Entrepreneurship as Dualism between Intelligence and Capital

Inhaltsverzeichnis

II List of figures and tables

III List of abbreviations

1 Introduction
1.1 Research problem
1.2 Course of investigation

2 Entrepreneurship
2.1 Definition
2.2 Development of the entrepreneur
2.3 Ventures of establishing a business

3 Intelligence and capital as essential factors of business formation
3.1 Intellectual factor starting a business
3.1.1 Invention versus innovation
3.1.2 Significance of intelligence
3.2 Financial opportunities
3.2.1 Methods
3.2.2 Significance of financing

4 Entrepreneurial design according to Faltin
4.1 Definition and development
4.2 Key success factors
4.3 Tea campaign as a sample of practicability

5 Conclusion
5.1 Summary
5.2 Critical acclaim
5.3 Outlook

IV Glossary

V List of references

II List of figures and tables

Figure 1: Waves of innovation throughout history

Figure 2: Types of financing

Figure 3: Seven techniques to develop an entrepreneurial design

Figure 4: A successful entrepreneurial design

Table 1: Requirements of the entrepreneur in comparison

Table 2: Problems of business formation (chronological order)

III List of abbreviations

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1 Introduction

1.1 Research problem

Entrepreneurship is the process of creating a commercial concept of an innovation or a solution for an existing disadvantage as a sample and starting a business. Over the last decades, the image of an entrepreneur developed from a thorough man of business involved in all kind of situations to a head of delegation. Commonly he or she is the innovator of the idea and of starting a new business process. Added to this are ventures of business formation like for example pioneer, control and bureaucracy risks, which can end up on a crisis.

Intelligence and capital are essential factors to start a business. An entrepreneur needs a sophisticated concept, an objective to achieve and a purpose how he/she will be able to convince his customers of his/her product. For instance, to earn profit is an aim whereby the financial demand of having start-up capital at one’s disposal is mentioned. As a consequence thereof appears the question of the relevance how much or if capital is needed to start a business. Additionally, the impact of the intellectual factor plays a crucial role founding a company.

Entrepreneurial design is the connection between the idea, as an invention or innovation, and the economic success. Moreover, one can say it is the link between the research and market orientation and also defined as the draft of a convincing concept with various key success factors. The German economist Günter Faltin coined this word. He developed the so-called tea campaign to cheapen prices of Darjeeling tea. This campaign and other examples of application show the practicability of entrepreneurial design.

This research paper aims to give a description of the impact of intelligence and capital on entrepreneurship. The focus will be on whether a dualism between those two factors Faltin describes in Brains versus Capital: Entrepreneurship for Everyone - Lean, Smart, Simple influence a successful business formation. With regard to that, the significances of each will be considered in more detail.

1.2 Course of investigation

Based upon the aim that was described in the previous subchapter 1.1 Research problem, entrepreneurship will be focussed on. A definition of entrepreneurship and a distinction of the development from the traditional to a modern perception of an entrepreneur will be given in chapter 2. In addition to this, the last subchapter is going to focus on possible risks establishing a business as an entrepreneur.

The third chapter approaches intelligence and capital as essential factors of business formation. A differentiation between invention and innovation will be given to understand the following explanation why intelligence is an essential part of entrepreneurship in subchapter 3.1.2. After that, financial opportunities will be discussed in ways of funding and the significance of financing as a last point of this chapter.

The definition of entrepreneurial design, its development and key success factors are going to be provided in chapter 4. The practicability will be shown using the example of the tea campaign of Günter Faltin and its application of the key success factors.

A summary of the findings with a clarification of the research question, given in the subchapter before, will be dealt with in the conclusion. Thereafter, a critical acclaim will be pointed out and finally, an outlook of the topic concerning entrepreneurship will be defined.

2 Entrepreneurship

2.1 Definition

A plurality of definitions exists for entrepreneurship because of regularly varying circumstances and no fixed clarification while often it is referred to general ideas and prejudices (Jacobsen, 2003, pp. 31-32). The origin of the word entrepreneurship arises from the French word entreprendre which means “to undertake something” (Jacobsen, 2003, p. 32). Günter Faltin (2008/2013, p. 76), the author of Brains versus Capital, defines entrepreneurship as carefully reflecting about something, finding a solution and implementing this solution into establishing a business.

“[It is t]he process through which individuals and teams bring together the necessary resources to exploit opportunities and […] create wealth, social benefits, and prosperity” (Byers et al., 2005/c2015, p. 21). The aim of an entrepreneur is not profit maximisation (Faltin, 2008/2013, p. 172). The subject matter is business formation with focus on constituent decisions and entrepreneurship as a process (Fallgatter, 2005, pp. 102-103). “On average, ten per cent of the labo[u]r force in any developed country are entrepreneurs, […]” (Hartog et al., 2008, n. pag.). According to the working paper of Färnstrand Damsgaard et al. (2012, p. 3, 20), it “has emerged as a key issue on the policy arena”. Entrepreneurship is an upcoming topic and changing overtime revealed by the following subchapter.

