Entrepreneurship & Business Planning
This article looks at the multifaceted relationships between entrepreneurship and business planning, and it considers the causes and effects of entrepreneurship in new and preexisting businesses. As a strategic management tool, business planning is seen as one of the activities undertaken in the entrepreneurial process. Types of plans and aspects of business planning are also discussed, along with several contradictory schools of thought on the factors that determine entrepreneurship, the outcomes of planning, and information analysis.
Keywords Business Planning; Control Systems; Corporate Venturing; Entrepreneurial Behavior; Entrepreneurship; Environmental Scanning; Locus of Planning; Planning Flexibility; Planning Horizon
Business ventures fuel the economic growth and prosperity of nations and regions (Yusuf, 2002), and entrepreneurship has long been considered significant in encouraging such socioeconomic growth and development. Entrepreneurial ventures provide job opportunities, offer consumer goods and services, and increase general prosperity and competitiveness.
There is no universally accepted definition of the term "entrepreneurship." Entrepreneurship is a derivative of the term "entrepreneur," which historically referred to a businessperson, business owner, or owner-manager. In a narrow sense, entrepreneurship can be referred to as the creation of new enterprises, but over the years, the scope of this concept has expanded beyond basic new-venture creation (also known as corporate venturing or the setting-up of intra-firm 'venture capital' processes).
The expanded scope of entrepreneurship is two-pronged: on the one hand, it refers to the growth-oriented and employment-generating creation of new ventures; on the other hand, it includes small businesses and micro-enterprises that provide self-employment, even if they do not foster employment growth. Naturally, entrepreneurship is fostered by entrepreneurial behavior, or behavior that fosters growth through innovative ideas, products, services, markets, and technologies (Stevenson & Jarillo, 1990).
Entrepreneurship can be stimulated by certain favorable environmental conditions that may promote or prevent success by the nature of the climate they engender. Such favorable environmental conditions include family and support systems, financial resources, local community, and government agencies. Additionally, “larger societal factors such as cultural, economic, political and social forces can combine to create threats or opportunities in the environments where entrepreneurs operate” (Lee & Peterson, 2000).
Entrepreneurship can also be viewed at three levels: the macro level, individual level, and firm level. In macro terms, the word "entrepreneurship" is synonymous with the advancement of an economy (Schumpeter, 1934) and the disruption of market equilibrium. Entrepreneurial activity in itself leads to the promotion of competition and innovation, and by doing so, it contributes to economic growth and development. It is not surprising, therefore, that entrepreneurship has rapidly become a dynamic field of study and research.
Entrepreneurs are creative, innovative, and opportunistic. At the individual level, entrepreneurship has been attributed to individuals with certain internal psychological traits, sociological background characteristics, and behaviors. Psychologically, it is believed that entrepreneurs are believed to have a propensity toward risk-taking, high achievement, and an internal concentration of control. Sociological characteristics associated with entrepreneurs include being a first child, being an immigrant, and having early role models. Some writers, on the other hand, prefer to define entrepreneurship by what an entrepreneur does, not by who he or she is. For instance, a successful entrepreneur may be seen as one who most likely experiments with promising new technologies, seizes opportunities, or in other ways demonstrates initiative or decision making competence (Lee & Peterson, 2000).
Entrepreneurship is widely recognized as a process which involves businesses of all sizes, be they new or preexisting, owner-managed, family-run, or corporations. At the firm level, three variables have been identified as underlying a firm's ability to behave in an entrepreneurial manner. These are opportunity recognition, organizational flexibility, and the firm's ability to measure, encourage and reward innovative and risk-taking behavior (Barringer & Bluedorn, 1999). The success of a firm in its entrepreneurial ventures depends on the commitment of top management in taking the firm through the entrepreneurial process, which consists of opportunity identification, definition of business concept, assessment of resources requirements, acquisition of resources, and management and harvesting of the venture. Thereafter, whether the firm can increase its entrepreneurial commitment is mainly up to the compatibility of its management practices with its entrepreneurial ambitions (Lee & Peterson, 2000).
Corporate entrepreneurship is motivated by the need to transform, create or grow a business, create wealth, or change the status quo in response to factors such as intensified competition, corporate downsizing, corporate delayering, and technological progress. Through its two sub-processes, discovery and exploitation, corporate entrepreneurship refers to the process by which an organization pioneers, innovates, and takes risks for growth and development. Corporate entrepreneurship is made manifest in the form of corporate venturing, strategic renewal, and spin-offs for ideas generated within organizations (Hayton, George & Zahra, 2002).
There are three types of corporate entrepreneurship. The first is the creation of new businesses within a preexisting organization, also known as 'corporate venturing' or 'intrapreneurship,' and the second is the activity associated with the transformation or renewal of preexisting organizations, which involves the creation of new wealth through a combination of resources. The third is where the enterprise changes the 'rules of competition' for its industry.
Entrepreneurial firms are growth-oriented, proactive, innovative, creative, and flexible. They are pioneers and risk-takers, and they encourage their employees to be imaginative. Successful entrepreneurship will lead to the creation of value, through several means, including:
- The renewal of the organization itself
- The renewal of markets
- Changes in the pattern of resource deployment
- The creation of new capabilities to add new possibilities for positioning in markets
- The breaking of new ground
- The remixing of old ideas to make seemingly new applications
Entrepreneurship levels differ from one geographic location to another due to variations in environmental conditions and, in particular, economic, political/legal, and social conditions. The main factors affecting entrepreneurship in a particular locality are:
- Entrepreneurship policy
- Social systems and institutions
- Economic growth
- Industry conditions
- Industrial infrastructure
- Population dynamics
- The cultural landscape
Entrepreneurial research has discovered, for instance, that countries whose populations are excessively skewed toward old or young individuals are likely to experience low levels of entrepreneurial activity. Furthermore, a culture's entrepreneurial orientation — the way that culture is inclined toward entrepreneurship in the areas of autonomy, innovativeness, risk taking, proactiveness, and competitive aggressiveness — combined with key economic, political/legal, and social forces, will impact the degree of entrepreneurship experienced, and ultimately will impact the global competitiveness of a nation or nations (Lee & Peterson, 2000).
Within nations also, institutional patterns such as access to research and educational institutions, access to sources of financing, and the availability of educated labor, help to determine the manner in which an innovation — and hence entrepreneurship — emerges within a country. It is believed that differences in national institutions may bring about different levels of entrepreneurial activity across countries. Entrepreneurial activity is more likely to thrive when appropriate infrastructure is in place to enhance competition and problem-solving activities between a country's entrepreneurs (Busenitz et al, 2000).
Cultural values will determine how much a society believes entrepreneurial behaviors such as risk taking, proactiveness, and independent thinking are desirable. “Cultures that value and reward such behavior promote a propensity to develop and introduce radical innovation, whereas cultures that reinforce conformity, group interests, and control over the future are not likely to manifest risk-taking and entrepreneurial behavior” (Hayton, George & Zahra, 2002).
Entrepreneurs are expected to allocate sufficient...
(The entire section is 4053 words.)