Entrepreneurship Theory - Innovation and Entrepreneurship - Literature review Example

Entrepreneurship Theory Innovation & Entrepreneurship Introduction Over the years, many researchers have been widely involved in discussing the relationships amid entrepreneurship and innovation grounded on various aspects such as process, structure, and strategy pertaining to entrepreneurship or innovation. On the other hand, other researchers have been able to throw some light on the conceptual relationship between entrepreneurship and innovation. Nonetheless, it is apparent that there has been a growing importance of innovation to entrepreneurship which can be identified through a dramatic increase in literature dealing with the role as well as nature of innovation (Elbaz et al., 2013). Evidently, it has been propounded that entrepreneurship has gained noteworthy status as a legitimate scholarly research topic, coupled with growing interests of the public towards this subject. In this regard, it is further stated that academic journals such as Journal of Business Venturing has been identified to carry voluminous articles pertaining to entrepreneurship (Stevenson & Jarillo, 2012). However, Nielsen et al. (2012) noted that theories pertaining to entrepreneurship are occupied with dilemmas and tautness which may seem to be contradictory in nature (Nielsen et al., 2012). Correspondingly, this essay intends to conduct a critical review of literatures from a wide range of scholarly sources pertaining to innovation and entrepreneurship. Defining Entrepreneurship It has been observed that different authors have provided dissimilar views for entrepreneurship which reveals that there lacks unanimity in the viewpoints of authors towards entrepreneurship. According to Kuratko (2013), over the last two decades, entrepreneurship has appeared as arguably one of the most imperative economic forces that the world has ever experienced. Besides, it has been argued that entrepreneurial revolution has radically impacted the world business periphery to a considerable extent. In this regard, it has been stated that entrepreneurship firmly relates with continuous innovation and creativity (Kuratko, 2013). Correspondingly, Lumpkin & Dess (1996) stated that entrepreneurship is an imperative aspect for both existing firms as well as for start-up ventures. It has been affirmed that entrepreneurship deals with searching of business opportunities that contribute towards attaining business expansion, wealth creation as well as facilitates in technological progress. Outlining the importance of entrepreneurship Lumpkin & Dess (1996) further illustrated that in the current highly dynamic business environment and uncertain economic condition, entrepreneurial activity serves as a major engine that drives economic growth through the creation of new business along with jobs. In this backdrop, it has been stated that entrepreneurship is an imperative feature for firms performing exceptionally. Correspondingly, Bull & Willard (1993) has propounded a definition of entrepreneurship according to which it is considered as an act of innovation that encompasses bestowing existing resources with new wealth-producing capacity (Bull & Willard, 1993). Hussain et al. (2011) noted that entrepreneurship is an art or a science of innovation and risk taking for acquiring benefits in the form of profit in the business (Hussain et al., 2011). According to Shane (2003), entrepreneurs are different from other people and in the similar manner it has been argued that successful entrepreneurs are distinct from unsuccessful entrepreneurs (Shane, 2003). In addition, Austin et al. (2006) have attempted to conduct a comparative analysis of the social and the commercial entrepreneurships. It has been observed that social and commercial entrepreneurships share certain similarities and there are certain differences between the two approaches of entrepreneurship. Accordingly, it has been stated that social entrepreneurships are largely associated with fostering innovation with social purpose and objectives. On the other hand, it has been noted that commercial entrepreneurships are involved in innovation motivated with fashioning profitable operations that would result in achieving certain private gain. However, in terms of similarities, it has been identified that both social and commercial entrepreneurships require human as well as financial sources for attaining success (Austin et al., 2006). Defining Innovation Zhou et al. (2005) noted that innovation is generation as well as acceptance of ideas and processes which are perceived as new. In this regard, it has been highlighted that there lies two types of innovation which include incremental and breakthrough. Notably, it is argued that incremental changes are a continuous process that involves minor changes in technologies that ensure minimal improvement in the existing performance. Conversely, it is stated that breakthrough innovation involves significant alterations in the technologies that enable considerable improvement and transformation in the performances. It has also been argued that strategic orientation serves as an important capability of a firm. This strategic orientation is broken down into three sub-orientations among which entrepreneurial orientation is considered as the key driver for innovation (Zhou et al., 2005). McFadzean et al. (2006), state that there is no single definition of innovation. In this regard, it has been stated that literature dealing with innovation had resulted in immense diversity in terms of views which has created considerable amount of confusion within the subject area. Correspondingly, McFadzean et al. (2006) have also attempted to provide a comprehensive definition of innovation. Accordingly, in the words of McFadzean et al. (2006), innovation is a practice that offers organisations with added value and newness through the creation of new procedures, products