Factors Affecting Entrepreneurial and Economic Growth: The [PDF]

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7

Factors Affecting Entrepreneurial and Economic Growth: The Namibian Case Nico Schutte and Nicolene Barkhuizen It is a known fact that entrepreneurship is closely associated with responsiveness and innovation, two factors that have gained new significance as a source of competitiveness in an increasingly globalized world economy. With technological change and the intensified global competition brought about by globalization and economic independence, the assumption that nurturing entrepreneurship means raising a country's competitiveness today appears more valid than ever.

Keywords: Economic Development, Entrepreneurship, Innovation

I. Introduction It is a known fact that entrepreneurship is closely associated with responsiveness and innovation, two factors that have gained new significance as a source of competitiveness in an increasingly globalized world economy. With technological change and the intensified global competition brought about by globalization and economic independence, the assumption that nurturing entrepreneurship means raising a country's competitiveness today appears more valid than ever. Notwithstanding the fact that we have a better understanding of the building blocks of dynamic processes, economics-based theories and models largely fall short of dealing with the nexus between the self-sufficient entrepreneur and the subsequent economic growth outcomes. The increase of factors of production, i.e., knowledge, human and/or physical capital, cannot alone explain economic development. Innovation and entrepreneurship are needed to transform these inputs in profitable ways, an insight advocated already by Adam Smith`s argument about the size of the market and the scope for specialization. (Andersson and Tollison 1982). Cook (1989) in his article called Third World Economic Development contended that the countries who failed when it came to economic development are the ones that gave only a small role, if any, to private enterprises and did not embrace a market responsive approach to economic policy. He further stated that there is no lack of entrepreneurship in the Third World …

_________________________________________________________________ Nico Schutte, Department of Public Administration, North-West University, Mafikeng Campus, South Africa, 2745, Email: [email protected] Nicolene Barkhuizen, Department of Industrial Psychology, North-West University, Mafikeng Campus, South Africa, 2745 email: [email protected]

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Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 “to release its huge potential, government’s first need to do much less. Above all, they must stop trying to micromanage the process of industrialization, whether through trade policy, industrial licensing, or direct control of state-owned enterprises”. Furthermore, Reynolds et al., in the Global Entrepreneurship Monitor (GEM) 2002 Executive Report, established that countries with high levels of entrepreneurship have been able to stimulate high-levels of economic growth. This was supported through further research which demonstrates that there is a positive relationship between levels of entrepreneurial activity and economic growth across countries (Zacharakis, Bygrave, and Shepard, 2000). According to Porter (1990:125) entrepreneurship is ‗at the heart of national advantage’. Visà-vis the role of entrepreneurship in fuelling economic growth, numerous linkages to verify this fact has been discussed by academics and alike. For any country the role that entrepreneurship plays in their economic development is of obvious importance, leading towards innovations and stimulating positive competition. There is sufficient evidence that economic activity moved away from large firms (post WWII era) to small firms in the 1970s and 1980s. Evident of this aspect is the employment share of the 500 largest American firms also known as the Fortune 500 companies. Their employment share dropped from 20 % in 1970 to 8.5 % in 1996 (Carlsson, 1992 and 1999). 2. LITERATURE REVIEW A literature review shows that, historically, several disciplines have contributed to the development of entrepreneurship and have identified entrepreneurs as rational decision makers and/or capitalists willing to undertake risk by doing things ‗differently‘. This literature review examines how entrepreneurship and economic development has been previously addressed theoretically and empirically. Economic growth studies and Entrepreneurship are two fields with their own distinct literatures. The purpose of this systematic literature review is to provide a comprehensive overview of the landscape of an interdisciplinary field; show its evolution and progress over the past decades and synthesize its findings by combining the insights of the two literatures. The literature analysis aimed at reviewing local and international research to identify the set of competence (knowledge, skills and attitude) that are important for entrepreneurial success and economic growth. It starts with a brief discussion of all the factors that have been identified as crucial for entrepreneurial success and subsequent economic growth, in order to give a background to the importance of competences in entrepreneurship. The article defines those competencies identified in literature as likely to influence entrepreneurial survival and growth, as well as how the lack of competencies can constrain entrepreneurial development and ultimately lead to the failure of entrepreneurship and economic growth. Based on the exploratory literature review a model will be presented on needed competencies that might lead to entrepreneurial success. Given the vast amount of literature on venture success/survival/failure (Gartner et al, 1999:216), this article should not be regarded as a comprehensive review but merely as serving to highlight the importance of matters relating to the research topic. To determine the concepts to be included in the theory of the analysis, a comprehensive number of text books 2

