ENTREPRENEURSHIP AND INNOVATION

Assignment
Summary
Prajwal Khanal
12/30/2009

Summary of “Introduction – The Entrepreneurial Economy” , “The Practice of

Innovation (Systematic Entrepreneurship and Purposeful Innovation and the seven
sources for innovative opportunity )”
 Introduction: “The entrepreneurial economy”
The author has discussed about the emergence of entrepreneurship in the US quite broadly and
briefly about other big economies. He has discussed various Qualitative, Quantitative,
Demographic, Geographic and few more factors that had its impact on the emergence and
growth of entrepreneurship in the US and other huge economies.
The total jobs in America grew by 24million from 1974-1984. US has not created this many jobs
in any other peace time period. In the same period job creation was declining in Western Europe
and Japan. US provided employment to many women and in many cases the jobs were far better
than women had ever held before. The fortune 500 companies, governments, universities and
hospitals were the one’s which created practically all the jobs in the American economy in the
quarter century after World War II. But since the late 1960’s, job creation and job growth in the
US has shifted to a new sector. The old job creators had lost jobs from early 1960 – 1980.
“The Economist”: 600,000 new businesses were being started in the US every year in the 1980’s.
About seven times as many as were started in each of the boom years of the 50’s and 60’s. 40
million jobs were created from 1965 to 1980 among which high-tech contributed 5-6 million.
The author says that high-tech creates the vision for entrepreneurship and innovation in the
community, and the interest for them. Willingness of young, highly trained people to go to work
for small and unknown employers rather than for the big ones was because of high tech
mystique. Author has also said that the demographic factors like the differences in the “baby
boom” and “baby bust” period of the US and the Europe also has had much involvement in
outlining the start and growth of entrepreneurship there.
Contractor and physical exercise equipment makers among various entrepreneurial ventures were
among the “Inc.500” fast growing companies in a year when construction was at an all time low.
Entrepreneurial ventures during 1981-83 in the US like chain of barber shop, chain of dentistry
offices, manufacturers of hand tool, a finance company that leases machinery to small businesses
were doing tremendously well although the high tech companies at the same time were getting
less investment than those companies and were less profitable.
A research about the growth of the US economy (1981-83) revealed that midsized companies
grew at three times the rate of the fortune 500 in sales and in profits. They were adding jobs
where as the fortune 500 were losing jobs between “1970-83”. These midsized companies
included companies that made doughnuts, Furniture Company, chinaware and few more.
Finally, the author has said that management will be more needed and will have a greater impact
on the small entrepreneurial organization than it has in the big managed ones.
Example (Nepal): Bhatbhateni super market has been in Nepal since last 10-15 years; when
Kathmandu had been seeing lots of other small retail store openings. Bhatbhateni was small store
back then like many other small store. But at bhatbhateni several management techniques was
being applied. And with the help of several innovation and capability of understanding customer
value it succeeded. This shows an effective use of management in small entrepreneurial venture.
Management is such thing that can make the Nepali economy into an entrepreneurial economy.
Systematic Entrepreneurship and Purposeful innovation and the Seven Sources for
Innovative Opportunities: - This chapter starts with a thought about entrepreneurship from a
French economist J.B. Say. “Entrepreneurship shifts economic resources out of an area of lower
and into an area of higher productivity and greater yield”. But the author argues that Say’s
definition does not tell us who this “entrepreneur” is.
English people identify entrepreneurship with the new, small business; Germans identify it with
power and property, Americans believe the entrepreneur is often defined as one who starts his
own, new and small business.

Bright ideas are the riskiest and least successful source of innovative opportunities. Instead, he
advised the systematic, managed, purposeful and organized search for changes and analysis of
the opportunities, such changes might offer for innovation. Entrepreneurs need capital as do all
economic activities. They are not investors and also not necessarily an employer. It is thus a
distinct feature whether of an individual or an institution not a personality trait. The author
quotes down “the people who need certainty are unlikely to make good entrepreneurs”.

Entrepreneur’s search for change responds to it and exploits it as an opportunity.

Entrepreneurship needs to be systematic and well managed, also needs to be based on purposeful
innovation because businesses are becoming more complex, various high tech tools are coming
up so to cope up with changes people need to be able to systematize and manage well.

Innovation is a specific instrument of entrepreneurship that stimulates entrepreneurship. Every

innovation is not entrepreneurship. The author has rightly said “there are no such things as
resource until man finds a use for something in nature and thus endow it with economic value”.
When a need arises then men go out for search that satisfies the need but before the need has
been found there is no value for the good that now satisfies the aroused need.

Innovation which seems to be big may turn out to be merely a piece of intelligence that has no
much use but an innovation with modest intellect importance. It is the purpose that makes
innovation huge or shrinks it. Social innovation, technical innovations and economic innovations
are not important until and unless their purposefulness is described and understood properly.

Systematic innovation means monitoring seven sources for innovative opportunity. First four
sources are internal and are basically symptoms and are highly reliable indicators of change that
have already happened or can be made to happen with a little effort where as the other three are
external i.e. it consists of changes outside the enterprise or industry.The seven sources require
separate analysis for each has its own distinct characteristics. No area is however, inherently
more important or more productive than other.

Sources within the enterprise: The unexpected – Unexpected Success, failure, outside event. The
unexpected - Unexpected Success, failure, outside event. The incongruity – differences between
as it is and is assumed or ought to be. Innovation based on process need, Changes in industry and
Market structure that catch everyone awareness.

Sources outside the enterprise: Demographics, Changes in perception, mood and meaning, new
knowledge both scientific and non scientific.