all businessmen are entrepreneurs o A Businessman establishes a business for personal goals while an entrepreneur establishes an enterprise for profit and growth –Beaver and Jenkins 6/10/201616Henry M. Bwisa

18. Role of entrepreneurship in a country’s economy development Creates jobs Drives economic growth Frees up states resources Fosters competition Fosters innovation Increases productivity Provides a tax base for government 6/10/201617Henry M. Bwisa

19. Factors favouring entrepreneurship  Political stability  Macro-economic stability  Secure property rights  Ease of starting a business  Free flow of information  The rule of law and mechanism for contract enforcement  Availability of human capital  Access to finance  Size of the market in terms of numbers and income levels  Regulation of businesses  Culture 6/10/201618Henry M. Bwisa

20. Institutions that help entrepreneurship to thrive An independent central bank An independent judiciary An independent media and easy access to credible information Neutral and professional army or security forces 6/10/201619Henry M. Bwisa

21. Entrepreneurship is a process 6/10/201620Henry M. Bwisa

22. Entrepreneurship is a process. It is not a combination of some stray incidents. It is the purposeful and organized search for change, conducted after systematic analysis of opportunities in the environment. Entrepreneurship is a philosophy- it is the way one thinks, one acts and therefore it can exist in any situation be it business or government or in the field of education, science and technology or poverty alleviation or any others. 6/10/2016Henry M. Bwisa21

23. 6/10/201622 REVENUE, PROFIT TIME THE BUSINESS LIFE CYCLE BREAK EVEN POINT PRE-START UP STAGE START UP AND OPERATION STAGE Entrepreneurship is by and large the process of making the decision to start a new venture. The decision to start a new venture occurs when an individual perceives that forming a new venture is both desirable and possible. Desirability may result from an individual's culture, subculture, family, teachers and peers. Possibility stems from several factors: government, role models finances etc - contribute to the possibility to create a new venture. THE PROCESS OF ENTREPRENEURSHIP: Entrepreneurship is about business start-ups and growth. A business is like a person. It is conceived and developed in the mind (pre-start up) and born (start up). It then grows and matures and can die (business life cycle). Henry M. Bwisa

24. Steps in the Entrepreneurial Process 1.Discovery 2.Concept Development 3.Resourcing 4.Actualization 5.Harvesting 6/10/201623Henry M. Bwisa

25. Steps in the Entrepreneurial Process 1. Discovery: The stage in which the entrepreneur generates ideas, recognizes opportunities, and studies the market Consider your hobbies or skills Consider consumer needs and wants Conduct Surveys and questionnaires Study demographics 6/10/201624Henry M. Bwisa

26. Steps in the Entrepreneurial Process 2. Concept Development: –Develop a business plan: a detailed proposal describing the business idea –Choose business location –Will a patent or trademark be required? 6/10/201625Henry M. Bwisa

27. Steps in the Entrepreneurial Process 3. Resourcing : The stage in which the entrepreneur identifies and acquires the financial, human, and capital resources needed for the venture startup, etc Identify potential investors Hire employees Apply for loans, grants and assistance 6/10/201626Henry M. Bwisa

28. Steps in the Entrepreneurial Process 4. Actualization: The stage in which the entrepreneur operates the business and utilizes resources to achieve its goals/objectives. $$ Grand Opening $$ Day-to-Day Operations 6/10/201627Henry M. Bwisa

29. Steps in the Entrepreneurial Process 5. Harvesting: The stage in which the entrepreneur decides on venture’s future growth, development, or demise 6/10/201628Henry M. Bwisa

30. Steps in the Entrepreneurial Process 5. Harvesting: What is your 5-year plan? Consider Expansion: Possibly add multiple locations Providing different products/services What is your 10-year plan? Will you go public ? NYSE or NASDAQ 6/10/201629Henry M. Bwisa

31. Another view: Outline of the Entrepreneurial Process Decide to go into business for yourself Assess your potential Find an appropriate product or service idea Buy a businessStart a new businessAcquire a franchise Conduct a feasibility study Technical feasibilityMarket acceptabilityFinancial viability Organize your business structure and legal requirements Protect your idea Arrange the necessary financing Develop a comprehensive business plan