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 and articles were reviewed. The relevant literature is in leading academic journals and annual conference proceedings in such disciplines as new venture creation, entrepreneurship, management, social psychology, economics, organizational behaviour and organization theory. This article limits itself to factors specific to aspects of the functions of entrepreneurship and its subsequent role towards economic growth; it attempts to identify those factors with strong empirical links to entrepreneurial success. The factors identified were divided into the following:  Factors recorded in published articles and books that list competencies factors from other studies.  Factors noted in published articles that show strong evidence linking the competencies factor to entrepreneurial success and subsequent economic growth.  Factors listed in published articles that link education and training as well as the stated proficiencies factors.  Factors that are cited by experts in entrepreneurship models, theories and principles.  Factors noted in general by experts that might be affecting entrepreneurial success and economic growth. 3. THE RELATIONSHIP TO ECONOMIC GROWTH AND THE NAMIBIAN CONTEXT There is a great entrepreneurship enthusiasm in African countries such as Namibia but there is little solid evidence that entrepreneurship promotes economic growth in Sub-Saharan Africa and many other developing countries. A main reason is that many do not become entrepreneurs by choice or because they take advantage of an opportunity but out of survival because they cannot find wage employment and do not have any other source of income. They are forced to start a business and become self-employed. The renewed interest in recent years on research and development and innovation seems to increase the interest in the nexus between entrepreneurship and economic growth. However, it was only recently that economists began to synthesize the knowledge about entrepreneurship and analyse its impact on economic growth. From 1884, Namibia was a German colony, known as SüdWest Afrika, occupied by Germany until 1915. When the German troops surrendered during World War 1, South Africa obtained an allied mandate. The League of Nations gave responsibility to the Union of South Africa to administer the land, which was known as South West Africa (Dana, 1993: 90). The Republic of Namibia gained independence from South Africa on 21st March 1990, following the Namibian War of Independence. Namibia's economy is closely tied to that of South Africa through a number of institutional relationship's - in particular the Southern African Custom's Union and the Common Monetary Area - as well as through extensive trade and financial flows. Namibia has abundant natural resources, good infrastructure and access to markets, but contrary to potential, the economy is not well diversified. Economic activity is concentrated in primary sector activities - the extraction and processing of minerals for export which accounts for 20% of GDP, large scale commercial livestock farming, and fishing. The economy is highly vulnerable to world market price fluctuations of diamonds and uranium, prices and demand remaining crucial to the country‘s economic prospects. 3

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 While Namibia appears to be a prosperous, middle-income country, the estimated GDP per capita of US$ 1,800 camouflages huge income disparities, presenting Namibia one its main economic problems. The majority of the population is poor, with limited access to social services in certain areas. Furthermore, the historic pattern of land ownership means the majority of Namibians are landless or small-scale subsistence farmers. The local currency value of Namibia's principal exports in the first three-quarters of 2000 was 8% higher than in the same period of 1999, but because of the fall in the value of the Namibian dollar, export earnings declined slightly from US$875m to US$861m.

3.1.

Labour market and unemployment Unemployment, including underemployment, is estimated at around 30-40%. Labour force by occupation - agriculture 47%; industry and commerce 20%; services 33%. There has been a contraction in mining employment of almost two-thirds over the past 15 years.

3.1.2. Namibian National Development Framework 3 (NDP3) Notwithstanding the fact that entrepreneurship could enable a society such as Namibia to recognise opportunities (Schumpeter, 1934 and Zahra, 1999) and as such could most groups within the Namibian society benefit. It could also create a more egalitarian society; and enhance Namibia`s national development and growth (Wennekers and Thurik, 1999). In 2004, the Government of the Republic of Namibia launched a document that will see the country as an industrialised nation. This document is known as Namibia Vision 2030 and it states that ―Namibia will be transformed into a knowledge-based society‖ by 2030 (2004, p. 10). However, the document does not mention how this will be achieved. Namibia faces many challenges regarding the transformation and implementation of entrepreneurship programmes (NDP 3, 2008: 195-201). To deal with these challenges facing the Namibian nation, the development initiatives of the country are guided by NDP3 which looks at where Namibia sees itself as a nation in the next two decades. The Government of Namibia has an important role to play, but is only able to provide assistance to a certain extent because the country‘s resources are limited. Furthermore, as socially responsible professionals, entrepreneurs do have specific roles to play within their particular societies. Entrepreneurs could be regarded as change agents in any community, and creating a culture of entrepreneurship and innovation within a particular community will require entrepreneurs to discover or rediscover the various 4

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7

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responsibilities they have to play and the contributions they can make (NDP 3, 2008: 219-226). Subsequently, the need for Namibia to institute a knowledge economy becomes more important than ever, Thompson et al.: (2000, p. 122) argue that a knowledge economy is one where economic value is found more in the intangibles, such as new ideas, software, services and relationships, and less in the tangibles like physical products, tons of steel or acres of land. The Organization for Economic Co-operation and Development (1996, p. 7) defines knowledge-based economies as ―economies which are directly based on the production, distribution and use of knowledge and information‖. However, one cannot talk about entrepreneurship without its connection to the SME sector. The important contribution of a vibrant SME sector to economic growth has been widely acknowledged (Timmons, 1999:17; Henning, 2003:1; McPherson, 2000:514; Baron, 1998:275; Dreisler, Blenker & Nielsen, 2003:383). It is believed that SME`s are the crucial drivers of many economies (Miller, Besser, Gaskill & Sapp, 2003:215; Joubert, Schoeman & Blignaut, 1999:23; GEM, 1999:5). Therefore, most governments, bilateral and multilateral agencies as well as nongovernmental organizations worldwide have policies in place to assist entrepreneurship development (Rogerson, 2001a:115; Honig, 1998:372; Robertson, Collins, Medeira & Slater, 2003:308; Lange, Ottens & Taylor, 2000:5; Luiz, 2001:53). CORPORATE ENTREPRENEURSHIP CONTEXTUALIZED Scholars and researchers are in agreement that, corporate entrepreneurship is all about renewing and stimulating current businesses. It became a contemporary theory to provide a mechanism for business growth, profits increase, enrichment and innovative development of new products, services and processes (Kuratko et al., 1990; Lumpkin & Dess, 1996; Miles & Covin, 2002; Zahra, 1991; Zahra & Covin, 1995; Zahra et al., 1999b). Deliberate and intentional in nature, CE is concerned with various forms of newness (e.g., organizational renewal, innovation, and establishing new ventures) and has its consequences for organizational survival, growth, and performance (Kazanjian, Drazin & Glynn, 2001). Increasingly,CEis found to affect firm performance (Zahra&Covin, 1995; Zahra&Nielsen, 2002). From a resource-based perspective, CE is a key means of accumulating, converting, and leveraging resources for competitive purposes (Floyd & Wooldridge, 1999) such as developing and using product, process, and administrative innovations to rejuvenate and redefine the firm and its markets or industries (Covin & Miles, 1999). An intangible resource vital to 21st century organizations (Hitt&Ireland, 2002; Ireland& Hitt, 1999), knowledge can be created through effective CE (Kuratko, Ireland & Hornsby, 2001). In fact, Zahra et al. (1999: 169) argue that, ―. . . formal and informal CE activities can enrich a company‘s performance by creating new knowledge that becomes a foundation for building new competencies or revitalizing existing ones.‖ Embedded primarily within the firm‘s human capital (Lepak & Snell, 1999), knowledge is information that is laden with experience, judgment, intuition, and value (Nonaka & Takeuchi, 1995). Both explicit and tacit in nature, knowledge is mutable and can be thought of as true justified belief (von Grogh, Ichijo & Nonaka, 2000). 5

