Entrepreneur

We are living in an age of entrepreneurship. When Bill Gates, the founder and CEO of Microsoft or Anita Roddick, founder of the Body Shop seem to be better known around the world than most heads of state, one might conclude that the age of the entrepreneur has arrived. Entrepreneurs of large multinational corporations have had a distinctly important role in shaping today’s process of globalization.

The term “entrepreneurship” has historically referred to the efforts of an individual who takes on the odds in translating a vision into a successful business enterprise (Collins & Moore, 1964; Hebert & Link, 1988). More recently, however, entrepreneurship has been conceptualized as a process that can occur in organizations of all sizes and types, such as the public sector, and non-profit organization (Burgelman, 1983; Gartner, 1985; Kao, 1989; Miller, 1983).

In this paper, the author will use the case of Michael Young, Lord Young of Dartington, to discuss how useful is the notion of the ‘social entrepreneur’ and how different is such a concept from the more traditional portrayal of the private sector entrepreneur.

The Story of Michael Young

Michael Young, one of Britain foremost social entrepreneurs, has died aged 86. Lord Young of Dartington leaves behind dozens of institutions and charities which he either was founder, or played a major hand in creating including the Consumers Association and the Open University. He was an innovative and progressive thinker in political and social policy (Briggs2001).

By any standard, Young must count as one of the most fecund and versatile figures of British life. As head of the Labour Party’s research department and one of the people who drafted its manifesto in 1945, he helped craft the terms of the post-war settlement. His seminal study of family and kinship in London’s East End gave social inquiry a new direction. He was a prime mover in the development of the Consumers’ Association, the Open University, the Social Science Research Council, the University of the Third Age and, most recently, the School of Social Entrepreneurs. For nearly 60 years, Young has fertilised British life with new ideas and new institutions. Yet he is also one of the authors of a reactionary orthodoxy that lies on British politics and education with the weight of a corpse (Briggs2001).

His many dragon seeds have included starting the Advisory Centre for Education, which provided information on education issues (1960); the National Consumer Council (1975); the University of the Third Age, or U3A (1982); the Open College of the Arts, which taught practical arts by correspondence (1987); the National Association for the Education of Sick Children (1993); a Family Covenant Association, for promoting a secular form of Baptism (1994); and the School for Social Entrepreneurs (1998) (Gray2001)

The Nature of Entrepreneurship

According to Collins, Moore, (1964), the entrepreneur was defined as ‘a risk-taker – a man who braves uncertainty, strikes out on his own, and, through native wit, devotion ot duty, and singleness of purpose, somehow creates business and industrial activity where none existed before’. In a 21st century business context, and largely as lay people understand it, entrepreneur typically refers to ‘a person who undertakes or controls a business or enterprise and bears the risk of profit or loss’ (Brown 1993),

Underlying entrepreneurial attitudes and behaviors are three key dimensions: innovativeness, risk taking, and proactiveness (Covin & Slevin, 1989; Miller, 1983; Morris & Sexton, 1996). Innovativeness refers to the seeking of creative, unusual, or novel solutions to problems and needs. These solutions take the form of new technologies and processes, as well as new products and services. Risk taking involves the willingness to commit significant resources to opportunities having a reasonable chance of costly failure. These risks are typically moderate and calculated. Proactiveness is concerned with implementation, with doing what is necessary to bring an entrepreneurial concept to fruition. It usually involves considerable perseverance, adaptability, and a willingness to assume responsibility for failure.

To the extent that an undertaking demonstrates some amount of innovativeness, risk taking, and proactiveness, it can be considered an entrepreneurial event, and the person behind it an entrepreneur. Further, any number of entrepreneurial events can be produced in a given time period (Stevenson & Jarillo, 1990). Accordingly, entrepreneurship is not an either/or determination, but a question of “degree” and “frequency.” Organizations can be characterized, then, in terms of their entrepreneurial orientation or “intensity,” which is a reflection both of how many entrepreneurial things they are doing, and how innovative, risky, and proactive those things tend to be.

By dissecting the critical elements of entrepreneurship, we are able to highlight the essential ingredients for society to nurture, cultivate and value. It also frees the term for use in non-business, non-profit-seeking ventures. It blurs the boundaries between the business and social sectors in potentially useful ways as well and foreshadows a cultural shift in what we value. And Casson (1995) notes that entrepreneurship can be a distributed process across the public/private divide. He (1995) argues: “The public sector and the private sector therefore offer two distinct channels of advancement for the entrepreneur. The rewards to entrepreneurship in the public sector come more in the form of status rather than of income, of course.

Difference Between Social Entrepreneur and Private Sector Entrepreneur

The different mission

Compare to the private sector entrepreneur, social entrepreneurs has the different mission (Ackerman1996). Social entrepreneurs play the role of change agents in the social sector, by adopting a mission to create and sustain social value, not just private value. For social entrepreneurs, the social mission is explicit and central. This obviously affects how social entrepreneurs perceive and assess opportunities. Mission-related impact becomes the central criterion, not wealth creation. Wealth is just a means to an end for social entrepreneurs. With business entrepreneurs, wealth creation is a way of measuring value creation. This is because business entrepreneurs are subject to market discipline, which determines in large part whether they are creating value. If they do not shift resources to more economically productive uses, they tend to be driven out of business.

