Entrepreneurship and Innovation -Summary, FAQ & Exam Questions

The acronym PESTEL was derived from 6 environmental factors significance to entrepreneurial performance
(i) Political climate
(ii) Economical Conditions
(iii) Socio-cultural
(iv) Technological
(v)Environmental/ecological and
(vi)Legal system

• Taxation Policy (Tax rates and administration)
• Trade regulations
• Political stability
• Security of Life and Property
• Corruption index

• Inflation rate
• Growth in spending power
• Rate of people in a pensionable age
• Recession or Boom
• Access to Finance and cost of finance
• Production factor costs
• Per Capital Income
• Monetary/fiscal policies

• Age distribution.
• Education levels.
• Income level.
• Diet & nutrition.
• Local custom
• Religion

• Technological changes
• New or improved distribution channels
• Improved communication and infrastructure
• Knowledge Transfer and
• Technology Absorption

• Waste disposal
• Energy consumption
• Pollution monitoring etc.

• Legal System
• Registration of business and business premixes
• Licenses and Permits
• Product safety Standards
• Advertising regulations

PESTEL analysis is considered the starting point of ‘doing business’ and environmental analysis, and these will be used to discuss the Nigerian business environment.

PESTEL analysis is considered the starting point of ‘doing business’ and environmental analysis

According to Stokes, Wilson and Mador, the variety of definitions of entrepreneurship offered by a number of authors could be categorized into three main dimensions, which focus attention on:
• Behaviours
• Processes
• Outcomes

Many scholars associate entrepreneurship with setting up a new business. But it has been argued by stokes, Wilson and Mador(2010) that new venture creation is, in effect, a contingent outcome of entrepreneurship. In other words, you don’t have to start a business to be entrepreneurial.

Entrepreneurship is seen as a mindset for bringing about sustainable change.

• Validate Your Perfect Market
• Create a Financial Success Strategy
• Step-by-Step Action Plan
• Clarity, Motivation & Purpose
• Effortlessly Grow & Succeed
• Access a Network of Successful Entrepreneurs

Business opportunity scanning is the study and interpretation of the political, economic, social and technological events and trends which influence a business, an industry or even the total market.

SWOT analysis is the analysis of the business and the environment in which it is operating in terms of available strengths, weakness, opportunities and threats.

Creativity involves the ability to bring into existence new things, ideas, products and processes through imaginative skills.

Creative thinking can be defined as the art of generating solution to problem by the force of imagination and reasoning. Creativity is a process by which a symbolic domain in the culture is changed. New products, services, ideas, and machines are what creativity is all about.

All innovation begins with creative ideas. Creativity is the starting point for innovation. Creativity is also an attitude and the ability to accept change, and to look for new ideas and possibilities.

Three reasons why people are motivated to be creative include:
(i) need for novel, varied, and complex stimulation
(ii) need to communicate ideas and values and
(iii) need to solve problems.

Creativity comes in different forms. A number of different theorists have suggested models of the creative person. One model suggests that there are kinds of creativity that produce growth, innovation, speed, etc. These are referred to as the four “Creativity Profiles” that can help achieve such goals.
(i) Incubate (Long-term Development)
(ii) Imagine (Breakthrough Ideas)
(iii) Improve (Incremental Adjustments)
(iii) Invest (Short-term Goals) (Naiman, 2012).

The dominant factors are usually identified as “the four Ps” – Process, Product, Person and Place.
• A focus on Process is shown in cognitive approaches that try to describe thought mechanisms and techniques for creative thinking
• A focus on creative Product usually appears in attempts to measure creativity and the ability to produce more.
• A focus on the nature of the creative Person considers more general intellectual habits, such as openness, autonomy, expertise, exploratory behavior and so on.
• A focus on Place considers the circumstances in which creativity flourishes, such as degrees of autonomy, access to resources and the nature of gatekeepers.

