Week 3 Flashcards
What makes a firm more successful than others?
o Firm growth o Societal contribution o Innovativeness of the firm o Ambitious entrepreneur o Behaviour of entrepreneur o Human capital
When is a entrepreneur ambitious?
Engages in entrep… process with high aspirations to achieve entrepreneurial success
Tries to maximize value creation (beyond self-sufficiency)
Two achievement types:
• Role-residing achievements motivations
• Performance achievement motivations
Table about performance achievement and role-residing achievement motivation
PAM = high, RRAM = low
Latent High-ambition entrepreneur
PAM = low, RRAM = low
No entrepreneurial role-residing and performance ambition
PAM = high, RRAM = high
ambitious entrepreneur
PAM = low, RRAM = high
self-sufficient without ambition to grow or
innovateBehvaiour types of entrepreneurs
Commitment and determination (personal sacrifice)
• Effective to differentiate between successful and non-successful start-up firms
Opportunity obsession
• Differences in capacity to separate high potential opportunities from low potential, which influences the success rate
Tolerance of risk, ambiguity, and uncertainty
• No clear result
Creativity, self-reliance (internal LOC) and not afraid of failing.
• differentiate entrepreneur and non-entrepreneurs
Motivation to excel (need for achievement)
• Effective to differentiate between successful and non-successful start-up firms
What is human capital with regards to successful startups
Knowledge and skills
Young entrepreneurs and middle entrepreneurs usually linked to successful high growth
High level of human capital enhances the chances of survival and success.
What is leadership to the business? and what are managers?
the heart, the head
What is leadership?
o The process of influencing and inspiring people to work together to achieve a common goal o Having a clear vision o Being able to develop strategy o Communicate effectively o Create an appropriate culture o Managing and monitoring performance o MOST IMPORTANT: Emotional intelligence • Self-awareness • Self-management • Social awareness • Relationship management
What leadership styles are there?
Directive behaviour
• bossing
Supportive behaviour
• Coaching/supporting
what is the target area for leadership?
in the middel of supportive behaviour and directive behaviour:
SB = low, DB = low delegating SB = high, DB = low supporting SB = low, DB = high directing SB = high, DB = high coaching
What does a a manager do?
o A set of processes such as: Planning Budgeting Organizing Staffing Controlling o That keep an organization running well
Can a entrepreneur be both a leader and a manager?
• Entrepreneurial spirit to propel a new venture through start-up is different from the kind of person who has the capacity to manage the new firm as it grows
• Entrepreneur clinging too long on the lead role limits company growth
• They can do both if they shift from:
o exploration to exploitation
o passionate commitment to dispassionate objectivity
o direct personal control to indirect impersonal control
Greiner’s revolution stages exist of?
Creativity -> leadership crisis Direction -> autonomy crisis delegation -> control crisis co-ordination - > red-tape crisis Collaborate ->.....
how to build a winning team?
• team start-ups perform better than individual start-ups
o complementary capabilities
o committed to common objective, goals, and approach for which they hold themselves mutually accountable
• recruiting:
o skills profile & identify gaps
o coverage of the core functional disciplines
o specific market or industry skills
• work effectively
o Belbin
o Previously working together people have an advantage (already overcome collaboration problems)
o Expertise in the basic functional areas of business (technology, finance, marketing & operations)
o At least one of the team has experience in the industry (HELPS)
o Network of industry contacts
o Dedicated to the start-up and is in a position to endure any financial constraints
What are common pitfalls to recruiting?
o Not taking the time to go through an extended “mating dance”
o Not acknowledging it’s a Dynamic process:
Environmental dynamism
Venture stage of development
Winning team rewards and incentives
o Financial o Realize personal growth and goals o External issues o Skills needed: Able to differentiate Remain flexible
winning team: enlarging the team
o Board of directors/board of advisors
o Professional advisors
o Equity investors
o partners
What is social capital?
o The accumulation of active connections among people in a network
Set of relationships that endow those resources
o The sum of actual and potential resources embedded within, available through and derived from the network of relationships possessed by individuals or social units.