Different measurements to value creation

In the modern market, the value created by private sector entrepreneur can be clearly calculated by the market value. Whereas, it is inherently difficult to measure social value creation (Dees 1998). How much social value is created by reducing pollution in a given stream, by saving the spotted owl, or by providing companionship to the elderly? The calculations are not only hard but also contentious. Even when improvements can be measured, it is often difficult to attribute them to a specific intervention. Are the lower crime rates in an area due to the Block Watch, new policing techniques, or just a better economy? Even when improvements can be measured and attributed to a given intervention, social entrepreneurs often cannot capture the value they have created in an economic form to pay for the resources they use.

Defining Social Entrepreneurship

Although the growing attention devoted to the phenomenon, there have not a generally accepted definition of public/social sector entrepreneurship to emerge. Many of prior studies provided the definition of social entrepreneurship. Such as Bellone & Goerl (1992) social entrepreneurship is an active approach to administrative responsibility that includes generating new sources of revenue, providing enhanced services, and helping to facilitate increased citizen education and involvement. Osborne & Gaebler (1992) state it as a continuous attempt to apply resources in new ways so as to heighten the efficiency and effectiveness of public institutions. Linden (1990) concluded it as the purposeful and organized search for innovative changes in public sector organizations and operations.

Base on such prior studies, Dees (1998) stated social entrepreneurs play the role of change agents in the social sector, by:

• Adopting a mission to create and sustain social value (not just private value),
• Recognizing and relentlessly pursuing new opportunities to serve that mission,
• Engaging in a process of continuous innovation, adaptation, and learning,
• Acting boldly without being limited by resources currently in hand, and
• Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created.

Dees (1998) also mentioned this is clearly an “idealized” definition. Social sector leaders will exemplify these characteristics in different ways and to different degrees. The closer a person gets to satisfying all these conditions, the more that person fits the model of a social entrepreneur. Those who are more innovative in their work and who create more significant social improvements will naturally be seen as more entrepreneurial. The truly Schumpeterian social entrepreneurs will significantly reform or revolutionize their industries.

In sum, social entrepreneurship extends the definition of entrepreneurship by its emphasis on ethical integrity and maximizing social value rather than private value or profit.

How Michael Young fits the model of a social entrepreneur?

To consider how far that Michael Young was entrepreneurial? It is better to consider who closer Michael Young gets to satisfying all such conditions mentioned in the last section. Also Brazeal and Herbert (1999A) stated the way of viewing entrepreneurship is to recognize that entrepreneurship is enabled by the current or of something new (an innovation), new ways of looking at old problems (Creativity), or the lessened capability of prior processes or solutions to respond effectively to new problem parameters brought on by new or emerging external conditions (environmental change), which can supplant or be complementary to existing processes or solutions (a change), when championed by one or more invested individuals (the innovator). In the follow, some attributions of Michael Young are listed, and it is clear that Michael Young is a successful social entrepreneurial.

Young often turned personal experience into new opportunities for social action (Gary 2001). While in hospital with cancer, he devised the idea of the College of Health (and with his sense of provocative fun, he originally called it the Association of Trained Patients). While organizing the funeral of his wife, he saw the need to improve the training of funeral directors, and so he established the National Funerals College. When he discovered that Bengali patients at the London Hospital were unable to explain to doctors what was wrong with them he launched a telephone exchange offering instant translation services. His energy seemed unstoppable, and even into his late seventies he was publishing books and creating even more organizations.

Young created an alternative vision of education (Briggs2001). His views on education were often controversial, and heavily influenced by his time spent as a young man at the alternative school at Dartington Hall. The school was based on the philosophy of Rousseau who held the belief that all children were born gifted in one way or another and needed only to be fed and watered, like plants, for their gifts to grow.

Michael Young re-stated the egalitarian vision (Gary 2001). He stated where we to evaluate people, not only according to their intelligence and their education, their occupations and their power, but according to their kindliness and their courage, their imagination and sensitivity, their sympathy and generosity, there would be no overall inequalities of the sort we have got used to. Who would be able to say that the scientist was superior to the porter with admirable qualities as a father, the civil servant to the lorry-driver with unusual skills at growing roses?

In sum up, Michael Young has undoubtedly been a great innovator, and the greatest social entrepreneur in the UK. The valuation created by Michael Young is significant with the private sector entrepreneur. He was an innovative and progressive thinker in political and social policy.

The view of the human as a rational being is nowadays heavily questioned (Simon, 1959), UT in science a lot of models and theories still are based on this assumption. When looking at research on entrepreneurship, we notice that it is considered a relatively new field of study, though practice has shown that entrepreneurial activities have a great influence on the market. Schumacher (1934) already linked entrepreneurial Initiatives of Individuals to the creation and destruction of Industries, as well as to economic development.

More research has been conducted about entrepreneurship, which questions the classical picture of the economic man – Homo economics – and he classical concept of rationality. This might be because the entrepreneur himself Is one of the most crucial factors of either the success or failure of an entrepreneurial business. This has caused the entrepreneur to be a hot topic and so a lot of research has been dedicated to the phenomenon. An Shame to (2000) for example different argues that the underlying factor that causes entrepreneur knowledge. Other research has focused on the traits of entrepreneurs.

In general, entrepreneurs are considered overconfident (Cooper et al. , 1988), which is a good thing if you want to start-up a company. Without this trait, start-ups would probably not take place as often as we observe (Goodness & Lecher, 2013). However, research has also showed that this overconfidence is associated with failure (Camera & Lovable, 1999). Nobel (2011) argued that although we know 30 to 40 per cent of entrepreneurial firms fail, many other are bought out or never bring expected return on investment, meaning that the real failure rate can be up to 70 or 80 per cent.