32. THE ENTREPRENEUR The term “Entrepreneur” evolved from French word “entreprendre” meaning “to undertake” Richard Cantillon (1755): “a person who buys factors of production at certain prices in order to combine them into a product with a view to sell them at uncertain prices.” Considered as a risk bearer. Ex. Farmer pays definite price for seeds, fertilizers, pesticides, labours etc but not certain at which price he could sell his produce. 6/10/201631Henry M. Bwisa

33. F.H. Knight (1921): “a person who bears uncertainty (risk which cannot be insured & is incalculable) can be reduced by taking insurance.” J.B. Say: “one who combines the land of one, labour of another & capital of yet another & thus produces a product. By selling product pays rent, wages and interest.” 6/10/201632Henry M. Bwisa

34. Peter F Drucker: “One who considers the changes that take place in market as an opportunity to do business. Innovation is his tool.” Joseph Schumpeter: “Individuals who introduce something new in the market or economy.” New encyclopaedia: An individual who bears the risk of operating business in the face of uncertainty about the future conditions. 6/10/201633Henry M. Bwisa

35. The 21st century entrepreneur is “an individual who creates sustained and significant positive social or cultural resonance through the innovative creation of commercial value”. That is to say, that someone who opens another stall at a local farmers market just like the existing stall is not necessarily an entrepreneur, the person who starts another local management consultancy just like the existing consultancies is not necessarily an entrepreneur, the person who buys and sells a house or plot of land for a million dollar profit is not, necessarily an entrepreneur. To be entrepreneurial then, is to pursue or actively engage in the innovative creation of commercial value to the benefit of society. An entrepreneur would open a stall that sells differently and better; a consultancy that uses new and improved approaches etc. 34Henry M. Bwisa6/10/2016

36. Entrepreneur An entrepreneur is an individual who undertakes the risk associated with creating, organizing, and owning a business 6/10/201635Henry M. Bwisa

37. 36 CHARACTERISTICEXPLANATION E ENTERPRISING Are innovative and hard working N NEED-DRIVEN Motivated by need to achieve (n-Arch); self-starters T TOLERANT Tolerate long hours of work - are persevering and enduring. R RESPONSIBLE Self reliant; takes personal responsibility E EFFICIENT Economical, hates wasting resources P PROFITEER Wise investor; think of money as a source for more money R RESOURCEFUL Take initiative and seek personal responsibility; compete against self- imposed standards E ENERGETIC Have high amount of personal energy and drive N NETWORKING Know when, where, why and how to seek help; seek wide opportunities E ENVISAGERS Planners; think before leaping; have ability and commitment to set clear attainable goals U UNSTOPPABLE Have high determination and always desire to solve problems and complete the job; worry a problem till solution is found R RISK-LOVERS Take moderate calculated risks; do not gamble S SELF-CONFIDENT Have high level of self confidence Source: Bwisa H.M. (2011) Entrepreneurship theory and practice: A Kenyan perspective. JKF, Nairobi NOTE THAT READING DOWN THE FIRST LETTERS OF EVERY CHARACTERISTIC SPELLS THE WORD “E N T R E P R E N E U R S" 6/10/2016Henry M. Bwisa

38. Difference between entrepreneurship and entrepreneur The term entrepreneur is used to describe men and women who establish and manage their own business. The process involved is called entrepreneurship. Entrepreneurship is an abstraction whereas entrepreneurs are tangible people. Entrepreneurship is a process and an entrepreneur is a person. Entrepreneurship is the outcome of complex socio- economic, psychological and other factors. Entrepreneur is the key individual central to entrepreneurship who makes things happen. Entrepreneur is the actor, entrepreneurship is the act. Entrepreneurship is the most effective way of bridging the gap between science and the market place by creating new enterprises. An entrepreneur is the catalyst who brings about this change. 6/10/2016Henry M. Bwisa37