Set of resources rooted in relationships
o Represents an ideal means for founders to acquire and utilize the resources necessary to facilitate the firm-founding process
Internal ties
• Relationships within the social structures of a collective
External ties
• Relationships that span boundaries to other collectives
Informal relation
Formal relation
• Alliances
What are strategic alliances?
o Association between two or more firms that agree to cooperate with one another to achieve mutually compatible goals that would be difficult for each to accomplish alone
o Can be used to exploit a business opportunity where the entrepreneur may not have all the skills or resources in-house
o Mutual advantage to be gained
o True partners can become part of your team pursuing an opportunity
What kind of alliances are there?
Contractual alliance (non-equity)
Joint venture (equity)
Minority Participation (equity <50%)
What are the motives for alliances?
Access to knowledge or competences/learning
• R&D,
• Complementary technology
• Shares know how
Access to (new) markets & internationalization
• Market knowledge
• Local party required
Efficiency
• Scale
• Specialised partner
Clients do not want products, but tailored solutions
• Satisfy need, not a demand
Risk sharing
• Pool resources
• Portfolio
to create new concepts through combining different market companies
what do alliances give?
o alliances are growing source of competitive advantage for emerging firms
o positively associated with the rate of new product development and the creation of stakeholder’s wealth
o failure rate = 50%
due to strategic
operational
cultural differences
The relational & cognitive dimensions of Social Captial
• Alliances lead to networks
• Networking = key capability of entrepreneurs
• Network: contributes to success of start-up:
o Size of the network -> network overload
o Quality and reputation of the network
o Contingencies
What are the 3 social capital dimensions?
structural
relational
cognitive
what is the structural dimension?
Properties of the network of relations as a whole
Elements (eg. Density)
what is the relational dimensions?
Relationships that develop over time
Elements (eg. Trust)
• Strong versus weak ties
o Weak ties are more likely to link people from distant social circles
Entrepreneur can access more diverse & novel information
o Strong ties provide a founder with the resources that are needed
Strong ties that are bind are the ties that are blind
Dark side of social capital
What is the cognitive dimension
Shared representations, interpretations, and systems of meaning
Elements (eg. Shared language)
Dimensions
• Cognitive proximity
o The extent to which people understand each other, based on shared knowledge and experience
o The degree of similarity of knowledge bases of orgs.
o Leads to homogenous networks
Knowledge sharing occurs more readily when there are shared cognitions due to a common language
• Cognitive distance
o The degree of the knowledge base of organisations
o Leads to heterogenous networks
Larger distance in cognition
Negative effect on absorptive capacity
Positive effect on the potential for novelty creation
Find partners at sufficient cognitive distance to learn something new
But not to far to not understand
Structural dimension of social capital (extended)
o Structure of the network as a whole
Burt’s Structural Holes
• Absence of direct relations among focal actor’s network contacts
• Separation between non-redundant contacts
• Positioned in such a hole
o Broker/bridge position
o Information advantages by exploiting a position on the intersection of two groups
o Advantage for novelty and innovation
• Burt’s defines an entrepreneur
o A person who generates profit from being between others
Mostly dense and cohesive
• Closure view stresses the positive effects of densely embedded networks with strong social ties
o Generate trust,
o reputation mechanism
o Norms of reciprocity that enable cooperation among network members
• Benefits of ties in giving access to novelty will decline
Position (high closeness centrality)
• Access to other members of the network with the fewest links
• Not to far removed from majority of other actors in the network
• Shape reputation and generates visibility
• Better access to information, knowledge and resources
• Increased cooperation, trust, and support from people in the network
• Redundant -> novelty decrease
Position (low closeness centrality)
• Peripheral position
• Presence of outside connections
• Opportunity to fully take advantage of boundary-spanning ties and see things in fresh ways
Structure holes are absent
o Position of the firm within the network structure
What is a bridging view
- large networks
- sparse & heterogenous networks
- structural holes & bridge positions
- weak ties
- cognitive distance
Generate novel opportunities
what is a bonding view
- small networks
- dense & homogenous networks
- closure & central positions
- strong ties
- cognitive proximity
assemble resources to exploit opportunities
What is bootstrapping?
