Skip to 0 minutes and 11 seconds In this lecture, we will go deeper into a process model developed by me and my colleagues. this theory development is inspired by social system theory of Parsons. We label this as the entrepreneurship and networks model, also known as the 4S model. The focus of this work is the question, how to explain that a social system becomes and stays sustainable? In other words, how it starts and continues to exist. Moreover, the goal is to come to a better insight in how to create more value.
Skip to 0 minutes and 49 seconds The basic assumption to be developed and tested is that a social system comprises four mechanisms that must function effectively in conjunction with one another in order to achieve that sustainability, and that those mechanisms manifest themselves in every action and actor. Individual, group, organisation, country can all be actors. These four mechanisms are first, strategic capital. Enabling fission mission goals to be attained. Second, skills and culture in the organisation based on cultural capital. Third, scale. Creating economic efficiency processes based on economic capital. And social capital is the fourth, connecting the entrepreneur in his or her network.
Skip to 1 minute and 42 seconds Concerning strategic capital, traditional search information models require information on the opportunities and threats in the environment, and internal strengths and weaknesses. This so-called strengths, weaknesses, opportunities, and threats, also known as SWOT. Another currently leading citizen management theory explaining differences on value creation is the resource based view from Jay Barney. For a sustainable competitive strategy a company needs a set of heterogeneous resources and capabilities which are VRIN, valuable to the client, rare, inimitable without great effort by the future competitor, and non-substitutable.
Skip to 2 minutes and 31 seconds Under uncertainty Saras Sarasvathy developed, as a PhD student of Herbert Simon, the effectuation model. She claims that under uncertainty entrepreneurs use other decision-making mechanisms for developing the strategy. However, we found some evidence that entrepreneurs might actually have a mix of effectuation and causation similar to the model of mixed scanning of Etzioni already from 1966, which assumes a main goal and direction to be chosen, but flexibility in the sub goals, and charges of means to attain those goals.
Skip to 3 minutes and 10 seconds The second element of his model, labelled as skills and culture capital, refers to the competencies to organise a venture. This has to do with hard traits like what type of facilities such as offices, production space, technology you have, and more soft cultural traits and elements which steer the actions of the members of the organisation. That can range from being entrepreneurial oriented, be proactive, risk-taking, innovative, and market oriented, rocking with the needs of the customers constantly in mind, systematically handling competition, and sharing information with members of the organisation and relevant network partners.
Skip to 3 minutes and 55 seconds The third element, scale, refers to the economic performance and capital accrued needed for development. The money. Efficiency at the start of the life of a company usually is not very high. Often the quality of an innovation in the beginning is also not that great. The learning process leads to more efficient processes, creating more financial value. Obviously, this development means that in the beginning entrepreneurs often make a loss and the money from investors. Those investors are often denoted as triple f, family, friends, fools. And later, maybe venture capital. The problem that an entertainer first needs money from third parties to come to the situation he can make money is labelled as Death Valley.
Skip to 4 minutes and 45 seconds The name of the desert just east of California where many settlers who were travelling to the west died. The last mention of the model actually ties it together to other actors. Social networking happens in relational patterns. Who do you know? With whom do you interact? On how many topics do you interact? What we call multiplexity. And how frequent do you interact? The combination of frequency and multiplexity determines the strength or weakness of a relation, which Mark Granovetter in 1973 made clear. Weaker relations can be very useful to fight new information, while in strong relations, the information is easier shared when the clique of that strong relation.
Skip to 5 minutes and 32 seconds Coleman, Katz, and Menzel in 1966 already made seminal work by showing how innovations diffuse their networks through relational contagion. However, Ronald Burt in his book The Tertius Gardens discussed that entrepreneurs are often in the structural hole of a network. Meaning they connect to groups of actors who are otherwise not connected. Main example of this is brokering markets of housing, or bonds, or auctions. So combining the entrepreneurial process model and a social system dimensions, we come to the following definition of entrepreneurship that is consistent with this theory and the three stages of entrepreneurship.
Skip to 6 minutes and 17 seconds And it reads as follows, entrepreneurship is the setting and pursuit of a new goal based on an identified opportunity in a market by an entrepreneur who creates and maintains a patter of effective behaviour, a business concept, in interaction with others in which greater efficiency contribution to watch achieving financial growth.
The process model of entrepreneurship placed in a complex system
In this lecture Professor Aard Groen continues to build the concept of entrepreneurship and places the Process Model of Entrepreneurship in four dimensions representing the context.
© University of Groningen