39. Week 2 6/10/201638Henry M. Bwisa

40. What is Philosophy? The derivation of the word "philosophy" from the Greek is suggested by the following words and word-fragments. – philo—love of, affinity for, liking of – philanthropy—love of mankind in general – phile—(as in "anglophile") one having a love for – philology—having a liking for words – sophos—wisdom – sophist—lit. one who loves knowledge – sophomore—wise and moros—foolish; i.e. one who thinks he knows many things – sophisticated—one who is knowledgeable 6/10/201639Henry M. Bwisa

41. Meaning of Philosophy A philosophy is a way of thinking about the world and about people. The ideas in philosophy are abstract, which means that they are "things that cannot be touched." But this does not mean that philosophy is not about the real world. Sometimes people talk about how they have a "personal philosophy", which means the way a person thinks about the world. Philosophy is the systematic inquiry into the principles and presuppositions of any field of study. 6/10/201640Henry M. Bwisa

42. "The great virtue of philosophy is that it teaches not what to think, but how to think. It is the study of meaning, of the principles underlying conduct, thought and knowledge. 6/10/201641Henry M. Bwisa

43. The four main branches of philosophy are logic, epistemology, metaphysics, and ethics: 6/10/201642Henry M. Bwisa

44. Logic is the attempt to codify the rules of rational thought. Logicians explore the structure of arguments that preserve truth or allow the optimal extraction of knowledge from evidence. Logic is one of the primary tools philosophers use in their inquiries; the precision of logic helps them to cope with the subtlety of philosophical problems and the often misleading nature of conversational language. 6/10/201643Henry M. Bwisa

45. Epistemology is the study of knowledge. In particular the study of the nature, scope, and limits of human knowledge. Epistemology investigates the origin, structure, methods, and integrity of knowledge.Epistemologists ask, for instance, what criteria must be satisfied for something we believe to count as something we know, and even what it means for a proposition to be true. 6/10/201644Henry M. Bwisa

46. Ontology or Metaphysics: the study of what is really real. Metaphysics deals with the so-called first principles of the natural order and "the ultimate generalizations available to the human intellect." Specifically, ontology seeks to indentify and establish the relationships between the categories, if any, of the types of existent things. It asks: What kinds of things exist? Do only particular things exist or do general things also exist? How is existence possible? Questions as to identity and change of objects—are you the same person you were as a baby? as of yesterday? as of a moment ago? How do ideas exist if they have no size, shape, or color? (My idea of the Empire State Building is quite as "small" or as "large" as my idea of a book. I.e., an idea is not extended in space.) What is space? What is time? 6/10/201645Henry M. Bwisa

47. Axiology is the study of value; the investigation of its nature, criteria and is divided into two: (1) Ethics: the study of values in human behavior or the study of moral problems: e.g., (1) the rightness and wrongness of actions, (2) the kinds of things which are good or desirable, and (3) whether actions are blameworthy or praiseworthy and (2) Æsthetics: the study of value in the arts or the inquiry into feelings, judgments, or standards of beauty and related concepts. Philosophy of art is concerned with judgments of sense, taste, and emotion 6/10/201646Henry M. Bwisa

48. Nature of philosophy A philosophy is a way of living, and unlike religions which denote a belief in god(s), a philosophy dictates how to live life with out a god. Also a philosophy is a way to study and better understand the world around you, though without going into religious topics (usually). For example Confucianism is a philosophy it teaches people about literature and life but without going into religious topics. 6/10/201647Henry M. Bwisa

49. 6/10/201648 Entrepreneurship is a philosophy- it is the way one thinks, one acts and therefore it can exist in any situation be it business or government or in the field of education, science and technology or poverty alleviation or any others. Henry M. Bwisa