Overconfidence is one of the known biases that influence human beings in decision making. There are, however, a lot of more biases which an entrepreneur can encounter. This raises the question of whether being aware example of such of the biases could help the bias, entrepreneur in his activities. If we look at the overconfidence overconfidence can lead to wrong decisions. Awareness thus, could be helpful. On the other hand, if the entrepreneur is aware of this bias he could become too careful in the decision making process. This can result in no action being taken when the ‘moment’ arrives.

Or it could result in the entrepreneur even deciding not to continue due to the risks being too high. This leads us to the question: 3 The following questions will help us answer the main question by shedding some eight on the biases that are out there: Theory of Bounded Rationality As mentioned in the introduction, we assume Homo economics appears to be perfectly rational and has complete knowledge, while the economic choices one makes are clandestine in the economic sphere without affecting other aspects of the individual such as emotions or being influenced by the environment.

This is in line with the neoclassical economic theory that assumes full What is a cognitive bias? Why does this article address cognitive biases? What kind of cognitive biases could an entrepreneur encounter? Theory In this section the previously stated substitutions will be answered based on theory of decision-making, cognitive biases and the application to entrepreneurship. Entrepreneurship We accept the definition of entrepreneurship as suggested by Stevenson and Carillon (1990): ‘Entrepreneurship is about individuals who create opportunities through various modes of organizing, without regard to resources currently controlled. Sevens and Carillon moved away from the view of the traits school’ which tried to describe how entrepreneurs differed from other people by control, leadership, or propensity for risk-taking. When studies showed that entrepreneurs are as different from one another as they are from school’ non- entrepreneurs, the ‘behavioral rationality. This view has been criticized by Simon (1959) who developed an approach based on bounded rationality and problem solving. Simon stated that the assumption of full rationality is unrealistic.

In his view, the rationality of individuals is limited by the information they have, the cognitive limitations of their minds and the finite amount of time they have to make decisions. The theory of bounded rationality states that individuals face uncertainty about the future and costs in acquiring information in the present. What is a cognitive bias? Biases and heuristics (mental shortcuts) are decision rules, cognitive mechanisms, and subjective opinions people use to help them making decisions. This is a deviation of the benchmark Cognitive of biases rational prevent decision-making. Individuals to accurately understand reality and interfere with the ability to be impartial, unprejudiced or objective (Goodness and Lecher, 2013). Taverns and Keenan (1974) state that people rely on ‘heuristic principles which reduce the complex tasks of assessing probabilities and predicting values to simpler Judgmental operations. There are specific and systematic biases that move the Judgment away from the perfect rationality of individuals. Argued that the process of creating a new venture, should be the fundamental part of defining someone as an entrepreneur. (Gideon, 2010).

This is why we agree on the definition by Stevenson and Carillon, which also implies we will not discuss entrepreneurial traits in this article. 4 Drawing on aspects of both psychology and economics, the operating assumption of behavioral economics is that cognitive biases often prevent people from making rational decisions, despite their best efforts. Why do we focus on cognitive biases? The general opinion about entrepreneurs is that they are risk takers. However, research showed that if entrepreneurs have to choose, they prefer to take moderate risks instead of taking decisions where there is high risk involved (Keenan and Lovable, 1994).

This seems a contradiction, because the decision to become an entrepreneur is statistically a highs decision since over half of new ventures fail. In a study conducted by Cooper and colleagues their (1988), 95 per cent of the The interviewed entrepreneurs venture would did not entrepreneurs were convinced succeed. Where there is a complex interplay between feelings and thoughts which have awoken intense emotions. He concludes deal with that these entrepreneurs frequently situations that are new, unpredictable and complex. What kind of cognitive biases could an entrepreneur encounter?

When we look at what kind of biases an entrepreneur can encounter, it needs to be known what kind of biases exist. There are dozens of known biases but not all an entrepreneurs will meet. We would like to discuss the biases that came across the most in research of cognitive threats of entrepreneurs. Optimism bias. The decision to become an entrepreneur is a crucial step that only can be taken if the entrepreneur is feeling optimistic about the chances of success. Because the chance of failure is statistically higher than success, entrepreneurs usually have an optimism bias.

As mentioned before, 95 per cent of the entrepreneurs perceive the future of their new venture as being successful, while past studies of business survival suggest poor prospects for long-term survival for most new businesses (Cooper et al. , 1988). The optimism bias makes because entrepreneurs they see perceive less risk, more everything receive the new venture as a risk and their perception, rather than objective reality, explained the decision to start a current or future venture. That is why entrepreneurs do not necessarily have a higher risk propensity than other people (Keenan and Lovable, 1994).

They simply perceive existing risks smaller than they are which shows that entrepreneurs are biased. Baron (2004) suggests that entrepreneurs are more often exposed to situations that test the limits of their cognitive capacities than other people. This increases their susceptibility to various forms of bias or error. Baron argued that biases occur more frequently when individuals are confronted with more information than they can process at a given time, they face situations that are new to them and involve high degrees of uncertainty, and optimistically.