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7

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Given its centrality to forming competitive advantages that often are the path the firm travels to outperform its rivals (Coff, 2002; Grant, 1996), today‘s firms benefit by facilitating the development and management of knowledge stocks and flows between people and organizational units (Ireland, Hitt, Camp & Sexton, 2001).We argue that through effective CE, firms develop knowledge and use it as a continuous source of innovations to outperform competitors (Kazanjian et al., 2001). In this context, CE is a knowledge enabler as it forms and subsequently uses or applies knowledge (von Grogh et al., 2000)—knowledge that at its best, is valuable, new, unique, and competitively relevant (Zahra et al., 1999). ENTREPRENEURSHIP CONTEXTUALIZED It is believed by scholars and researchers that entrepreneurship is considered to be a critical factor in the process of economic growth and development and in this case the Namibian economy for several reasons. It is a method by which the Namibian people could transforms technological information into products and services (Shane & Venkataraman, 2000). They further argue that, entrepreneurship reveals and alleviates not only technological, but also time-based and spatial wastefulness in an economy (Shane & Venkataraman, 2000). In addition, for the Namibian people, it would important to acknowledge the fact that, there are several peculiar characteristics, cognitions, and social conditions that might shape an individual‘s choice to follow entrepreneurial activities (Carter, Gartner, Gatewood and Shaver，2003). Moreover, the roots of the concept of entrepreneurship emerged in the thirteenth century, and originated from a French word, ―entreprendre‖, which refers to the taking of ‗one‘s own hand‘, or to do something (Landstrőm, 2005: 8). According to Chell, Haworth and Brearley, (1991: 13), the first one to take up thinking about the role of entrepreneurs in economy was Cantillon (1680's - 1734). He classified economic agents into three groups: (1) landowners (2) entrepreneurs and (3) hirelings Additionally, Cantillon brought the concept of entrepreneurship under the intention of academia and expanded to his original definition with the risk factor. They further postulated that Baudeau broadened the concept of the entrepreneur by classifying the entrepreneur as an innovator. Baudeau (1771) suggested that the function of the entrepreneur as an innovator and thus brought invention and innovation into the debate. Furthermore, he emphasized the capacity to process knowledge and information as that which makes the entrepreneur a lively and active economic agent. This is in accordance with the subsequent work of Schumpeter (1934) an Austrian economist who associated entrepreneurship with the concept of innovation applied to a business context: ‘The entrepreneur is the innovator who implements change within markets through the carrying out of new combinations. The carrying out of new combinations can take several forms; 1) the introduction of a new good or quality thereof, 2) the introduction of a new method of production, 3) the opening of a new market, 4) the conquest of a new source of supply of new materials or parts, 5) the carrying out of the new organization of any industry.’ 6

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 A third French economist Jean-Baptiste Say, came to the forefront during the late 1700s as he theorizes that entrepreneurship also include behavioural aspects and that it should get more attention (Chell, Haworth and Brearley, 1991: 14-15). Ever since, entrepreneurship has played a pivotal role in the development of business as a distinct academic and research topic. Earlier research about entrepreneurship mostly emphasised the ways in which the establishments of capitalism and industrialism emerged, probable due to the lack of agreement between the French approach and that of the English economist, Adam Smith (1723-90). ―From the time of the publication of Smith‘s seminal work ―The Wealth of Nations‖, the function of the entrepreneur has been combined with that of the capitalist; profits were regarded solely as a reward for risking capital‖ (Chell, Haworth and Brearley, 1991: 14-15). Schumpeter phrased his analysis in an initial state of general ―equilibrium‖. He viewed the market process as a dynamic process driven by creative destruction: ―It [referring to the market process] must be seen in its role in the perennial gale of creative destruction; it cannot be understood irrespective of it…‖ (1950: 83). Schumpeter linked the market process of creative destruction – which he associated with ―new combinations‖ – and therefore economic development and progress, to innovation and distinguished the entrepreneur as the prime innovator. In addition to being an innovator, the entrepreneur is a leader. His actions channel the means of production into previously unexploited markets and other producers follow him into these new markets (1960: 89). Kirzner best described the market impact of Schumpeter‘s entrepreneur when he wrote: ―…for Schumpeter the essence of entrepreneurship is the ability to break away from routine, to destroy existing structures, to move the system away from the even, circular flow of equilibrium‖ (1973: 127). Although not the emphasis of his analysis, Schumpeter recognized that the entrepreneur (in addition to all economic actors) would have to adapt to his surrounding institutional environment: …the field of individual choice is always, though in very different ways and very different degrees, fenced in by social habits or conventions and the likes: it still remains broadly true that, within the circular flow, everyone adapts himself to his environment so as to best satisfy given wants….as best he can (1960: 91). However, Kirzner recognized the role that the entrepreneur would play in economic development. ―In economic development, too, the entrepreneur is to be seen as responding to opportunities rather than creating them; as capturing profit opportunities rather than generating them…Without entrepreneurship, without alertness to the new possibility, the long-term benefits may remain untapped‖ (1973: 74). So, for Kirzner, the competitive market and entrepreneurship are inseparable – the competitive process is in essence entrepreneurial (1973: 15-16). For Kirzner, entrepreneurship does not just involve alertness, but also the exploitation of the opportunity realized through alertness: It follows, then, that for opportunities for social improvement to be more rapidly discovered and exploited, these opportunities must be translated into opportunities that are not merely encountered…but into opportunities that are to the advantage of these potential entrepreneurs, and that most effectively excite their interest and alertness… (ibid, 149). 7