50. 49 Entrepreneurship creates business knowledge in the head; business passion in the heart and business fire in the belly 6/10/2016Henry M. Bwisa http://www.google.co.ke/url?sa=i&source=images&cd=&docid=VyCySw63D4nlVM&tbnid=l5pQgC6i9MQcfM:&ved=0CAcQjB0w AA&url=http%3A%2F%2Fwww.business-opportunities.biz%2F2005%2F07%2F22%2Fanatomy-of-an- entrepreneur%2F&ei=PSuWUdWRDKmq0QXN0ICACw&psig=AFQjCNF4GzXLEhUiWHHO1KaC9gnqb2EOqQ&ust=13688823 65259041

51. ANATOMY OF AN ENTREPRENEUR RICE ALLIANCE TECHNOLOGY WORKSHOP MARC NATHAN JULY 2010 WWW.SLIDESHARE.NET/MARC1919/MARC-NATHAN-ANATOMY-OF-AN-ENTREPRENEUR... ‎ 6/10/201650Henry M. Bwisa

52. Always be on your toes Dancer’s feet Sturdy knees Runner’s legs 6/10/201651Henry M. Bwisa

53. Intestinal fortitude Thick skin Strong back Cu + Zn 6/10/201652Henry M. Bwisa

54. PSYCHOLOGICAL, NOT FINANCIAL PROFIT GETS ENTREPRENEURS OUT OF BED. 6/10/201653Henry M. Bwisa

55. Strong chin Silver tongue Smell opportunity Taste victory Great listener Head on a swivel Good balance 6/10/201654Henry M. Bwisa

56. 6/10/201655 THE SERENITY PHILOSOPHY OF ENTREPRENEURSHIP bizthoughts.mikelee.org/the-serenity-philosophy-of-entrepreneu There is a the Serenity Prayer: see Wikepediathe Serenity Prayer God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference. As an entrepreneur, the line that impresses us the most should be the third: having the courage to change the things we can. It encourages us to challenge the status quo, to know that “the way things are” isn’t an immutable rule. Just because we’ve always had to buy books from a bookshop doesn’t mean that’s the only way to purchase them. Visit www.mukmik.com or better still google amazonwww.mukmik.com Just because we’ve always gotten the latest news from a journalist doesn’t mean that’s the only way to get the news. Think: Twitter.Twitter Just because we’ve always had to walk into a bank hall to deposit money doesn’t mean that’s the only way to bank. Think: M-Kesho, M-shwari. That’s what we may call the Serenity Philosophy of Entrepreneurship. The title is perhaps a little misleading. It’s not about being serene and accepting things the way they are. It’s quite the opposite. There are things we cannot change e.g. The laws of mathematics and physics. And taxes. Those are things we must accept. But to be a successful entrepreneur, you will need to know what you can change – and there is often more you can change than you think. Henry M. Bwisa

57. 6/10/201656 WEEKS 3 and 4 Henry M. Bwisa

58. 6/10/201657 SCHOOLS OF ENTREPRENEURSHIP Henry M. Bwisa

59. some basic economics 6/10/201658Henry M. Bwisa

60. Definition of Economics Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people. Economics is concerned with the production, consumption, distribution and investment of goods and services. 6/10/201659Henry M. Bwisa

61. Adam Smith’s Contribution Adam Smith, who is generally regarded as father of economics, defined economics as “ a science which enquires into the nature and cause of wealth of nation”. He emphasized the production and growth of wealth as the subject matter of economics. Smith considered how individual prices are set, studied the determination of prices of land, labour, and capital & inquired into the strengths & weaknesses of market mechanism. He identified the remarkable efficiency properties of markets and saw that economic benefit comes from self- interested actions of individuals. 6/10/201660Henry M. Bwisa

62. A. Marshall’s Welfare Concept According to A. Marshall “Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of material requisites of well being. Thus, it is on one side a study of wealth; and on other; and more important side, a part of the study of man. 6/10/201661Henry M. Bwisa

63. Characteristics of Welfare Definition # It is primarily the study of mankind. #Takes into account ordinary business of life – It is not concerned with social, religious and political aspects of man’s life. # Emphasize on material welfare as the primary concern of economics i.e., that part of human welfare which is related to wealth. # Limited the scope to activities amenable to measurement in terms of money. 6/10/201662Henry M. Bwisa