In ‘The Evolution of Cognitive Bias’, (2005) Hasten, Nettle, and Andrews state that where biases exist individuals draw inferences or adopt beliefs where the evidence for doing so in a logically sound manner is either insufficient or absent. In the case of 5 entrepreneurs however, we see that even if logical sound manner is sufficient still an entrepreneur can be biased. In the experiment by Cooper and colleagues (1988) 95 percent of the entrepreneurs was thinking that their venture would be a success, disappear when they knew about the objective chances.

Business and Barney (1997) have stated that the optimism bias of an entrepreneur could also influence the stakeholders around them as well. If the stakeholders wait until they attain all additional information, the opportunity they seek to exploit could be gone by the time this data is available. This means that the optimism bias of an entrepreneur can even overrule the rationality of other persons involved. Illusion of control The illusion of control gives the entrepreneur a sense of control that increases the likelihood of them acting on an opportunity, but at the same time it may blind them to genuine risks. Simon et al. 2000) The illusion of control states that decision makers often overestimate the personal control they have over the outcomes. This type of bias influences the ability for decision makers to actually make a decision. This could also be the reason many entrepreneurs fail even though they thought they had made a right decision. Belief in the Law of Small Numbers The belief in the law of small numbers is the use small off limited sample of to draw rim are conclusions. The bias makes people believe samples information representative of the entire population from Overconfidence bias.

Overconfidence refers to an unwarranted, high level of confidence (Forester and Scratchy, 2007). It is interesting that overconfidence can only be determined in retrospect, after an evaluation of knowledge, predictions and outcomes. Therefore, it will be difficult to notice beforehand if an entrepreneur is dealing with an overconfidence bias. Because of overconfidence, people do not take into account other factors and information that they need for decision-making. Goodness and Lecher optimism (2013), bias and argued distrust. Hat They the overconfidence bias is influenced by both the see overconfidence as a central theme in the failure of entrepreneurial firms with its effects magnified in combination with other cognitive biases. Which they are drawn (Simon et al, 2000). Simon and Houghton (2002) argued that belief in the law of small numbers may explain why entrepreneurs often overestimate demand. The success of a small number of people in their own environment can make entrepreneurs think that they will also be successful, while the objective probability of success may be very low.

Business and Barney (1997) mint out that entrepreneurs often use biased samples from a small number of friends or potential customers. Decision-makers versus Entrepreneurs Business and Barney mentioned that entrepreneurs are influenced by the sorts of cognitive biases that we all as individuals encounter (1997). However, they found that the extent to which people deviate from rational thinking may not be constant and that different individuals may utilize biases and heuristics to different degrees.

They argued, and Baron (2004) agrees, that entrepreneurs in general are more susceptible to the use of biases and heuristics in decision-making. For entrepreneurs, the level of uncertainty in making decisions is higher than for general decision-makers (Humpback and Cozier, 1985; Covina and Sliven, 1989). Also, general managers can approximate the rational ideal more closely because they usually have access to historical trends and past performance, while entrepreneurs do not. Several studies (Covina and Sliven, 1991; Garner et al. 992; Miller and Ferries, 1984) have shown that the context faced in decommissioning by entrepreneurs tends to be more complex than the context faced by managers. Pitfalls, biases and heuristics are likely to have more utility in hose highly complex decision settings faced by entrepreneurs, compared to the less complex context that managers face (Business and Barney, 1997). We find that entrepreneurs in general encounter, and until now no attempt has been done in making such a list. Simon et al. (2000) did make a selection in their research towards risk perception and the start of a new venture.

They selected three biases that may lower risk perception when starting a new venture. Their research focused on the overconfidence bias, the illusion of control and the belief in small numbers (see table 3). In their research optimism did not have a significant relationship with the decision to start a new venture, therefore they left this bias out of the model. Striking is that they left optimism out of their model, because they found a lack of significant relationship between optimism and the decision to start a venture.

They mentioned however that other studies did encounter optimism affecting both cognition and behavior and explain that their outcome may have occurred because their survey measured optimism in a specific context. Further research on at least the optimism bias therefore is necessary. What influence can biases have on the success or failure of an entrepreneurial firm? Biases can have great impact on the success or failure of a company. Goodness and Lecher (2013) argued that their research shows that overconfidence can lead to disastrous effects in the entrepreneurial domain.

In fact, they even found a strong relationship between overconfidence and company failure, especially if overconfidence was linked with other biases. Also they found that optimism bias has a negative effect on firm survival, strengthening arguments on low risk perception and resultant propensity to fail. However optimism bias also acted positively on opportunity orientation. This is an important encounter more biases than other types of decision-makers, but no specific research has been done on framing the most common biases faced by entrepreneurs.

In the field of strategic decision-making however, Hogwash described the 29 most common separate biases (1980). The ones that he considered most likely to affect strategic decisions are listed in table 1. An overview like this is missing in the field of entrepreneurship. One reason for this might be that most entrepreneurship common biases is hard to frame. Previous research did not mention a list of the that 7 finding, as one of the important aspects of entrepreneurship is finding opportunities. Effective decision-making by entrepreneurs with respect to actions involving risk could play an important role in the success of new ventures.

Empirical findings in literature about entrepreneurship offer support for the possibility that successful entrepreneurs are more effective at this task. Simon et al. (2000) found that effectiveness at decision making is an important factor in the performance of new ventures. Lovable and Keenan (1993) prescribed corrective measures to overcome the biases and achieve optimal behavior in every situation. Also Russo and Shoemaker (1989) reasoned that decision biases can be corrected through training.