Bootstrapping is using resources that you may not own. Entrepreneurs often commit only limited resources themselves – the resources they can afford to lose. They find ways of using resources that they do not own by partnering with others. Actually, minimizing your ownership of resources reduces your risks and gives you more flexibility – it allows you to commit (and de-commit) quickly to new opportunities.
type of resources:
Financial capital
Human capital, e.g. education, training, and previous managerial or industry experience.
Social capital, e.g. derived from access to personal networks of friends and commercial
contacts.
It is social capital that enables you to build your credibility with all these stakeholders in your business. Networks can therefore increase your flexibility and reduce, or give you early warning of, the risks you face. They also might provide you with your first customers, or provide you with lowcost or free office space.
Character traits of entrepreneurs?
Need for independence need for achievement internal locus of control (believe can control own destiny) creativity, innovation, and opportunism acceptance of risk and uncertainty
factors that influence the entrepreneurial character
nationality ( individualism versus collectivism, power distance, uncertainty avoidance, and masculinity versus femininity)
education (highly educated people tend to be more entrepreneurial and successful)
age and partnering (middle age or very young entrepreneurs)
immigration and ethnicity (integration to a foreign country is positively associated)
gender (woman less likely to start a business than men)
Dimensions for measuring creativity
Abstraction connection perspective curiosity boldness paradox complexity persistence
How entrepreneurs manage
Relationships: entrepreneurs are good at developing relationships with customers, staff, suppliers and all the stakeholders in the business.
Strategy development: entrepreneurs develop strategy differently. Successful entrepreneurs develop a strong vision of what they want their business to become.
Decision-making: entrepreneurs adopt an incremental approach to decision-making, despite their strong long-term vision.
Risk mitigation: whilst entrepreneurs are prepared to take measured risks, they always want to keep them to a minimum
Key activities are the most important things that you need to get right to make your business model work. Some will be critical success factors:
Key pre-launch activities: a working prototype before trying to get finance and you certainly need to have refined that prototype and be able to deliver the product in the required volumes before you go to market.
Key operating activities: Your business model and the operational imperatives associated with the three core value propositions have important implications for your key operating activities. It is not just about urgent tasks – most are urgent for a start-up. It is not just about identifying factors that might set you back- there will be many of these. It is about deciding which things might fundamentally affect the success of the venture. Start by considering whether you are
low-price/low-cost, high differentiation, or customer focus oriented.
five types of operation processes involved in manufacturing:
Project,
Jobbing,
Project and jobbing manufacture requires a high degree of specialist knowledge
and skill and may require expensive specialist equipment.
Batch,
Line, and
Continuous
Line manufacturing involves the ability to
organize assembly and manage repetitive, routine operations efficiently and effectively.
What is franchising?
Franchising is another form of partnership. A franchise is a business in which the owner of the name and method of doing business (the franchisor) allows a local operator (the franchisee) to set up a business under that name offering their products or services.
What is sweat equity?
the share each has might reflect the cash, intellectual property or simply the time and
effort they have put in to get the business off the ground.
Building the organization structure:
Informal: The most typical organization structure seen in a small-scale start-up is the spider’s web. The founder sits at the center of the web with each new member of staff reporting to them. It works for up to about 20 staff. Beyond that it becomes increasingly inefficient.
Hierarchy: The larger an organization the greater the need for a hierarchical structure. There is no ‘best’ structure. Each division might have its own departmental structure.
Matrix: A business that has multiple products, functions or geographic locations still needs to coordinate activities across all these dimensions. The organizational structure used to aid this is the matrix structure.
Team-working: The matrix blueprint is also the basis for bringing together informal selforganizing project teams from different departments, division or geographic parts of an organization. It is used extensively in firms that seek to encourage creativity and innovation. They bring together different functional disciplines, foster communication and interaction, and can be highly flexible.
When to use what organizational structure?