64. 63 of 50 The Scope And Method Of Economics economics The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. The key word in this definition is choose. Economics is a behavioral, or social, science. In large measure it is the study of how people make choices. The choices that people make, when added up, translate into societal choices. 6/10/2016Henry M. Bwisa

65. The Basic Decision-Making Units A firm is an organization that transforms resources (inputs) into products (outputs). Firms are the primary producing units in a market economy. An entrepreneur is a person who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business. Households are the consuming units in an economy. 6/10/201664Henry M. Bwisa

66. The Circular Flow of Economic Activity The circular flow of economic activity shows the connections between firms and households in input and output markets. 6/10/201665Henry M. Bwisa

67. Input Markets and Output Markets Output, or product, markets are the markets in which goods and services are exchanged. Input markets are the markets in which resources—labor, capital, and land—used to produce products, are exchanged. Payments flow in the opposite direction as the physical flow of resources, goods, and services (counterclockwise).Payments flow in the opposite direction as the physical flow of resources, goods, and services (counterclockwise). 6/10/201666Henry M. Bwisa

68. Market Equilibrium The operation of the market depends on the interaction between buyers and sellers. An equilibrium is the condition that exists when quantity supplied and quantity demanded are equal. At equilibrium, there is no tendency for the market price to change. 6/10/201667Henry M. Bwisa

69. Market Equilibrium Only in equilibrium is quantity supplied equal to quantity demanded. At any price level other than P 0, the wishes of buyers and sellers do not coincide.At any price level other than P 0, the wishes of buyers and sellers do not coincide. 6/10/201668Henry M. Bwisa

70. Market Disequilibria Excess demand, or shortage, is the condition that exists when quantity demanded exceeds quantity supplied at the current price. When quantity demanded exceeds quantity supplied, price tends to rise until equilibrium is restored.When quantity demanded exceeds quantity supplied, price tends to rise until equilibrium is restored. 6/10/201669Henry M. Bwisa

71. Market Disequilibria Excess supply, or surplus, is the condition that exists when quantity supplied exceeds quantity demanded at the current price. When quantity supplied exceeds quantity demanded, price tends to fall until equilibrium is restored.When quantity supplied exceeds quantity demanded, price tends to fall until equilibrium is restored. 6/10/201670Henry M. Bwisa

72. The schools 6/10/201671Henry M. Bwisa

73. Classical economists Classical economists such as Adam Smith distinguished between the "undertaker" (a translation of the French "entrepreneur") who manages his own capital and receives profit and the "inactive capitalist" who receives interest. Classical economists merged the entrepreneurial and capitalist functions and did not develop a separate theory of entrepreneurship. The belief of the classical school that economic relationships were determined by a natural law "the invisible hand" may have further forestalled the idea of a conscious agent such as the entrepreneur at the centre of the economic process. There is an entrepreneurship joke that economists are very dangerous people armed with an invisible hand given to them by Adam Smith. 6/10/201672Henry M. Bwisa

74. NEOCLASSICAL ECONOMISTS Neoclassical economic thought is more explicit about the role of an entrepreneur in economic development and can be categorized in three general schools: the Chicago, Schumpeterian and Austrian schools. The Chicago school represented by Frank Knight focuses on the entrepreneur as a person. It describes an entrepreneur as a risk taker whose driving force is profit maximization. Nevertheless a clear line between an entrepreneur and a capitalist is not drawn by this school. 6/10/201673Henry M. Bwisa

75. The Schumpeterian school To Schumpeter an entrepreneur is an innovator, one who carries out new combinations, introduces new products and production functions, opens new markets, conquers new sources of material etc. Thus anybody engaged in routine type of activities is no entrepreneur. Schumpeter sees the driving force of an entrepreneur as motivation to achieve and this is shared by David C. McClelland (1961) with his n-Ach theory. On the market situation Schumpeter sees the entrepreneur as a person who disrupts the equilibrium state imagined by the classicals. With his innovations the entrepreneur can influence the market forces and cause disequilibrium. 6/10/201674Henry M. Bwisa