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 In accordance Mises an Austrian economist wrote: In any real and living economy, every actor is always an entrepreneur and speculator… Economics, in speaking of entrepreneurs, has in view not men, but a definite function. This function is not the particular feature of a particular special group or class of men; it is inherent in every action and burdens every actor…The term entrepreneur as used in catalectic theory means: acting man exclusively seen from the aspect of the uncertainty inherent in every action (1949, 252-3). Conversely, it is essential to remember that Kirzner‘s entrepreneur need not own any resources to fulfill his function: The pure entrepreneur…proceeds by his alertness to discover and exploit situations in which he is able to sell for high prices that which he can buy for low prices…It is not yielded by exchanging something the entrepreneur values less for something he values more highly. It comes from discovering sellers and buyers of something for which the latter will pay more that the former demand. The discovery of a profit opportunity means the discovery of something obtainable for nothing at all. No investment is required; the free ten-dollar bill is discovered to already be within one’s grasp (1973: 48). McClelland (1961: 65) defines an entrepreneur as someone who exercises control over production that is not just for his or her personal consumption. The characteristics of entrepreneurs from a behaviourist perspective are that they are social beings and products of their environment. Numerous scholars have shown that entrepreneurs reflect the characteristics of the period and the places, in which they live (Ellis, 1983; Fillion, 1991; Gibb and Ritchie, 1981; Newman, 1981; Toulouse, 1979). Looking at the behaviourist perspective, it is clear that a scientific profile for entrepreneurs has not yet been established with certainty (Nieman et al. 2003).  Perspectives on entrepreneurship PERIOD EMERGENT THEMES AUTHORS What entrepreneurs do: 1700 - 1950 The entrepreneur personal characteristics: 1960 - 1980 What entrepreneurs do: 1980 onwards What support is needed by entrepreneurs: 1985 onwards

An economic Perspective A behaviourist perspective

Cantillon, Say and Schumpeter Weber, McClelland

A managerial perspective

Drucker, Mintzberg

Social perspective , including Gartner, economists, geographers and Bygrave, sociologists Timmons What entrepreneurial activities An entrepreneurship perspective are and competencies needed: 1990 onwards

Dana,

Source: Amended from Nieman et al. (2003). 5.1.

THE EVOLUTION OF ENTREPRENEURSHIP THEORY A SYNTHESIS Adam Smith (1776) - An entrepreneur is a person who acts as agent in transforming demand into supply. Jean Babtiste Say (1803) - An entrepreneur is a person who shifts resources from an area of low productivity to high productivity. 8

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John Stuart Mill (1848) - An entrepreneur is a prime mover in the private enterprise. The entrepreneur is the fourth factor of production after land, labor and capital. Carl Menger (1871) - The entrepreneur acts as an economic agent who transforms resources into products and services. The entrepreneur transforms and gives added value. Joseph Aloysius Schumpeter (1934) - An entrepreneur is an innovator. The economy moves through leaps and bounds and the prime mover is the entrepreneur through the process of creative destruction. Alfred Marshall (1936) - The process of entrepreneurship or business development is incremental or evolutionary. It evolves from sole proprietorship to a public company. David McClelland (1963) - The entrepreneur is a person with a high need for achievement. This need for achievement is directly related to the process of entrepreneurship. MODELS OF ENTREPRENEURSHIP Timmons‘ model of the entrepreneurial process is based on the work of Timmons and Bygrave. They were the initiators of Global Entrepreneurship Monitor (GEM), and have been involved in helping economies measure their entrepreneurial activity. According to Chell and Haworth (1987), in Furnham (1992: 175), Timmons‘ model of the entrepreneurial process is one of the most advanced approaches in understanding entrepreneurship to date because it emphasises capitalising on opportunities, rather than only on mobilising resources. The key factors in the Timmons model are the opportunity, the entrepreneur and the resources required to start a new organisation. Uncertainty refers to conditions over which the entrepreneur has little or no control, such as turbulence in markets. The Timmons model bases itself on the entrepreneur. The entrepreneur searches for an opportunity, and on finding it, shapes the opportunity into a high-potential venture by drawing up a team and gathering the required resources to start a business that capitalizes on the opportunity. In the process of starting the business, the entrepreneur risks his or her career, personal cash flow and net worth. The model bases itself on the premise that the entrepreneur earns rewards in commensuration with the risk and effort involved in starting or financing the business. According to Timmons and Spinelli (2007: 88) the driving forces behind a successful new venture creation can be illustrated by the following Timmons Model: Figure 1: The Timmons Model of the Entrepreneurial Process

According to three visible components new depicted in

figure 1 are there, crucial for a successful business as the model above 9

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7

6.1.

