The Entrepreneur An Evolutionary Concept
The word evolutionary is vague. Economists like Jolink and Hodgson stated it signifying little or nothing. Meanwhile, evolutionary economists like Schumpeter and Kirzner re-examined and accelerated the evolutionary theory by introducing themes like innovation confined to an economic system. Innovation means originality, newness, freshness, uniqueness as in the dictionary. The innovations tend to ignore or/and address the economic changes spurred by the dynamic entrepreneur, who is engaged in creating wealth and job towards economic development.
To our understanding this entrepreneur undergoes uncertainties building on decisions at each phase of business life cycle. This may differ between incumbent entrepreneurs while identifying opportunities and utilising it. The entrepreneur may be certain or uncertain on the out come of such entrepreneurial moves but this associates with a lot of probabilities. We cannot deprive him from optimising on the capabilities possessed, thereby taking the best decision optimising upon resources and capabilities. These decisions are clearly a result of an evolution by the individual, the endowments and the business environment, which is always volatile, uncertain, complex and ambiguous (VUCA).
An entrepreneur’s individual capability may be divided into three components i.e. entrepreneurial spirit, human capital and venture capital. In the entrepreneurial context this ‘agent’ neither knows the outcome or can calculate corresponding probabilities.
The entrepreneurial component comprises the indescribable characteristics as stated in Schumpeter’s entrepreneur. It is difficult to discrete the entrepreneur and the association of “risk” with the element of being human on the entrepreneurial composition. We must understand that ‘every human being has a prospective of a human action’.
The second component ‘human capital’ refers to one of the more successful approach to research. This approach constituted by Schultz and elaborated by Becker attempts to elucidate optimal investment in human capital while delivering insights on the distribution of income. The emphasis is on the consequence of human capital towards establishing an enterprise. If the incumbents expect the returns of going entrepreneurial to be more than being an employee, on become an entrepreneur will be preferred.
The other element is venture capital. Few think entrepreneurs as a risk taker while most view as a capitalist maker. This is not contradictory but complementary. The capital making is normally possible by taking calculated risk. Whether he borrows from other resources or generates is just for the good of understanding it. Few fails to sustain and drop out of their venture. Some diversify from the risks and shallow down to lower risky businesses. What is imperative to understand as to how the entrepreneur, the actor or agent in discussion, manoeuvres to his success in establishing the firm of his choice, to the industry he wishes to associate with and lastly in further establishing the way to emerging markets. The presence and availability of social networks should not be discounted, as networks have the ability to influence on entrepreneurial actions.
Intermediate assessment
Once firms are established, they are engaged in entrepreneurial extension to becoming innovative between competitive pressures to expand into newer territories. Here in, early entrants have a competitive advantage by utilising the market potential in the struggle to compete and survive against the larger established ones. This is where the evolutionary intent continues.
The best practices by the entrant firms are commonly replicated. But at times in short run, some firms have expressed higher return in profits those that have emulated the ideas and adopted to best suit their own markets with higher technological absorption capacity. The other reason could be the market capitalisation and resource utilisation as a result of abundance in the market size.
With entrepreneurial firms growing their existence in the market, the competitive ring increases, and with the growth shrinking some early exits are witnessed. Many lose their capital and vanish, while select ones still march on changing their trajectory, creating followers.
Sources of opportunity and risk
Opportunity drives entrepreneurship and innovation. The discovery sources as in science tends to exploit the excessive demand and supply in the form of inventions. These market imperfections engage high level of interpretations and coordination in different settings.
There are four types of risks associated with the creation the entrepreneurial venture. These are Technological, Market, Execution and Financial risks. Technology risk are connected to the question whether the product/service work? How much money and time is needed to evaluate this? Market risk associates with the uncertainty of will anyone buy it at a price that will return a profit? How will the entrepreneur find its customers? Execution risk relates to the implementation of the incumbent’s business plan and the financial risk circles around the funding.
Technology risk: Seems to be higher in ventures based around technology. This will certainly involve ensuring official protection of intellectual property. Market risk: The customers do not buy technology; they acquire solutions to problems. This must be appropriately addressed. Execution risk: This is very high. The successful commercialisation depends on the ability of technology developers to integrate and synergise with the people who initiate business development. Financial risk: Since this involves generating sources of private capital, the investors shall presume a high return on their investment with a greater degree of control.
The entrepreneur is persistently engaged as an evolutionary balancing the dynamic transformations and challenges caused due to turbulence or VUCA conditions. The above are potential factors that support the entrepreneurial environment. Besides this there are supportive elements needed to encourage the entrepreneurial spirit.
Supportive elements that need to be encouraged
Uncertainties to be minimised
What is the take away?
The entrepreneurs as evolutionist must be role models, taking up the challenge with a creative and distinct leadership. They must inspire. Their entrepreneurial firms must create employment and collective be a role model. They must overcome any kind of unexpected and unknown challenges such as VUCA challenges and exhibit an evolutionary role at each stage in their entrepreneurial journey. Do you have this revolutionary inside you to become a creative entrepreneurial leader?
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