They have indicated that every decision-maker must, consciously or unconsciously, go through each phase of the decision-making process. They have stated ten most common barriers that entrepreneurs encounter in making good decisions. These barriers show resemblance with the biases described by Hogwash (1980). The availability bias, ‘Judgments of probability of clearheadedly events are distorted’, can be linked to the trusting shortsighted the most shortcuts, readily ‘relying or inappropriately on rules of thumb such as information anchoring too much on invention facts’.

Both of them trust the most readily available information and thus the Judgment of probability may be distorted. Conservatism, which is the failure to sufficiently revise forecasts based on new information, can be linked to fooling ourselves about feedback, since in both cases the feedback will not be taken into account when forecasting new decisions, which can also emerge from being overconfident in making a Judgment. Russo and Shoemaker (1989) indicated that good decision-making can be broken down into four main elements: (1) framing; (2) gathering intelligence; (3) coming to a conclusion; (4) learning from feedback.

Entrepreneurs have to keep track of what they expected to happen while guarding and against Lecher self-serving (2013) also explanations. Goodness agreed with the effectiveness of training on biases. They stated that for example the training of unrealistic optimists should stimulate the motivation to manage finances, to take advice, not to leave matters up to chance, and to understand the value of healthy distrust in oneself and others in non-routine situations.

However, they also warned that training programs for entrepreneurs are not always a good idea. If it was not for the cognitive biases, start-ups would not occur as often as we observe now. Their advice for entrepreneurs is to balance the organization with people that are aware of these biases and can correct the entrepreneur where necessary. As well, Taverns and Keenan (1974) do not consider the biases as something that always should be eliminated.

They argued that under conditions of environmental uncertainty and complexity, biases and heuristics sometimes also can be an effective and efficient guide to decision-making, simply because in such settings comprehensive and cautious decommissioning is not always possible. They state that biases and heuristics may even provide an effective way to Training When a bias causes harm, it is of critical importance that it can be addressed properly. Errors in decision-making can be extremely costs at not only the personal but also at the professional and societal level.

As this article indicates, there does not seem to be an easy fix. Building further upon his previous work, Fishhook (1982) reviewed four strategies for reducing bias: (1) warning subjects about the potential for bias, (2) describing the likely direction of bias, (3) illustrating bias to the subject, and (4) providing extended training, feedback, coaching and other interventions. Fishhook concluded that these first three strategies yielded limited success, and that ‘even intensive, personalized feedback and training produced only moderate improvements in decision making. This model, derived from Wilson and Breaker (1994), shows how Judgmental biases are created and how they can be reduced. Awareness should first be created, there must be motivation to correct this bias and the direction and magnitude of the bias should be understood. As a final step, the bias should be removed or countered. But what is interesting is to see which techniques can be used to mitigate the bias of concern. We believe this can be done by applying a counter bias or by structuring the decision-making process.

If decision makers rely less on intuition and emotion when making a decision, and more on deliberate and structured thinking processes, a decision can be made which approximates rationality. Analysis A list of the most common biases among decision-makers (note this it is not a list of the most common among entrepreneurs) have been framed earlier in this paper by Hogwash (1980). It is known that entrepreneurs are more susceptible to the effects of biases, but it is doubtful whether the most important biases for decision-makers are also the most important ones for entrepreneurs.

The optimism bias and overconfidence decision-makers, bias do not appear on in the Hogwash’s list of most common biases for while research cognitive biases of entrepreneurs mentions them often. The problem with making an analysis on the cognitive biases that entrepreneurs encounter is that there is no such a list of most common biases among entrepreneurs. Earlier in this paper, we accepted the definition by Stevenson and is Carillon several to (1990) modes that of entrepreneurship opportunities organizing without about creating resources through rage rd currently controlled.

This made us not look at the traits of an entrepreneur, but at the processes of decision-making and biases that can occur. There are biases that every person encounters, but there are certain biases that have a more effect on decision-making but also have to be aware of different sorts of biases that can influence their perception of the world. This can be of great influence on the future of their new ventures. As Abide (1994) argued, there are three critical elements of successful entrepreneurial approaches.

Entrepreneurs 9 have to screen opportunities quickly to weed out unpromising ventures, they have to analyze ideas in which they focus on new important issues and they have to integrate taking action and analysis. His most important conclusion is that entrepreneurs must reflect on the adequacy of their ideas and their capacities to execute them. This comes back to what we are addressing in this article. Can entrepreneurs be aware of adequacy of their ideas? And is it recommendable to create this awareness among entrepreneurs?

To be able to have a better perception of the world and thus be better capable of reflecting and making decisions, biases are of great importance. Hen reflecting on the environment of the new venture and when making decisions based upon those reflections. Training programs to become aware of bias do exist. Russo and Shoemaker (1989) proposed a training system in which good decision- making can be broken down into four main elements. In each element the person involved is encouraged to take the different barriers (table 2) into account so that he or she is guarded against silvering explanations.

However, Goodness and Lecher (2013) argued that when entrepreneur are aware of biases, probably less start-ups will be realized. They advise that not the entrepreneurs will follow a raining program, biases. But rather people around the entrepreneur should be aware of existing Conclusion Although there are frameworks of individual cognitive biases in the literature of decision making, like the barriers by Hogwash (1980), there is no clear framework which cognitive biases entrepreneurs commonly encounter and how and if the effects of these biases should be reduced.