76. THE AUSTRIAN SCHOOL The school was spearheaded by Israel Kirzner (1978). Unlike Schumpeter, Kirzner thinks that markets are already in disequilibrium and entrepreneurs intervene to bring them to equilibrium. Kirzner sees an entrepreneur as a discoverer. To Kirzner one of the key qualities of an entrepreneur is alertness. He thinks that all the answers to entrepreneurial success are hidden in information. Thus the focus of this school may be said to be information. 6/10/201675Henry M. Bwisa

77. The logic of Kirzner's thinking may be seen in the fact that the equilibrium situation advanced by the classical economists assumed a perfect market situation which in turn assumes perfect knowledge. Information can be a source of such knowledge. Since a lot of this information is not normally available there is no perfect knowledge and the equilibrium situation rarely exists. 6/10/201676Henry M. Bwisa

78. 6/10/201677 18 TH – 19 TH CENTURY 20 TH CENTURY GENERAL RECOGNITION NO SEPARATION OF ENTREPRENEUR FROM CAPITALIST FOCUS ON MARKET FORCES AND INVISIBLE HAND DRIVING FORCE FOR ENTREPRENEUR SEEN AS PROFIT MAXIMIZATION SPECIFIC RECOGNITION ENTREPRENEUR AS ENTREPRENEUR CHICAGO (KNIGHT) SCHUMPETERIAN (SCHUMPETER) AUSTRIAN (KIRZNER) 1920s1930s1970s FOCUS: ENTREPRENEUR AS RISK TAKER AND CAPITALIST DRIVING FORCE: PROFIT FOCUS: ENTREPRENEUR AS INNOVATOR AND EQUILIBRIUM DESTRUCTOR DRIVING FORCE: NEED TO ACHIEVE (n-ARCH) FOCUS: ENTREPRENEUR AS DISCOVERER AND EQUILIBRIUM STABILIZER DRIVING FORCE: CURIOSITY A summary of views on an entrepreneur through different eras represented by specific authors is given in the following diagramme. Henry M. Bwisa

79. 6/10/201678 TIMEKEY PERSON AND FOCUS OF DEFINITION Middle agesActor and person in charge of large scale production projects 17 th centuryPerson bearing risks of profit (loss) in a fixed-price contract with government. 1725Richard Cantillon: person bearing risks is different from one supplying capital 1803Jean Baptist Say - separated profits of entrepreneur from profits of capital. 1876Jean Baptist Say - separated profits of entrepreneur from profits of capital. 1934Joseph Schumpeter - entrepreneur is an innovator and develops untried technology. 1961David McClelland - entrepreneur is an energetic, moderate risk taker. 1964Peter Drucker - entrepreneur maximizes opportunities. 1975Albert Shapero - entrepreneur takes initiative, organizes some social and economic mechanisms and accepts risk of failure. 1980Karl Vesper - entrepreneur seen differently by economists, psychologists, businesspersons, and politicians. 1983Gifford Pinchot - intrapreneur is an entrepreneur within an already established organization. 1985Robert Hisrich - entrepreneurship is the process of creating something different with value by devoting the necessary time and effort; assuming the accompanying financial, psychological, and social risk and receiving the resulting rewards of monetary and personal satisfaction. Hisrich and Peters have given a general chronology of the development of the term entrepreneur by economists. Source: Hisrich D. R., Peters P.M. 2002. Entrepreneurship. N.Y: McGraw-Hill Publishers. Henry M. Bwisa

80. 6/10/201679 Entrepreneurial modelDefinitionMeasures Great personExtra ordinary achieversPersonal principles, histories, experiences Psychological characteristics Founder, controller over means of production Locus of control, tolerance of ambiguity, need for achievement ClassicalPeople who make innovations bearing risk and uncertainty, “creative destruction” Decision making abilities to see opportunities - creativity ManagementCreating value through recognition of business opportunity. The management of risk taking through communicative and management to mobilize Expertise technical knowledge technical plans LeadershipSocial architect; promotion and protection of values Attitudes style management of people IntrapreneurshipThose whom pull together to promote innovation Decision making ENTREPRENEURIAL SCHOOLS, THEIR DEFINITIONS AND CRITERIA Adopted from J.B Cunningham and J. Lischeron (Journal of Small Business Management) Jan. 1991. Henry M. Bwisa