namely: the opportunity, the entrepreneur (management team) and the resources needed to start the venture and make it grow. Out of these three crucial components the Timmons Model of the Entrepreneurial Process starts with an opportunity. (Timmons and Spinelli, 2007: 88). The Opportunity Factor The shape, size and depth of this opportunity form the shape, size and depth of both the team and the resources as per model. Furthermore, Timmons (1990: 17) argues that, any single spark which ignites an explosion of entrepreneurship can be regarded as an opportunity. Timmons emphasises that at the centre of an opportunity is always an idea; however, not all ideas should be regarded as opportunities. If individuals are able to understand that entrepreneurship is a market driven process, they will also opportunities are generally created due to the changing nature of the current conditions, chaos, inconsistencies, information gaps and a variety of other vacuums, because there are entrepreneurs who are easily able to recognise them and pursue them (Timmons, 1990: 19). Similarly, Timmons are also of the opinion in that if an entrepreneur has the right resources, he or she will deliberately search for an opportunity and, on finding it, develop it so that it has the potential to become a high potential venture (Timmons, 1989). In support, Bygrave (2004: 12) states that in order to recognise an opportunity, an individual must be prepared, as in any other profession. ―... Luck is where preparation and opportunity meet‖. Bygrave notes that the biggest misconception people have about starting a new enterprise is that the idea must be unique, and too many entrepreneurs have an obsession about having a unique idea. Once entrepreneurs recognise their unique idea, they believe that people are going to steal their ideas. As a result, they become secretive and are unwilling to share their knowledge and wisdom. Being secretive makes it impossible to evaluate the idea, whether it will be feasible or not. For example, Bygrave (2004: 13) recalls that: ...a computer programmer telephoned and said he had a fantastic idea on a new piece of software. Eventually after I assured him that, I was not going to steal his idea, he told me his ware was for managing hairdressing salons. He was completely floored when I told him in less than a month previously another entrepreneur had visited my office and showed me the exact same idea. According to Timmons and Spinelli (2007: 118) superior business opportunities have four fundamental anchors: i. They create or add significant value to a customer or end-user; ii. They achieve this by solving a significant problem, removing a serious pain-point, or meeting a significant pain or need for which someone is willing to pay a premium; iii. They have robust market, margin and money making characteristics; iv. They are a good fit with the founder and management team at the time and market place, along with an attractive risk reward balance. An entrepreneur is responsible for scanning the business landscape for unexploited opportunities. Identifying and evaluating an opportunity is not an easy task. An entrepreneur must deliberately search for creative ideas that can be converted into new business venture. Converting ideas into opportunities requires one to evaluate each idea. This can be achieved through a viability and feasibility study (Nieuwenhuizen, 2003: 20). 10

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7

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Further, in identifying and evaluating ideas to determine good opportunities, it is important for entrepreneurs to realise that there are characteristics of good opportunities (Timmons and Spinelli, 2007, 90): i. Market demand is a key ingredient to measuring an opportunity, ii. Market structure and size help define an opportunity, and iii. Margin analysis helps differentiate an opportunity from an idea. When determining the risks and rewards it is very important for an entrepreneur to consider the market size and the length of the window of opportunity. In this instance the window of opportunity refers to the time period available for creating the new venture. When markets grow more and more opportunities arise, but as markets matures the window of opportunity starts to close and as a result opportunities decline (Nieuwenhuizen, 2003: 20). Shapero's model of new-venture initiation posits that the decision to initiate a new venture requires two things. First, founders should perceive that starting a new venture is "credible" (i.e., they have intentions toward entrepreneurship). Starting a new venture must be a believable opportunity. Second, new-venture initiation requires some kind of precipitating (or "displacing") event. In turn, credibility requires at least a threshold level of perceptions of feasibility and desirability plus some propensity to act upon the opportunity. Shapero suggests that the process of forming intentions may prove complex. Propensity to act is likely to also have indirect influences on relationships in the model, thus we should test for moderating effects by propensity to act. Shapero also suggests that intentions may depend on only a threshold level of feasibility and desirability perceptions, thus we may also want to attempt identification of threshold effects The Entrepreneurial Factor Mill (1984) suggested that risk taking is a key factor in distinguishing entrepreneurs from managers. It is believed that entrepreneurs take greater degree of risk especially in areas where they have control or competencies in realizing the profit. It appears that, numerous studies have included risk taking as a major entrepreneurial characteristic. Mitton (1989) confirmed that entrepreneurs eagerly undertake the unknown and uncertain circumstances, thus the entrepreneurial inclined individuals are expected to display more tolerance of ambiguity than others. As far as innovativeness is concerned, Mitton suggested that it is the focal point of entrepreneurship and an essential entrepreneur characteristic. In actual fact, entrepreneurial literatures confirm that entrepreneurs are significantly more innovative than non-entrepreneurs (Ho & Koh, 1992; Robinson & Sexton, 1994). An entrepreneur forms the fundamental focus of an enterprise, regardless of how right the opportunity appears to be. The enterprise will not be a success unless it is established by an individual with strong entrepreneurial and managerial competence. In line with this does Timmons (1990: 15) maintain, ―The research which was conducted on hightechnology firms in the United States since 1967 indicated that the elegance of these high venture firms was based on the great entrepreneurs who appeared to show greater importance than technology‖. With regard to the ―entrepreneur‖, Bygrave (2004: 16) noted that starting a business venture is a very demanding task, and therefore there is not enough time for on-the job training. If an individual wants to start his/her own business 11

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7

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6.4.