The biases studied showed however that they can have big influence on the success or failure of a new venture. Goodness and Lecher (2013) found a strong relationship between overconfidence and company failure. Also positive biases strengthen low risk reception and increased the chance of failure. On the other hand, a positive bias in the startup phase of the company could be of great help because it strengthens the entrepreneur in motivation and opportunity finding.

If entrepreneurs are aware of their biases, they could take this knowledge into consideration Taverns and Keenan (1974) pointed at the fact that not always should be eliminated. Under conditions of environmental uncertainty and in complexity, biases and simply heuristics because sometimes also can be effective and efficient decision-making, comprehensive and cautious decision-making is not always possible. Being aware of cognitive biases contributes towards obtaining optimal behavior in every situation.

However, when we want to answer the question if awareness helps entrepreneurial firms perform better we would like to advise to also create awareness among the people around the entrepreneur and not the entrepreneur himself. The bias of an entrepreneur can be crucial in the start-up of a company and the motivation of other people. However, when a bias is harmful people around him can undertake action to 10 eliminate this bias and therefore reduce the chance of a company’s failure. As a radical note we would like to mention that research on biases that an entrepreneur can encounter still has not been done.

Personality traits like overconfidence, ambition, and greed motivate entrepreneurs to push for fast growth as the desired and best route for building companies. This also leads them to raise greater capital and push for sales at any cost, often at the cost of both margins and cash flows. Inherently unprofitable orders with razor thin margins are accepted in the hope of growing sales. At other times orders with extended payment terms are signed with consequent blockage of money and inability to accept other orders (Hupala, 2008).

Enron is a classic case of the desire for growth gone wrong. Whilst Enron is too big a company to be used as an example of small entrepreneurship, smaller businessmen have on many times been found to engage in fraud, wrong documentation, misrepresentation and fudging of accounts to enhance their growth. Wrong value systems, which do not have much time for issues associated with expediency and focus on ends rather than means motivate people to choose unlawful routes for growing their business, strategies that rarely pay off and more often than not land the entrepreneur in legal trouble and social disgrace.

Growth needs to be carefully controlled, pushed up when it falters and guided carefully when it speeds up. Entrepreneurs need to resist their urges to take extraordinary risks or to engage in excess conservatism whilst guiding growth routes. Impulses to take advantage of illegal and wrong means need to be resisted strongly (Hupala, 2008).

Much of the success or failure of entrepreneurs in setting up profitable and growing small businesses depend upon the personal traits, attitudes, abilities, values and emotions of individual entrepreneurs. With very few individuals having the numerous requirements needed for entrepreneurial success, it becomes necessary for individuals desiring to take up entrepreneurial careers to assess their personal qualities and their strong and weak points, which can help or hinder their entrepreneurial activities.

Such self analysis will help entrepreneurs in their choice of projects, in choosing employees, in determining the financial structures of their firms, in choosing ethical action routes, and in their dealing with outsiders and insiders.

Entrepreneurs in small businesses should take particular care to ensure that their project is in line with their abilities, that growth is achieved gradually rather than dramatically, and that financial conservatism is adopted as a way of business life. Much of the financial crisis that has enveloped small and big entrepreneurs today stems from over ambition and the availability of cheap and abundant finance that was used without paying thought to the possibility of the tap drying up one day.

Entrepreneurs must take lesson from the current crisis, work on their strengths and control their weaknesses if they are to succeed in their entrepreneurial career.

In 2011, my five pals and I were driving home from one of our weekend ski trips in Vermont. We were engineering students at the time and used to throw out all kinds of during those three-hour drives. On this one day, my friend Donny suggested building skis that were based on engineering principles and thus unequivocally better. We loved the . Surely we could build a better ski.

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During my material sciences class, I learned about a rare class of soft materials that harden the instant you apply force, which meant we could produce a ski that was soft in powder but stiff in icy conditions. We made a sample and ran some tests, and the numbers were astonishing: Because of the variability of their dampness (a ski’s ability to adapt to conditions), our skis were 300 percent better than anything on the market. The other guys stayed in school, but I quit and took the lead on . I also had a side business washing residential windows, and every dime I earned went toward building . One of my clients had some business experience and was curious about my friends — what do they do, exactly? I explained that they’d launched the brand with me. “But what do they do now?” he asked.

The truth is, I was doing all the work. They were still in class while I was trying to get a product to market. It didn’t bother me until I realized investors saw them as liabilities. That was the first really difficult . I called each guy individually and said I would quit Renoun if they didn’t sign over their shares. Some guys were hurt — and understandably so. But in time, every one of them relented. It’s a testament to how awesome they are. By handing over their stakes, they allowed me to keep going.

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I set out on sales missions, but they were disastrous. I visited Japan, the second-biggest ski market in the world, and my translator never showed, so I tried, and failed, to sell skis with hand gestures. I flew out West to visit every ski shop I could, and left with nothing. Everything I’d learned about the industry started eating away at my : The market was saturated, and to make a profit through retail stores, I’d need to sell about 20,000 skis. I’d sold zero.

If I was going to flame out, I thought, I’d flame out hard. I spent the last $300 in my bank account driving to Denver for a trade show. And on the way, a string of good news rolled in: An investor I’d been working with wired me money. Then test results on our latest skis came in: They showed the best dampness numbers yet. And then the ski industry’s most prestigious show, called ISPO, gave Renoun a gold medal for . I reached Denver on a high and hung a banner over our booth: ISPO gold medal winner. We earned some publicity in a couple of ski publications and The New York Times wrote about us. Even so, I received exactly zero orders at that trade show.