• Creative individuals have a great deal of energy, but they are also often quiet and at rest.
• Creative individuals tend to be smart, yet also naive at the same time.
• Creative individuals have a combination of playfulness and discipline, or responsibility and irresponsibility.
• Creative individuals alternate between imagination and fantasy on the one end, and rooted sense of reality at the other.
• Creative people seem to harbor opposite tendencies on the continuum between extroversion and introversion.
• Creative individuals are also remarkable humble and proud at the same time.
• Creative individuals to a certain extent escape rigid gender role stereotyping and have a tendency toward androgyny.
• Generally, creative people are thought to be rebellious and independent.
• Most creative persons are very passionate about their work, yet they can be extremely objective about it as well.
• The openness and sensitivity of creative individuals often exposes them to suffering and pains yet, also display a great deal of enjoyment.

Creative thinking can be defined as the art of generating solution to problem by the force of imagination and reasoning. It is an activity of the mind seeking to find answers to some of life’s questions.
Generally, creativity is a function of three components: expertise, creative thinking skills and motivation
Creative thinking is the process which we use when we come up with a new idea. It is the merging of ideas which have not been merged before. Brainstorming is one form of creative thinking: it works by merging someone else’s ideas with your own to create a new one

• Critical thinking is much of the thinking done in formal education. It emphasizes the skills of analysis–teaching students how to understand claims, follow or create a logical argument, figure out the answer, eliminate the incorrect paths and focus on the correct one.
• Creative thinking focuses on exploring ideas, generating possibilities, looking for many right answers rather than just one. Both of these kinds of thinking are vital to a successful working life of an entrepreneur.

Several methods have been identified for producing creative results. Here are the five classic ones
• Evolution – This is the method of incremental improvement. New ideas stem from other ideas, new solutions from previous ones, the new ones slightly improved over the old ones.
• Synthesis – With this method, two or more existing ideas are combined into a third, new idea
• Revolution – Sometimes the best new idea is a completely different one, a marked change from the previous ones
• Reapplication – Look at something old in a new way. Go beyond labels
• Changing Direction – Many creative breakthroughs occur when attention is shifted from one angle of a problem to another. This is sometimes called creative insight

The nature of creativity is about innovation leading to the creation of new ventures while entrepreneurship itself is a form of creativity or can even be referred to as business creativity and in most cases, new businesses are creatively original and functional

• Oh no, a problem!
• It can’t be done.
• I can’t do it. Or there’s nothing I can do.
• But I’m not creative.
• That’s childish.
• What will people think?
• I might fail.

Intellectual Property: (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.
IP is divided into two categories: Industrial property and Copyright

Intellectual Property can also be defined as a creative works that have economic value and are protected by law.

Some forms of intellectual property, such as trademarks, date to ancient times. But comprehensive legal protection for intellectual property did not become common until the 18th century. Protection for trademarks was originally left to the states but eventually, in 1870, Congress adopted the first Federal trademark law.

Intellectual Property (IP) in Nigeria can be traced back to the colonial era when the English Trademark Ordinance was introduced into the colonies even before the amalgamation of the then British Northern Nigeria and Southern Nigeria Protectorates to form what is today called Nigeria in 1914.

The World Trade Organization’s Trade Related Aspect of Intellectual Property Rights (TRIPS) Agreement of 1994, obliges members to provide intellectual property protection in its laws. TRIPS established minimum standards for the availability, scope, and use of seven forms of intellectual property: copyright, trademarks, geographical indications, industrial designs, patents including (Plant Variety Protection, PVP), layout designs for integrated circuits and undisclosed information (trade secrets).

The principal types of intellectual property are patents, copyrights, and trademarks.

Patent law protects inventions that demonstrate technological progress.
Copyright law protects a variety of literary and artistic works, including paintings, sculpture, prose, poetry, plays, musical compositions, dances, photographs, motion pictures, radio and television programs, sound recordings, and computer software programs.

Trademark law protects words, slogans, and symbols that serve to identify different brands of goods and services in the marketplace. Trademark rights never expire, so long as a merchant continues to use the trademark to identify a given product.

Industrial Property; the Nigerian perspective: This deals with trademarks, patents and industrial designs.
Copyright; the Nigerian Perspective: Copyright which is protected in Nigeria by the Copyright Act.

• Literary works irrespective of literary quality
• Artistic works which irrespective of quality
• Cinematograph Film
• Sound Recordings
• Broadcast

The first limitation is the exclusion from copyright protection of certain categories of works. In some countries, works are excluded from protection if they are not fixed in tangible form.