venture, he or she must therefore possess the right skills and experience. If they do not, then they should ‗exit‘, and obtain proper training before starting a business venture. The Resources Factor: There are three visible crucial components for a successful new business as depicted in the Timmons model above. One of these is resources. According to Van Aardt et al (2008: 122) resources can be divided into four broad categories namely: 0 i. Operating resources – these refer to the buildings, assets, equipment and stock that will be needed to achieve the goals and objectives of the new business venture; ii. Human resources – this include all personnel who are directly and indirectly involved in rendering the service; iii. Financial resources – here the entrepreneur determines what financial resources are available, whether it is own capital, loan capital or investment capital and; iv. Technological resources – it is virtually impossible for a business to exist without technological resources such as computers, telephones access to internet and e-mail. In order for an entrepreneur to realize an opportunity one needs initially be able to identify, attract and manage the available resources effectively. The mindsets of entrepreneurs are quite different when it comes to the managing of resources. This is mainly because to get an enterprise started, an entrepreneur must manage to get as much as possible from a minimum investment of resources. In order for an entrepreneur to get more out of less, they work very hard and, in some instances, use customer advances and barters (Timmons, 1990: 18). Thereafter, the entrepreneur gathers the resources required to start the business to capitalize on his or her opportunity. It is explicit in Timmons framework that the capital provided by the entrepreneur will be rewarded with profits, and that both are commensurate with risks and effort in starting a business and financing and building the business (Timmons, 1989). In support, Bygrave (2004: 18) noted that it is also critical for the entrepreneur to assess what resources are important for the enterprise to succeed in the marketplace. The assessment of the most important resources is critical because it gives an indication of what distinctive advantage an enterprise could have over its competitors. For example, if the company is producing a particular ‗high-tech‘ product, technological know-how will be important. The primary resource will be engineers and the designs produced. Moreover, Bygrave, (2004: 12) contends that, at the centre of the model is a business plan (‗fits and gaps‘), in which the three key factors are integrated into a complete strategic plan for the business. All parts must fit well together, as there is no point in having a first-rate idea for a new business, if you have a second-rate management team. It is also important to emphasise that neither ideas nor management are any good without the appropriate resources). The Entrepreneurial Team It is well understood today that the entrepreneurial team is a key to the success of a higher potential venture. This calls for a lead entrepreneur with an ability to lead and communicate effectively so as to build an effective entrepreneurial team. Clearly, a new 12

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 venture requires a lead entrepreneur with the following characteristics (Timmons and Spinelli, 2007, 91): i. An entrepreneur that learns and teaches faster; ii. That deals with adversity and is resilient; iii. That exhibit integrity, dependability and honesty; iv. That builds entrepreneurial culture and organisation. It is important to notice that, a high potential venture also requires interpersonal skills to foster communications and team building. Most investors now concentrate on the creative brilliance of the lead entrepreneur. Teams should be formed and led by a capable lead entrepreneur, because the lead entrepreneur will always be central to the team as both player and coach. With the creative brilliance of the lead entrepreneur, the team should exhibit these qualities (Timmons and Spinelli, 2007, 91): i. The team should have relevant experience and track record; ii. They should be motivated to excel; iii. They should be committed, determined and persistent; iv. Creative; v. Opportunity obsessed; vi. Have leadership and courage; vii. Be able to adapt to different situations; viii. Be able to communicate effectively; ix. Tolerance of risk, ambiguity and uncertainty. Therefore, investors will look for a lead entrepreneur who is capable of building a management team that possesses the above qualities. Timmons and Spinelli (2007, 91) state that a leader should adapt a philosophy that rewards success and support honest failure, shares the wealth with those who help create it and sets high standards for both performance and conduct. 6.5.

Carol Moore’s Entrepreneurial Model

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Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 6.5.1. Moore’s model of the entrepreneurial process Unlike Timmons‘ model, rewards are not explicit in the Moore model. Moore‘s model is important because it argues that there is always a triggering event that gives birth to a new organisation. The model focuses on personal attributes, environmental factors (role models) and other sociological factors (family) (Bygrave, 2004), while the Timmons model only focuses on opportunity, entrepreneur and resources. According to Bygrave and Hofer (1991), the entrepreneurial process in this model involves all the functions, activities and actions associated with perceiving opportunities and creating organisations to pursue them. This was explained in Moore‘s model (1986) in Pearce and Robinson (1986); however, it was embellished by Bygrave (1995), where the entrepreneurial process seemed to follow a predictable sequence. 6.5.1.1 Personal Attributes Nowadays, it seems that entrepreneurs have a higher locus of control than nonentrepreneurs. For that reason, it appears that entrepreneurs have a great determination to be in control of their own destiny. Many surveys have confirmed that entrepreneurs seek independence, this become a main reason for starting their business (Bygrave and Zacharakis, 2004: 5). Personal attributes can be considered as the driving force behind the motivation to embark in the entrepreneurial journey. As important as personal attributes are environmental factors that positively influence a prospective entrepreneur. 6.5.1.2 Environmental Factors External factors have a noticeable impact on a would-be entrepreneur. It‘s no accident that some parts of the world are more entrepreneurial than others. Role models are very important in terms of playing an influential role to prospective entrepreneurs. Knowing a successful entrepreneur makes the act of aspiring to be an entrepreneur seems much more credible. Prospective entrepreneurs come into contact with role models primarily in the home or at work. The study conducted to undergraduate students studying entrepreneurship reveals that most of them come from families that own business (Bygrave and Zacharakis, 2004: 7). This is a clear indication that environmental factors as per Carol Moore‘s model influence prospective entrepreneurs‘ decision to strive to become an entrepreneur. Besides role models, entrepreneurs are also influenced by other sociological factors. 6.5.1.3 Sociological Factors Family responsibilities play an important role in the decision whether to start a new business venture. It is a relatively easy career decision to start a business when a prospective entrepreneur is single and without any dependents. It is a much harder decision when a prospective entrepreneur is married and has children, a hefty mortgage and a secure well-paying job. Another factor that plays an important role in the decision to start a business is the trade-off between the experience that comes with age and the optimism and energy of the youth. As one grows older he or she gains experience in the industry that can manifest itself into pessimism about a chance of succeeding in business (Bygrave and Zacharakis, 2004: 7). Clearly social factors play a crucial role in the decision making of a potential entrepreneur. 6.5.2. The 10 D`s of William Bygrave William Bygrave10 summarised the important characteristics of successful entrepreneurs in everyday words. 14