81. 6/10/201680 Entrepreneurial model Central focus or purpose Assumption Behaviour and skills Situation Great person school Entrepreneur has an intuitive ability – a 6 th sense and traits and inborn instincts Without inborn instincts the individual will be ordinary Intuition, energy, vigour, persistence, self esteem Start up Psychological characteristics school Entrepreneurs have unique values, attitudes which drive them People behave as per their values, behaviour results from attempts to satisfy needs Personal values, risk taking, need for achievement and discovery Start up Classical Central characteristic of entrepreneurial behaviour is innovation The critical aspect of entrepreneurship is in the process of doing not owning Innovation, creativity and discovery Start up and early growth Management Entrepreneurs are organizers of an economic venture, they organize, own, manage and assume risk Entrepreneurs can be developed or trained in technical functions of management Production, planning, people organization, capitalization and budgeting Early growth and maturity Leadership school Entrepreneurs are leaders of people; have ability to adapt their style to people’s needs Entrepreneurs cannot meet their goals alone but depend on others Motivating, directing, leading Early growth; maturity Intrapreneur schoolEntrepreneurial skills can be useful in complex organizations Organizations need to adapt to survive; entrepreneurial activity leads to organizational building and entrepreneurs being managers Alertness to opportunities; maximizing decisions Maturity and change APPROACHES FOR DESCRIBING ENTREPRENEURS HIP Adopted from J.B Cunningham and J. Lischeron (Journal of Small Business Management) Jan. 1991. Henry M. Bwisa

82. Other schools of entrepreneurship thought 6/10/201681Henry M. Bwisa

83. I. Macro View: Environmental School of Thought: This school of thoughts asserts that an entrepreneurs’ success is the direct influenced by his or her environment (being located in Nairobi vs. Kitale; friends, family i.e. if you’re dad is the President vs. a broken home). The Financial/Capital School of Thought: This school of thought reckons that an entrepreneur can only get somewhere if (s)he (i) has capital, (ii) knows how to grow it, and (iii) knows how to manage it. The Displacement School of Thought: This school of thought, which I think is quite fascinating, revolves around a situation where a person feels “left out,” or displaced. For isntance, if all of their friends are latter-climbers in the corporate world, and the one individual is “displaced,” then that feeling will cause him or her to pursue entrepreneurial ventures to prove their friends wrong. Think of it as the “I’ll show them,” type of people. 6/10/201682Henry M. Bwisa

84. II. Micro View: The micro view of entrepreneurship focuses on the individual–what a person can actually control; as opposed to their macro-environment. The Entrepreneurial Trait School of Thought: For some reason, this area absolutely fascinates academics. They feel one can uncover specific characteristics that make an entrepreneur an entrepreneur.. Venture Opportunity School of Thought: This is almost a hybrid macro/micro school of thought. It simply asserts that an entrepreneurs ability to spot, see and execute on a market pain influences his or her success as an entrepreneur. Strategic Formulation School of Thought: Ahh, yes. The concept of strategy. Yet another concept academics love. This school holds that an entrepreneurs ability to target unique markets, with a unique strategy is the ultimate deteminant of success. 6/10/201683Henry M. Bwisa

85. Let’s summarize our unit 6/10/201684Henry M. Bwisa

86. Federico's philosophy to business success is quite simple......... Think like an 'entrepreneur' ! To be successful, it's not just about the product or service you want to sell, but rather how you think on a day to day basis. If you foster an 'entrepreneurial' mindset, there is a much greater chance that you will achieve the desired goals in the long run. This philosophy applies to any type of business. Thinking like an entrepreneur is important for every person, whether you are a business owner, employee, or an individual seeking ultimate success in your life, in whatever shape or form. 6/10/201685Henry M. Bwisa