Soon after, I nearly lost the business because a design firm played me for a chump. I’d put a 75 percent deposit down on some graphic work for the skis, and I’m pretty sure they saw me as an easy paycheck and handed the work to an intern. After they failed a few revisions, I enlisted a second firm to advise me on how to handle the problem. I was throwing good money at bad, and I overshot my marketing budget by 300 percent — and the delays meant I didn’t have skis ready for the start of ski season. I had to continue washing windows to keep the company afloat. 

The 2015-2016 ski season was Renoun’s first real one on the market. I landed in a couple of ski shops, which seemed great — but after visiting one undercover, I realized the sales reps had no clue how to explain our technology. So I decided to sell exclusively through our own website. That would change the economics entirely: With retail, I needed to sell 20,000 units just to break even. Now my margins would be much higher, and I didn’t have to spend money educating in-store salespeople. 

I’m discovering other perks to being small: I’m able to create buzz with limited-run products, like our “Feel the Bern” ski, which doubled Renoun’s email list in 48 hours, even though everyone told me to steer clear of politics. I’ve decided that the key to success is . People say to sell through shops, and I say no. They say avoid controversy, but this year I’m selling a “Hillary versus Trump” ski. Our skis are expensive — $1,200 versus the industry average of $600 — so we’re not going to pinch pennies or take investments from people who want us to grow fast and sell out.

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I expect 2016 to be Renoun’s first profitable year. We have nobody on payroll — not even me, technically — but I have a dedicated group of designers and suppliers who work on contract to keep the brand going. I can’t say for sure that the worst struggles are behind me, but I’m becoming less beholden to my window-washing gig. With any luck, I’ll soon be able to hang up the squeegee.  — As told to Clint Carter

Aiming to incorporate innovation in the conventional aviation sector, and to support the UAE’s ambitious plans for the industry, The Emirates Group along with GE and Etisalat have launched (“taking off” in Arabic), an aviation and travel technology entrepreneurship incubator. Through this joint initiative, the companies are inviting “passionate and talented” early-stage entrepreneurs and students to help them take the industry forward. Seeking to nurture ideas with the support of the physical space and network provided by , Intelak is accepting submissions till October 31, 2016 from 3-5 member teams with at least one UAE National as an “integral team member or co-founder.” The target of such teams should be to “independently deliver a MVP to make travel simpler, better and more exciting,” and such ideas will be judged based on “creativity, innovation, feasibility, and scalability.”

According to Intelak, the idea must relate to improving any aspect in the realm of aviation and travel. in airports, loyalty programs, aircraft improvements, better food etc. are a few specified instances. In terms of the intake process, top 20 teams selected from the applications will go through a two-week bootcamp, which will include workshops on design, financial modeling, marketing, and other topics. After this training, the teams will then compete against each other in a pitch challenge, from which four teams will be chosen as winners. Besides a cash prize of up to AED 50,000, these teams will get enrolled in the Intelak incubator for a three-month program to develop their idea into a viable business.  Besides the required mentorship, the teams will also receive access to the investor community to pitch for investment. That’s not all—the website also states that, “they may also have co-creation or employment opportunities with the Emirates Group, GE, or Etisalat.”

If you have an idea that could potentially alter the travel and aviation space, hurry and to be a part of Intelak.

Unfettered by memories of failure or downturns, new breeds of young entrepreneurs are unleashing a wave of startup activity marked by swagger and confidence associated more with the Silicon Valley.

Today we have developed an ecosystem where there are about 21,000 startups in India and about $ 15 billion have gone behind them. Points such as these were raised at ASSOCHAM conference where industry leaders talked about how the startup ecosystem is evolving over the time with the rising of new entrepreneurs.

The session was chaired by Ritu Marya, Editor-in-Chief, Entrepreneur India which had eminent speakers such as Shailendra Singh, Joint Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India; Arun George, ‎Founder and CEO, Avant Garde Innovations; Takeshi Ebihara, Founding Partner, Rebright Partners Pte Ltd.; Aakash Moondhra, Global CFO, Naspers Group, Mohit Saxena, Co-founder and CTO, InMobi Technologies Private Limited, Feng Guangyi, CEO, ET International Logistics Co. Ltd China; Abhinav Sinha, COO, Oyo Rooms and Padmaja Ruparel, President, Indian Angel Network (IAN).

Welcoming Foreign Investors

Global investors, including early-stage investors, are actively looking to grab a pie of India’s growth story because its thriving entrepreneurial ecosystem is seen as one of the most lucrative investment destinations across the world. While US investors have been active in the Indian startup scene for long, it is now the turn of Japanese investors to commit significant investment and management focus to grab the India opportunity.

Speaking on the same lines, Ruparel said, “We should welcome overseas fund not because they are bringing money into our country but they are helping our whole entrepreneurial ecosystem to grow. It is helping to create value and wealth over hear. And more importantly when you have overseas investors they also help young startups to go global as they have networks in their market which will allow companies to go beyond India.”

According to a recent venture capital (VC) funding report released by CB Insights, India has outpaced China in the number of deals struck by VC funds in the first quarter of 2015. Though, China was still ahead of India in terms of deal value at $2.99 billion, India’s funding stood at $1.35 billion. For India, this marks a rise of 225 per cent over the same quarter of the previous year. In this entire funding scene, Japan saw around 28 startup deals by VCs during the first quarter of 2015.