Task = T Environment = E
T = simple, E = stable
quadrant 1:
machine bureaucracy
hierarchical structure
tight controls
T = complex, E = stable
quadrant 3:
hierarchical structure
Matrix sub-structures
Adherence to established protocols
T = simple, E = changing
quadrant 2:
hierarchical structure
Matrix sub-structures
Considerable discretion
T = complex, E = changing
quadrant 4:
Organic structure
Autonomous sub-structure
Considerable freedom
When to use what organizational structure?
Task = T Environment = E
T = simple, E = stable
management is concerned with:
handling complexity in organizational processes and the execution of
work. It is lined to the authority given to managers within a hierarchy.
Leadership on the other hand is concerned with
setting direction, communicating and motivating. It is about principles and emotion and less detail. If management is the head, leadership is the hart of an organization.
Role of leader (burns,2014)
Having a vision for the organization
Being able to develop strategy
Being able to communicate effectively, particularly the vision
what is situational or contingency theory?
The appropriate leader style to adopt depends upon how these factors interact.
the leader, the task, the group being led and the situation or context.
Three broad styles of leadership have been popularized:
Authoritarian: This style focuses decision-making powers in the leader. It is most appropriate in times of crisis but usually fails to win ‘hearts and minds’.
Democratic: This style favors group decision-making and consensus building. It is more appropriate in circumstances other than crisis.
Laissez-faire: This style allows a high degree of freedom for followers. However, a leader
adopting this style is often perceived as weak.
Contingency theory emphasizes that there is no one ‘best’ way of managing or leading. It depends on the interaction of the factors ‘leader, task, group, and context/situation’.
Contingency theory emphasizes that there is no one ‘best’ way of managing or leading. It depends on the interaction of the factors ‘leader, task, group, and context/situation’.
Contingency theory emphasizes that there is no one ‘best’ way of managing or leading. It depends on the interaction of the factors ‘leader, task, group, and context/situation’.
Contingency theory emphasizes that there is no one ‘best’ way of managing or leading. It depends on the interaction of the factors ‘leader, task, group, and context/situation’.
Leader and task scoring grid?
Concern for people (CFP)
Concern for task (CFT)
CFP = low, CFT = low
poor leadership
CFP = high, CFT = low
Country club
CFP = low, CFT = high
task leadership
CFP = high, CFT = high
team leadership
in between all, firm but fair leadership
Leader and group matrix:
Group autonomy in decision-making (GAD) leaders authority (LA)
GAD = low, LA = low,
paternalistic
GAD = high, LA = low,
participative
GAD = low, LA = high,
autocratic
GAD = high, LA = high,
consultative
leader and context/situation (thomas-kilmann conflict modes)
assertiveness (A)
cooperativeness (C)
A = low, C = low
Avoiding
may involve side-stepping an issue or withdrawing from the conflict altogether
A = high, C = low
Competing
individuals are concerned for themselves and peruse their own agenda forcefully, using power, rank or ability to argue in order to win the conflict
A = low, C = high
Accommodating
individuals want to see the concerns of others satisfied (run the risk of not making their own views heard)
A = high, C = high
Collaborating
issues get addressed but individuals are willing to work with others to resolve conflict, perhaps finding alternatives that meet everybody’s concerns
in the middle Compromising
the diplomatic, expedient solution to
conflict which partially satisfies everyone.
According to Handy what 4 factors should be looked at when choosing a structure, leadership style and organizational culture?
Size (big = apollo, small = athena) work patterns (repetitive and routine = apollo, continuaiously changing = zeus or dionysus BUT IF IT IS IN GROUPS athena is better) life cycle (short and new product development is important = athena, long = apollo) people (profs, young people, educated people = dionysus, countries with conformist cultures = apollo, countries with individualism = zeus or dionysus)
Attributes, skills and behaviours of entrepreneural leaders
- visionary
- good communication/motivator
- strategic thinker and learner
- emotionally intelligent with strong interpersonal skills
- relationship builder
- teamplayer
- builder of confidence
- builder of an open organization that shares information
- clarifier of ambiguity and uncertainty
- builder of empowering opportunities