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 Dream:

7.

8.

Entrepreneurs have a vision and the ability to implement their dreams. Decisiveness: They make decisions swiftly, their swiftness is a key factor in their success. Doers : Once they decide on a course of action, they implement it as quickly as possible. Determination They implement their ventures with total commitment. Dedication They are totally dedicated and work tirelessly Devotion Entrepreneurs love what they do Details The entrepreneur must be on top of the critical details Destiny They want to be in charge of their own destiny Dollars Getting rich is not the prime motivator, but the measure of success Distribute Entrepreneurs distribute ownership of the business with key employees WHY IS ENTREPRENEURSHIP IMPORTANT FOR DEVELOPMENT? Brinkman points out that economic development implies ―a process of structural transformations‖ leading to an overall higher growth trajectory ([7], p.1183). For Namibia, Per capita income growth requires shifts from less productive to more productive techniques per worker, the creation or adoption of new commodities, new materials, new markets, new organizational forms, the creation of new skill, and the accumulation of new knowledge…the entrepreneur as gap filler and input-completer is probably the prime mover of the capacity creation part of these elements in the growth process. ([55], p.77) Again, economic development involves change and the entrepreneur becomes the best agent for this change. Indeed, entrepreneurship matters for developing countries because markets matter. Hayek recognized that knowledge was ―dispersed‖ throughout society (p.520) with each person having a unique stock of information (p.521). CONCLUSION Various definitions have been put forward by different authors. For instance, Hellriegel and Slocum (1996:708) describe the entrepreneur as the trademark that is usually given to someone who creates new business activity in the economy. Another viewpoint is that the awareness and utilization of an opportunity as well as the formation of an organisation are of utmost importance to entrepreneurs (Reitan, 1997: 3; Drucker, 1985: 25 & Timmons, 1999: 41). It became clear through this article that successful entrepreneurs do not just emanate from the good knowledge of one or two elements of business, but they require well-rounded management competence together with some hands-on experience of a particular type of business. Thus, the potential entrepreneur appears when an opportunity emerges and takes the initiative to initiate a profitable and viable industry. However, the seizure of the opportunity must coincide with the willingness and the ability to take advantage of the opportunity. For Wickham (1998: 22), the motive behind entrepreneurial activities goes beyond a desire to make money. They have an urge to create a new and better world. A review of the literature on entrepreneurship, explaining not only the perspectives of entrepreneurship literature and the distinctive forms of entrepreneurship, but also 15

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 illustrating clearly how both the literature and the phenomenon of entrepreneurship may improve our understanding of the practical application of entrepreneurship and its role towards economic growth. The entrepreneurship literature looked at the definition and models of entrepreneurship, it also give an overview of some factors that needs to be addressed by nations to be able to successfully employ entrepreneurship as an economic stimulating strategy. Some models of entrepreneurship were also discussed to highlight certain compelling factors that individuals must be considering becoming entrepreneurs. It is also important to take note of the fact that human beings, especially indigenous communities, live and survive within a different cultural context compared to some Western nations. However, the ―persistent importance‖ of innovative and modernized models should not be underestimated. The modernized model may be questioned amongst authors but might remain on in the minds of the older generation of business leaders and economists in global institutions. It also became clear that community‘s needs to appreciate the fact that, entrepreneurs are not robots blindly fulfilling an economic function, like all individuals do entrepreneurs also operate within communities that define and are defined by culture. Subsequently, the so called entrepreneur is an individual who should be able to perform numerous activities within an empowering environment. Furthermore, it is also evident that research consistently come to an agreement that entrepreneurship happens to be the channel through which most nations such as Namibia drive their economy (Pretorius and Van Vuuren, 2003:1; Isaacs, Visser, Friedrich and Brijlal, 2007:613; Fatoki, 2009: 87). It is for this reason in accordance with Kroon (2002:215) that the United Nations General Assembly, in 1994, passed a resolution sanctioning and urging all emerging and developed nations such as Namibia to pursue entrepreneurship as a policy matter. The study has to a great extent uncovered the key factors which seem to influence the success of entrepreneurship resilience that might lead to economic growth. This was seen as a key area of intervention to address the difficulty of entrepreneurship. Giving attention to these underlying factors, prior to the roll out of entrepreneurial programmes, can ensure higher success rates, higher, contributing in the long run to the establishing of sustainable opportunity-based new ventures. Therefore, understanding the role of the entrepreneur in economic development and growth entails an understanding of the role that the entrepreneur played in Namibia, in the transition from stagnation to growth, in transforming the Namibian economy structurally from a traditional, agricultural based economy to a modern industrial economy, and finally in sustaining growth based on innovation (knowledge capital). According to Murphy et al. (2006:12) it was the ‗advent of entrepreneurship‘ that allowed per capita income to grow exponentially in the West from the 1700s. REFERENCES Albornoz, C.A, (2008), Toward a set of Trainable Content on Entrepreneurship Education: A Review of Entrepreneurship Research from an Educational Perspective, Journal of Technological Management and Innovation, 3(1):88-98. Audretsch, BD 2007, ‗Entrepreneurship Capital and Economic Growth‘, Oxford Review of Economic Policy, 23, pp. 63-78. 16