Government Support to Startup  

Everyone knows about the Prime Minister Narendra Modi’s ‘Startup India’ initiative and it has become the hottest buzz word among all Indian startups and entrepreneurs. These startup policies are helpful for youth to bring in new ideas leading to innovation and economic growth of the country.

“For startups we are coming up with lots of schemes, shortly we have launched module, we already have a portal in which we recognized startups, we give them certification for tax benefits, we have 10,000 cr of funds of funds which DIPP is administrating and we are also shortly coming up with credit grantee scheme of 2,000 cr for startups,” said Shailendra Singh.

Secondly, profit is viewed as a reward that entrepreneurs reap due to their decision making in the face of uncertainty (Casson, 2001). Entrepreneurs undertake risks by investing their money in the market in order to provide goods and services that satisfy the needs of the consumers at some future time. Uncertainty is involved because the entrepreneur cannot guarantee the satisfaction of the consumer needs with his offerings which will determined at a future time (Williamson, 1998). Therefore, profit serves as reward to the entrepreneur who acts in this face of risk and uncertainty.

Moreover, risk is also involved when the entrepreneur recruits individuals to serve his purpose. The entrepreneur can hire a wrong person and then bear the loss by compensating him from his profits earned (Green & Sutcliffe, 1987). Thus profit serves as a reward against the uncertain action that entrepreneurs undertake and then bear their positive or negative consequences. This makes profit as a reward earned due to risk taking (Foss & Klein, 2002). Thirdly, profit is also viewed as a reward for the innovative skills of the entrepreneur who identifies a need and then tries to satisfy it creatively.

Innovation becomes an integral part of entrepreneurship since the job of the entrepreneur is to create more out of the existing resources and satisfy consumer needs effectively (Fulcher, 2004). The reward that the individual reaps after paying for the innovative products and processes becomes his entrepreneurial profit. As stated earlier, the more entrepreneurs begin copying the innovative idea the lesser is the level of profit achieved. Thus, the profit becomes the reward of the entrepreneur due to his innovative skills and capabilities (Kirzner, 1979).

Profit is explained by Marshall as a reward that an individual earns due to his management expertise in bringing the factors of production together. He perceives profit as a residual reward and not a return to the factor of production which is a result of the business ability and energy of the entrepreneur (Obrinsky, 1983). The return on land, labor and capital is not considered the entrepreneurial reward but the residual profit resulting due to the management abilities of the individual which distinguishes him as an entrepreneur is viewed as his reward (Heath, 2010).

He stresses the fact that it is the management ability of the entrepreneur to create an innovative idea and implement it in the face of risk that earns him his reward as profit (Wu, 1990). Thus, profit serves as the reward for the risk taking behavior and judgmental ability of the entrepreneur. These profits may rise in the face of high barriers to entry and superior knowledge leading to monopoly pricing (Nee & Swedberg, 2005). The entrepreneur earns profits for his decision making in risky situations about the coordination of resources.

The entrepreneurial reward is different from the return on the factors of production but it is in fact reward for their business ability and effort spent in creating innovative concepts and making decisions in the face of uncertainty (Knight & McClure, 2009). REFERENCES Barbera, R. (2009). The Cost of capitalism: understanding market mayhem and stabilizing our economic future. Mc-Graw Hill. Bowles, S. , Edwards, R. , & Roosevelt, F. (2005). Understanding capitalism: competition, command, and change. New York: Oxford University Press. Casson, M. (2001).

Information and organization: a new perspective on the theory of the firm. USA: Oxford University Press. Casson, M. (2003). The Entrepreneur: an economic theory. Edward Elgar Publishing. Foss, N. J. , & Klein, P. G. (2002). Entrepreneurship and the firm: Austrian perspectives on economic organization . Edward Elgar Publishing. Fulcher, J. (2004). Capitalism: a very short introduction. USA: Oxford University Press. Glancey, K. D. , & McQuaid, R. W. (2000). Entrepreneurial economics. Palgrave Macmillan. Green, F. , & Sutcliffe, B. (1987). The Profit system: the economics of capitalism.

Penguin. Harper, D. A. (2007). Foundations of entrepreneurship and economic development. Routledge. Heath, J. (2010). Economics without illusions: debunking the myths of modern capitalism. Broadway. Kay, J. (1996). The Business of economics. Oxford: Oxford University Press. Knight, F. H. , & McClure, J. (2009). Risk, uncertainty, and profit. Signalman Publishing. Kirzner, I. M. (1979). Perception, opportunity, and profit: studies in the theory of entrepreneurship. Chicago: University of Chicago Press. Obrinsky, M. (1983). Profit theory and capitalism. Philadelphia: University of Pennsylvania Press.

Moschandreas, M. (1999). Business economics. Cengage Learning Business Press. Nee, V. , & Swedberg, R. (2005). The Economic sociology of capitalism. Princeton University Press. Parker, D. , & Stead, R. (1991). Profit and enterprise: the political economy of profit. Palgrave Macmillan. Schumpeter, J. A. (1982). The Theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle. Transaction Publishers. Williamson, O. E. (1998). The Economic institutions of capitalism. Free Press. Wu, S. (1990). Production, entrepreneurship, and profits. Blackwell Pub.