The second category of limitations concerns particular acts of exploitation, normally requiring the authorization of the rights owner, which may, under circumstances specified in the law, be carried out without authorization. There are two basic types of limitations in this category:

• free use, which carries no obligation to compensate the rights owner for the use of his work without authorization; and
• non-voluntary licenses, which do require that compensation b paid to the rights owner for non-authorized exploitation.

Quoting from a protected work, provided that the source of the quotation and the name of the author is mentioned, and that the extent of the quotation is compatible with fair practice;
• Use of works by way of illustration for teaching purposes; and
• Use of works for the purpose of news reporting.

Copyright does not continue indefinitely. The law provides for a period of time during which the rights of the copyright owner exist. The period or duration of copyright begins from the moment when the work has been created, or, under some national laws, when it has been expressed in a tangible form.

In countries party to the Berne Convention, and in many other countries, the duration of copyright provided for by national law is as a general rule the life of the author plus not less than 50 years after his death.

In Nigeria, the duration of copyright depends on the nature of work involved:
• For Literary, musical or artistic works other than photographs, copyright in the work will expire seventy years after the end of the year in which the author dies. If the Author is a corporate body or Government copyright will expire seventy years after the end of the year in which the work was first published.
• For Cinematograph films and photographs the copyright will expire fifty years after the end of the year in which the recording was first made.
• With respect to broadcast, copyright will expire 50 years after the end of the year in which the broadcast first took place.

The laws of many countries provide that the initial rights owner in a work may transfer all economic rights to a third party. (Moral rights, being personal to the author, can never be transferred). Authors may sell the rights to their works to individuals or companies best able to market the works, in return for payment. These payments are often made dependent on the actual use of the work, and are then referred to as royalties. Transfers of copyright may take one of two forms: assignments and licenses.

In some countries, an assignment of copyright is not legally possible, and only licensing is allowed. Licensing means that the owner of the copyright retains ownership but authorizes a third party to carry out certain acts covered by his economic rights, generally for a specific period of time and for a specific purpose.

(a) Literary works
(b) Artistic works
(c) Cinematograph Film
(d) Sound Recordings
(e) Broadcast

An entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation or a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to achieve the desire objectives

Entrepreneurship is the act of being an entrepreneur, which can be defined as one who undertakes innovations, finance and business acumen in an effort to transform inventions into economic goods through innovations.

are three basic roles of entrepreneurs, these include:
• The Innovator: She/he turns creativity into reality. The entrepreneur as innovator produces new things or creates new ways of doing things. Many innovators are obsessive or single-minded about their invention.
• The promoters: He/she is concerned more about how to develop the innovation into a viable and successful business proposition.
• The Catalyst: He/she facilitates the functions of the innovator and the promoter by
i. Identifying opportunities for innovation
ii. Identifying new business opportunities
iii. Commits resources to exploit these new opportunities
iv. Takes a personal risk whether in financial or status terms
v. Contemplate and accept the consequences of failures.

• TECHNOLOGY INCUBATION CENTERS (TIC)
• NATIONAL OFFICE FOR TECHNOLOGY ACQUISITION AND PROMOTION (NOTAP)
• RAW MATERIAL RESEARCH AND DEVELOPMENT COUNCIL (RMRDC)
• FEDERAL INSTITUTE OF INDUSTRIAL RESEARCH, OSHODI (FIRRO)

The term innovation comes from the Latin word ‘innovare’ meaning ‘to make something new’.

Okpara (2005) identified the following elements of innovation:
i. Challenge: what we are trying to change or accomplish- the-“pull”.
ii. Customer focus: creating value for your customers- the “push”.
iii. Creativity: generating and sharing the idea(s)- the “brain”
iv. Communication: The flow of information and ideas- the “life blood”
v. Collaboration: people coming together to work together on the idea(s)- the “heart”
vi. Completion: implementing the new idea- the “muscle”
vii. Contemplation: learning and sharing lession lead to higher competency – the“ladder”
viii. Culture:

Innovation impregnates the entire enterprise for the creation and invention of the competitive edge and relevancy in the market place. Innovation can take several forms
• Innovation in process
• Innovation in product or services
• Innovation in management and work organization

It is imperative to note that from the extant entrepreneurship literature, three basic types of innovation can be categorized. These are: Breakthrough Innovation, Technological Innovation, and Ordinary Innovation.