along with services and a new approach of commercialisation (McFadzean et al., 2006). Shaw et al. (2005) noted that apart from internal and external factors, new technology also influences innovation (Shaw et al. 2005). Innovation and Entrepreneurship Drucker & Drucker (2007), state that innovation is a specific tool for entrepreneurs. In this regard, it has been stated that innovation facilitates entrepreneurs to exploit changes as opportunities related to different businesses and services. Moreover, it has been stated that entrepreneurs are required to search for sources of innovation as well as the changes that represent opportunities for successful innovation (Drucker, & Drucker, 2007). On the other hand, a similar view has been propounded by Bessant & Tidd (2011), where it has been argued that innovation is an imperative factor for the success of entrepreneurs. It has been further claimed that innovation is closely associated growth that drives prosperity and success. Innovation has been considered to be fundamental to entrepreneurship. However, it has been argued that innovation does not emerge automatically. In this regard, it has been emphasised that innovation is firmly driven with the entrepreneurship that reflects the mixture of vision, desire, dynamism, enthusiasm, judgement and insights that enable placing ideas into realities. At the same time, it has been argued that achieving innovation is not a very easy task, it requires entrepreneurs to confront with numerous challenges. Correspondingly, it is stated that only those entrepreneurs are able to exploit the opportunities offered by innovation who successfully overcome the challenges and hurdles that impede the innovation (Bessant, & Tidd, 2011). McFadzean et al. (2006) stated that internal and external environment act as a strong determinant for innovation and entrepreneurships. Besides, it is stated that in order to foster innovation and entrepreneurship firms are required to prudently scan both internal as well as external environment. It has been further argued that there exists a gap in terms of explanation available for innovation and entrepreneurial dynamics. Correspondingly, it has been stated that in order to identify the relationships between the innovation and entrepreneurships, it is crucial to derive an understanding regarding entrepreneurial vision, actions and attitudes. Moreover, it has been stated that entrepreneurial attitudes serve as a critical component for deriving an understanding regarding the linkage of innovation and entrepreneur. Responsively, it has been affirmed that there are two key components that stimulate an individual to foster entrepreneurial tendencies. Accordingly, unfavourable situation or the desire to leverage business opportunities is identified to stimulate entrepreneurial tendencies in an individual. Moreover, entrepreneurial attitudes such as propensity to take risks and persistence along with confidence among others are also determined to be the other major factors for promoting an individual to develop entrepreneurial tendencies. The entrepreneurial vision is considered as the second element worth to be considered in order to comprehend the relationship between innovation and entrepreneurship. In addition, it has been ascertained that vision facilitates an individual to face the challenges encountered in a proactive manner. Furthermore, the activities of entrepreneurs are perceived to have a considerable impact on the performance of the firm. An entrepreneur is required to perform a wide range of activities. Subsequently, it has been stated that as the firm expands, the entrepreneur is required to search for business opportunities. McFadzean et al. (2006) concluded that all these three components ultimately create the needs for innovation within the firm (McFadzean et al., 2006). Shane & Venkataraman (2000), state that not all entrepreneurs are able to exploit the entrepreneurial opportunities in the same expected manner. This is owing to the fact that not all individuals are similar but are unique and embrace certain differences. The differences in the perceptions often result in the variances in the outcomes derived from the exploitation of entrepreneurial opportunities (Shane & Venkataraman, 2000). Stevenson & Jarillo (1990) argue that the concept of corporate entrepreneurship has accorded considerable importance over the last few years. The authors related the concept of corporate entrepreneurship with oxymoron. In addition, Stevenson & Jarillo (1990) noted that growth, innovation and flexibility as the key traits associated with entrepreneurship. However, these traits were also recognised to be associated with large corporations akin. Entrepreneurship has been considered as indistinguishable from innovation (Stevenson & Jarillo, 1990). Wiklund & Shepherd (2003) from the perspective of resource-based view theory argue that firms possessing valuable, rare and inimitable resources often succeed in achieving high performance (Wiklund & Shepherd, 2003). Subsequently, Alvarez & Busentiz (2001) have attempted to explore the relationship between the resource-based theory and entrepreneurship. From their study, it has been revealed that entrepreneurs owe individual-specific resources that largely enable them to recognise new opportunities and compile the resources for exploiting the identified opportunities (Alvarez & Busentiz, 2001). According to Knight (1997), entrepreneurship is an essential standpoint and is considered as important to strategic innovation, especially during the changing external environment in which the firm operates. It has been further stated that entrepreneurial is fundamental as it promotes superior performance and offers firms with greater competitive advantages (Knight, 1997). Moreover, Florida & Kenney (1988) noted that the role of venture capital is imperative in high technology entrepreneurships. In this regard, it has been