87. Discovering the power of entrepreneurship involves firstly understanding the philosophies and beliefs of well known entrepreneur's; becoming aware of personal traits and skills that are regarded as 'entrepreneurial', that can be harnessed into powerful business building tools (eg. ability to delegate); and focusing on key priorities and tasks within the business on a day to day basis. The bottom line is, work more 'on' the business by focusing on business development; and less 'in' it, by minimising or avoiding operational or routinal tasks that perhaps can be delegated or even outsourced. 6/10/201686Henry M. Bwisa

88. Fishes swim, birds fly, startups die. Starting up is easy but keeping it going is difficult. Research in Kenya has produced statements such as (…three out of five businesses fail within the first few months of operation….Thirty three percent of all new businesses will fail within the first 6 months … This explains why 1 in every 3 new businesses fails within the first 6 months) If you really looked at your whole life and put metrics on happiness and sadness, depressed states and exalted states and success and failure, the probability is you were sad, depressed, failed most number of times. But we don’t accept that into our mind. We are thrilled at success and happiness. We keep it as a pointer to keep going in life. The same applies to startups. You need to navigate through your successful points, keeping failures on the wayside. 6/10/201687Henry M. Bwisa

89. Success and failure. There is no absolute success or absolute failure. Everything is relative but a successful startup is always that one which excites customers who are willing to pay. First, get your customers and make them willingly pay. That’s where all complexity lies. How do you convince your customer to pay? Peter Drucker said, ultimately, it’s customers who drive your business. Only paying customers sustain your business. 6/10/201688Henry M. Bwisa

90. You are not born an 'Entrepreneur'. You become one if you think like one ! If you’re not a risk taker, you should get the hell out of business ! - [quote by Ray Croc - Mac Donald's] Do the one thing you think you cannot do. Fail at it. Try again. Do better the second time. The only people who never tumble are those who never mount the high wire. - [quote by Oprah Winfrey] 6/10/201689Henry M. Bwisa

91. Some famous entrepreneurship quotes “The best way to predict the future is to create it.” - Peter Drucker “Winners never quit and quitters never win.” - Vince Lombardi “It’s fine to celebrate success but it is more important to heed the lessons of failure.” Bill Gates. “Success is walking from failure to failure with no loss of enthusiasm.”- Winston Churchill ”Genius is 1% inspiration, and 99% perspiration.”- Thomas Edison “If you cannot do great things, do small things in a great way.” - Napoleon Hill “I don’t know the key to success, but the key to failure is trying to please everybody.” - Bill Cosby “Entrepreneurship is living a few years of your life like most people won’t so you can spend the rest of your life like most people cant.” - Warren G. Tracy’s student “To win without risk is to triumph without glory.” - Corneille 6/10/201690Henry M. Bwisa

92. “There is only one success- to be able to spend your life in your own way.” - Christopher Morley “Whatever the mind can conceive and believe, the mind can achieve.” - Napoleon Hill “Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.” - Albert Schweitzer “What is not started will never get finished” - Johann Wolfgang von Goethe “When you cease to dream you cease to live.” - Malcolm Forbes “Formal education will make you a living; self-education will make you a fortune.” - Jim Rohn “The most valuable thing you can make is a mistake- you can’t learn anything from being perfect.” - Adam Osborne 6/10/201691Henry M. Bwisa

93. WEEK 7 TO 11 6/10/201692Henry M. Bwisa

94. In a group of not more than three identify two businesses: one you think is successful and another you think is not equally successful. Observe and record the differences between the two businesses. Interview the owners in terms of the stages of an entrepreneurial process studied in class. Attempt to justifiably position them on the business life cycle discussed in class. Propose the entrepreneurship philosophies you think guides the businesses. Make a report in class 6/10/2016Henry M. Bwisa93

95. The end THANK YOU P.O BOX 7228 (00300) NAIROBI, KENYA Tel: 254722858507 bwihem@gmail.com www.mukmik.com www.professorbwisa.com