A breakthrough innovation is extremely unique innovation which in most cases determines the basis for further innovation in that area or field. Consequently, such innovations need to be protected as much as possible by strong patents, trade secrets, or copyrights.

In contrast to breakthrough innovation, the technological innovation occurs more frequently than breakthrough innovation and in general is not at the same level of scientific discovery and advancement Examples of technological innovations are voice and text messaging, the jet airplane, the personal computer, the flip watch for containing pictures, etc.

Unlike the breakthrough and technological innovations, the ordinary innovation is the one that occurs most frequently. This kind of innovation extends the technological innovation into a better product or service. These innovations usually come from market-led or market- push innovation.

According to this theory, once innovation occurs, innovations may be spread from the innovator to other individuals and groups. However, this process has been proposed that the life cycle of innovations can be described using the ‘S’ – curve or diffusion curve.

• The Innovation: an idea, practice(s) or objects that is perceived as new by individuals or a group of adopters.
• Communication Channels: the means by which innovations move from individual to individual, or group to group.
• Time: the non-spatial interval through which the diffusion events occur.
• A Social System: a set of interrelated units that are engaged in joint problem solving activities to accomplish a goal or goals.

The Internet, The automobile, The computer, The airplane etc

Voice and Text messaging, The jet airplane, The personal
computer, The flip watch for containing pictures, etc.

• Change is defined as the transformation in patterns of organizational activity.
• Change has also been defined as modification of those forces keeping a system’s behavior stable
• Change can be seen as an overhaul of both internal and external environments of an organization

The forces responsible for change are:
• economic factors
• change in technology
• social causes
• political and legal changes and
• intense competition

Economic Factors: Entrepreneurs should note that economic factors have imparted very serious effects on consumers’ behavior or attitudes of buyers of goods and services.
Change in Technology: The emergence of some technological devices, such as thinking computers, robotics, computer engineering, miracle drugs, space communications, lasers, cloning, satellite networks fibre optics, electronics money transfers etc, have altered the frequency of operations of organization.
Social – Cultural Causes: Social, cultural, demographic and geographic factors could have very serious effects on the products, services, markets and customers of an organization if ignored or not considered by the organization in its operation.
Political and Legal Changes: Political and legal changes are the other set of major environmental variables that can influence the external audit of an organization or a venture.
Intense Competition: This exists among ventures or businesses that offer similar
products or render similar services.

Some of the factors that increase entrepreneur resistance to change include:
• Uncertainty about the Impact of Change
• Economic Implications
• Lack of Proper Communication
• The Group Resistance
• Emotional Reasons

• Education and Communication
• Participation and Involvement
• Negotiation and Agreement
• Timing of Change
• Leadership

Accordingly, a four stage processes which is relevant for managing and responding to technical change and innovation which by its very nature, requires change is stated below:
• Stage 1. Scanning the Environment
• Stage 2. Evaluation of Opportunity
• Stage 3. Resource Acquisition
• Stage 4. Technological and Market Development

The following situations suggest the definition of
family business:
• A business is owned by a family but run by non-family managers.
• A business is owned by a large, multi-national corporation but run by a local family.
• A business is jointly owned by two unrelated partners, each of whom has a son in the business (Hoy et al 1994 )

• Family Influenced Start-ups
• Family Corporate Venturing
• Family corporate renewal
• Provision of family private cash
• Family Investment Funds

Family Influenced Start-ups : Family influenced start-ups commonly occur and usually involve new business in which family ownership, vision and or leadership shape the strategic intent, decision making, and financial goals of the business.
Family Corporate Venturing: This is like entrepreneurship within an established family business, In this stance, the family business catalyses the start-up of new business
Family corporate renewal: An existing family business may be operated in an industry characterized by stiff competition making growth of the business slow and difficult.
Provision of family private cash: Most new ventures are funded through family private cash. Family funding is usually based on altruistic sentiments toward the family rather than formal; is very soft and might not even have repayment period or interest component.
Family Investment Funds: Family funds are common as families (whether formal or informal) sometimes find themselves with surplus cash which is in excess of their investment needs.