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 Audretsch, D.B., Leeuwen, G. van, Menkveld, B. and Thurik, A.R. 2001. Market Dynamics in the Netherlands: Competition Policy and the Role of Small Firms. International Journal of Industrial Organization, 19, 611--862. Baum, J.R, (1995), The Relation of Traits, Competencies, Motivation, Strategy and Structure to Venture Growth, Frontiers of Entrepreneurship Research 1995 Edition. Bridge. S, O‟Neil.K and Cromie.S, (1998), Understanding Enterprise, Entrepreneurship & Small Business, New York, Palgrave Publishers. Brown, T.E and Uljin, J, (2004), Innovation, Entrepreneurship and Culture, The Interaction between Technology, Progress and Economic Growth, United Kingdom, Edward Elgar Publishing. Bygrave, B, Zacharakis, A. (2008). Entrepreneurship, John Wiley & Sons, NJ. Cronje, G.J de J, Du Toit, G.S, Motlatla, M.D.C and Marais, A. de K, (2003), Introduction to Business Management, 6th ed. Southern Africa, Oxford University Press. Dimov, D (2007) From Opportunity Insight to Opportunity Intention: The Importance of PersonSituation Learning Match, Entrepreneurship Theory and Practice, 31(4): 561-583, July 2007. Dimov, D (2007) Beyond the Single-Person, Single-Insight Attribution in Understanding Entrepreneurial Opportunities, Entrepreneurship Theory and Practice, 31(5): 713-731, September 2007. Djankov, S., La Porta, R., Silanes, F. L. de and Shleifer, A. 2001. The Regulation of Entry. National Bureau of Economic Research, Working Paper 7892. Available at www.nber.org. Fatoki, O.O, (2010), Graduate Entrepreneurial Intention in South Africa: Motivations and Obstacles, International Journal of Business and Management, 5(9), September, 2010. Hamidi, D.Y, Wennberg, K and Berglund, H, (2008), Creativity in Entrepreneurship Education, Journal of Small Business and Enterprise Development, 15 (2): 304-320. Ho, T. S., & Koh, H. C. (1992). Differences in psychological characteristics between entrepreneurially inclined and non-entrepreneurially inclined accounting graduates in Singapore. Entrepreneurship, Innovation and Change: An International Journal, 1, 243-254. Kirzner, I. M., 1973, Competition and Entrepreneurship, Chicago: University of Chicago Press. Kroon, J, (1997), General Management, Pretoria, Kagiso Tertiary. Maas, G and Herrington, M, (2007), Global Entrepreneurship Monitor South Africa Report, University of Cape Town. Mises, L. von. [1949]1996. Human Action: A Treatise on Economics. San Francisco: Fox & Wilkes. Mill, J. S. (1984). Principles of political economy with some application to social philosophy. London: John W. Parker. Mitton, D. G. (1989). The complete entrepreneur. Entrepreneurship: Theory and Practice, 13, 919. Nieman, G, Hough, J and Nieuwenhuizen, C, (2003), Entrepreneurship: A South African Perspective, Pretoria, Van Schaik Publishers. OECD 2006, ‗Understanding Entrepreneurship: Developing Indicators for International Comparisons and Assessments‘, Paris. Organization for Economic Co-operation and Development (1996). The knowledge-based economy. Paris: OECD Reynolds, P. D., S. Michael Camp, W. D. Bygrave, E. Autio and M. Hay, 2002, Global Entrepreneurship 17

Proceedings of 26th International Business Research Conference 7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7 Romer, P 1986, ‗Increasing Returns and Long-run Growth‘, Journal of Political Economy, 94, pp. 1002-37. Rwigema, H and Venter, R, (2004), Advanced Entrepreneurship, Cape Town, Oxford University Press Southern Africa. Schumpeter, JA 1934, ‗The Theory of Economic Development‘, Cambridge, MA: Harvard University. Schumpeter, J. A., 1911, Theorie der wirtschaftlichen Entwicklung. Eine Untersuchung ueber Unternehmergewinn,Kapital, Kredit, Zins und den Konjunkturzyklus, Berlin:Duncker und Humblot; translated by Redvers Opie,1934 & 1963, The Theory of Economic Development: an Inquiry into Profits, capital, credit, Interest and the Business Cycle, Oxford: Oxford university PressSolow, R 1956, ‗A Contribution to the Theory of Economic Growth‘, Quarterly Journal of Economics, 70(1), pp. 65-94Turner, Colin (2000). The information economy: business strategies for competing in the global age. London: Kogan Page. Schumpeter, J.A.1950. Capitalism, Socialism and Democracy. New York: Harper & Brothers Publishers. Smith, A. 1776 [1991]. The Wealth of Nations. New York: Prometheus Books. Storey, D. J., 1991, ‗The Birth of New Firms – DoesUnemployment Matter? A Review of the Evidence‘,Small Business Economics 3(3), 167–178. Thurik, R. and S. Wennekers, 2004, ‗Entrepreneurship, Small Business and Economic Growth‘, Journal of Small Business and Enterprise Development 11(1), 140–149. Wennekers, S. and R. Thurik, 1999, ‗Linking Entrepreneurship and Economic Growth‘, Small Business Economics 13(1), 27–55.

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