2.2 Development of the entrepreneur

Over 30 to 60 years ago an entrepreneur was characterized by ‘cigar smoking’ businessmen, who appreciate status symbols like expensive suits, clocks and cars (Jacobsen, 2003, p. 30). In addition, the social perception of an entrepreneur was connected to excessive labour, financial risks and maximum loads (Rövekamp, 2011, pp. 383-384).

The traditional perception of entrepreneurs is changing to a delegator of tasks and components because of simplifications in outsourcing of different sections of a company for start-ups such as accounting and office services (Rövekamp, 2011, p. 128 and Faltin, 2008/2013, pp. 92-93). An entrepreneur is “a person who directs a company and takes commercial risks” (Collin, 2008, p. 139).

In the context of the character traits of an entrepreneur and the success of a company any connection cannot be found (Jacobsen, 2003, p. 243 and Faltin, 2012, p. 183 and Chell, 2013, pp. 14-15). Jacobsen (2003, pp. 242-243) clarifies by analysing successful establishments that a synergy of different traits like motivation, personal interests and conception is conducive to entrepreneurial thinking. Therefore, she falsifies the thesis of the American economist Lazaer (2003, pp. 35, 50), who characterises entrepreneurs as ‘jacks-of-all-trades’. Abilities like identifying market potential, managing people socially, capture increasingly the attention of analysts of successful entrepreneurship (Chell, 2013, pp. 12-13, 21-23).

In the following table a comparison between the two different perceptions is drawn on the basis of the requirements that Faltin brings forth to distinguish the traditional requirements from the modern ones:

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Table 1: Requirements of the entrepreneur in comparison

Source: own figure, based on Faltin, 2008/2013, pp. 63-67

Faltin (2008/2013, pp. 64-65) points out that the traditional requirements of knowledge started with controlling, accounting and financing and ended on marketing, several industry experiences and human resource management. In contrast to these, he mentions that it is crucial to develop an own innovative concept, enthuse one’s employees for the concept and the premature cognition of market trends as modern requirements (2008/2013, p. 66).

Above all, the concept of entrepreneur has changed by characteristics like intuitive and constructive recognition of market potential and innovative concepts (Jacobsen, 2003, p. 36 and Klandt, 2005, pp. 101-102).

2.3 Ventures of establishing a business

Regarding the formation of a company, an entrepreneur has to consider different ventures (Byers et al., 2008/c2015, p. 213). These occur dependent on the phase from opening to increasing growth illustrated in the following table based on the process described by Faltin:

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Table 2: Problems of business formation (chronological order)

Source: own table based on Faltin, 2008/2013, pp. 100-101

The opening provides motivated employees, whereas with increasing growth, more and more employees carry new requirements, which leads to other difficulties. The company needs more departments and managers who are demanding for more participation. As a consequence the top management faces the danger of losing control (ibid, p. 100-101).

Apart from that, other difficulties can be encountered establishing a business such as missing industry experiences, missing skills in delegating work and organisational problems (Rövekamp, 2011, p. 128). “An entry barrier is […] an obstacle or hurdle that you as an entrepreneur meet and must either beat, get around or reduce through an irresistible business idea” (Hougaard, 2005, p. 121).

Hougaard (2005, pp. 121-138), adjunct professor of entrepreneurship at the Copenhagen Business School and entrepreneur himself, exemplifies different “[e]ntry barriers to markets” and differentiates between three types of barriers: customer access, -acceptance and competitor reaction, which an entrepreneur has to consider developing a business concept and to avoid risks.

3 Intelligence and capital as essential factors of business formation

3.1 Intellectual factor starting a business

3.1.1 Invention versus innovation

An inventive step, something new, applicable and technological, is subjectively a ‘stroke of genius’ whereas objectively seen relevant for the authentication of patents (Münch, 2010, p. 63). Patents are protective commercial rights, which prohibit third parties to use the subject matter of the patent (Münch, 2010, p. 146). The marketability of patents and inventions is dependant on the customer acceptance and selling conditions (Faltin, 2008/2013, p. 41).

In contrast to that, an innovation is characterized by Schumpeter as an implementation of new combinations of production goods (Russo, 2005, p. 203). He distinguishes between five innovation fields: (1) product innovation, (2) process innovation, (3) new distribution channels domestic and abroad, (4) new markets for primary products and resources and (5) change of the market and company organization (Hilzenberger, 2005, p. 51).

In his 4th chapter, Faltin illustrates (2008/2013, pp. 33-35) the differentiation between innovation and invention by the example of the inventor Charles Goodyear, who dedicated his life to his idea and invented vulcanized rubber but unfortunately died before his name became popular when two German immigrants named their company after him.

There are several examples like Goodyear’s that show that the innovators have more authority than the inventors (Faltin, 2008/2013, p. 35).

The following graphic illustrates the development of innovation from the 18th century to the present:

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Figure 1: Waves of innovation throughout history

Source: Byers et al., 2005/c2015, p. 15

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