firmly advocated that innovation and entrepreneurship rely on the host of interactions, networks and linkages which are characterised by venture capital. However, it has been argued that in certain circumstances venture capital leads to unavoidable conclusions. In addition, it has been stated that venture capital alone is not adequate to promote high technology entrepreneurships. Nonetheless, it is ascertained that technology oriented venture capital contributes towards the occurrence of hybrid variants which grew up synergistically in conjunction with high technology businesses as well as with an array of support mechanisms that offer a favourable platform for innovation and entrepreneurship (Florida & Kenney, 1988). Besides, Wiklunda & Shepherd (2005) state that financial capital is an important aspect that needs to interact with entrepreneur orientation (EO) for promoting firm innovativeness. Also, it has been firmly asserted that small businesses with high degree of EO accompanied with substantial access to financial capital are able to accord impressive performance (Wiklunda & Shepherd, 2005). Conclusion From the foregoing discussion, it has been comprehended that the concept of innovation and entrepreneurship has acquired significant importance amid the scholars. The growing importance of innovation and entrepreneurship can be identified through the wide range of literatures representing innovation and entrepreneurship. The emergence of entrepreneurial revolution has dramatically influenced the businesses across the world. However, it has been identified that there has been different viewpoints revealed by scholars towards the concept of entrepreneurship. In this regard, many scholars have regarded entrepreneurship as an engine essential for achieving growth and prosperity. While on the other hand, a few have regarded it as an act of innovation that facilitates in realising new wealth-producing capacity. Similar to entrepreneurship, it has been further identified that there has been a lack of unanimity in terms of defining innovation. Different scholars have postulated their diverse views towards innovation which has created a considerable extent of confusion. As far as innovation and entrepreneurship are concerned, it has been identified that innovation serves as a key tool for entrepreneurs. Moreover, it has been ascertained that innovation is essential factor for the success of the entrepreneurs. Correspondingly, innovation facilitates entrepreneurs to exploit opportunities in the most efficient manner. At the same time, it has been further ascertained that in order to determine the he relationship between innovation and entrepreneurs it is crucial to understand the certain components such as entrepreneurial attitudes, vision and action. Capital venture is also identified to stimulate innovation and entrepreneurships. However, capital venture alone is identified to be not sufficient to promote innovation and entrepreneurship. Scanning of internal and external environment is also determined to be important for stimulating innovation and entrepreneurship. References Austin, J., Stevenson, H., & Wei-Skillern, J. (2006). Social and commercial entrepreneurship: same, different, or both. Entrepreneurship Theory and Practice, 1-22. Alvarez, S. A., & Busentiz, L. W. (2001). The entrepreneurship of resource-based theory. Journal of Management, 27(6), 755-775. Bull, I., & Willard, G. E. (1993). Towards theory of entrepreneurship. Journal of Business Venturing, 8, 183-195. Bessant, J., & Tidd, J. (2011). Innovation and entrepreneurship. United States: John Wiley & Sons. Drucker, P. F., & Drucker, P. F. (2007). Innovation and entrepreneurship: practice and principles. United Kingdom: Routledge. Elbaz, J., Binkour, M., & Majdouline, I. (2013). Innovation and entrepreneurship: An empirical study of Moroccan Firms. International Conferences on Economics and Management of Network, 1-23. Florida, R., & Kenney, M. (1988). Venture capital and high technology entrepreneurship. Journal of Business Venturing, 3, 301-319. Hussain, M. F., Afzal, A., Asif, M., Ahmad, N., & Bilal, R. M. (2011). Impact of innovation, technology and economic growth on entrepreneurship. American International Journal of Contemporary Research, 1(1), 45-51. Knight, G. A. (1997). Cross-cultural reliability and validity of a scale to measure firm entrepreneurial orientation. Journal of Business Venturing, 12, 213-225. Kuratko, D. (2013). Entrepreneurship: theory, process, and practice. United States: Cengage Learning. Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. The Academy of Management Review, 21(1), 135-172. McFadzean, E., O’Loughlin, A., & Shaw, E. (2005). Corporate entrepreneurship and innovation part 1: the missing link. European Journal of Innovation Management, 8(3), 350-372. Nielsen, S. L., Klyver, K., Evald, M. R., & Bager, T. (2012). Entrepreneurship in theory and practice. United Kingdom: Edward Elgar Publishing, Shane, S. (2003). A general theory of entrepreneurship: the individual-opportunity nexus. United Kingdom: Edward Elgar Publishing. Shane, S., & Venkataraman, S. (2000). The promise of enterpreneurship as a field of research. The Academy of Management Review, 25(1), 217-226. Shaw, E., O’Loughlin, A., & McFadzean, E. (2005). Corporate entrepreneurship and innovation part 2: a role- and process-based approach. European Journal of Innovation Management, 8(4), 393-408. Stevenson, H. H., & Jarillo, T.J. (2012). A paradigm of entrepreneurship: entrepreneurial management. Strategic Management Journal, 11, 17-27. Wiklund, J., & Shepherd, D. (2003). Knowledge-based resources, entrepreneurial orientation, and the performance of small and medium-sized businesses. Strategic Management Journal, 24, 1307-1314. Zhou, K. Z., Yim, C. K., & Tse, D. K. (2005). The effects of strategic orientations on technology- and market-based breakthrough innovations. Journal of Marketing, 69(2), 42-60. Read More