Hyderabad (2006) identifies the most important areas of concern for the success of a family business and refers to them as the ten commandments of Family business. These are listed below in no specific order as:
• Induction and grooming;
• Ownership Structure;
• Preserving wealth;
• Conflict resolution mechanism;
• Business vision, strategy and governance;
• Family vision, strategy and governance;
• Succession planning;
• Compensation and rewards for planning;
• Recruitment and reward for non – family professionals;
• Retirement and estate planning.

Timmons (2007:568) identifies twelve universal challenges that family enterprises face:
• Families assuming that their past success will guarantee their future success;
• The legacy value attributed to the business does not translate into a market value or advantage;
• Families want a legacy pass in the market such as being recognized as good citizens for operating for a long period;
• Leaders try to balance the risk profile of their shareholders with the risk and investment demands of the marketplace;
• Risk profiles differ between senior and successor generations;
• Families find it hard to pass the responsibility of managing the firm into the hands of younger generations which they deem less capable;
• Families build the first-generation business on the founder’s intuition, but then business never establishes more intentional entrepreneurial processes or confirmed strategy for the future to keep the entrepreneurial contributions alive;
• Families rarely make use of the same financial strategies as those used by fellow entrepreneurs to grow the business;
• Families do not get rid of unproductive assets and underperforming businesses to reallocate resources to more productive places;
• Successor generation family members feel entitled to get a business rather than seek next generation entrepreneurial opportunity;
• Senior leaser communicates to the next generation that business planning and entrepreneurial analysis is a waste of time;
• The family member is given part of the business to run as part of their legacy, and this is deemed to be entrepreneurship in the family.

Iwan (2006) goes further to include the following challenges:
• Lack of an exit strategy;
• Succession planning;
• High turnover of non-family members;
• Lack of training of new family members who join the business;
• Lack of outside opinions and diversity on how to operate the business.

The cultural background of the community as enumerated above where the business is located could affect the business in some ways viz:
• Work Days Available for Operation
• Gender Structure of the Work Force / Management
• Nature of Investment
• Succession in The Business

• Strength of family relationships during challenging periods of business change
• Financial sacrifices that family members make for the good of the firm
• Operation as a family business distinguishes the firm from its competitors
• Higher levels of concern for its community and non-family employees
• Capability to plan and prepare for the long haul
• Emphasis on quality and value

Conflict among family members may result in:
• Risk (consequences of failure) to the family in launching a business
• Nepotism and the differences in competencies and merit of family members involved in the business
• Family traditions versus the business need to innovate and seize opportunities
• Unity and cooperation of family versus business need to foster diversity and competition
• Family loyalty versus the necessity to provide opportunities for non-family employees

The Founder’s Imprint on the Culture
• The founder’s core values become a transmitted part of the culture (for better or worse).

According to Ukaegbu (2003), succession, in organizational theory and practice, refers to the process of transferring managerial control from one leader or one generation of leaders to the next

• Pre-Business Involvement
• Education and Personal Development
• Proof of Competence
• Formal Start in the Business
• Declaration of Succession

“Economists and policy makers (in Africa) cannot afford to ignore gender issues if they truly wish to follow a shared growth agenda””
-John Page, Chief Economist for the Africa Region, World Bank

Overall, the explanation for the behavior of women entrepreneurs and why they are distinct is complex and multifaceted. Reasons contributing to these differences include factors such as
• Demographics
• Socioeconomic variables
• Subjective perceptions
• Cultural factors
• Institutions

• Socio-Cultural Factors
• Legal and Regulatory Environment
• Access to Finance
• Sense of Self-Worth and Role-Models
• Networking
• Support Services and Other Factors

These initiatives often are tailored under the following general areas:
• Mainstreaming
• Participatory Approach
• Integrated Approach

Mainstreaming: This involves devising a plan or strategy to involve women in the development process or in specific activities. Women are also integrated in decision making at all levels
Participatory approach: This involves continuous dialogue in the course of formulating and implementing programmes that involve and affect women
Integrated Approach: Women entrepreneurs’ issues and constraints are addressed in a broad perspective and in a coordinated manner.

Results from a US survey indicate that Increasing number of women have discovered that the best way to break the “glass ceiling” that prevents them from rising to the top of many organizations is to start their own companies.

The idea of social entrepreneurship was first used in the 1960s and 1970s, but did not become popular until in the 1980s and 1990s. Bill Drayton, the founder of “Ashoka: Innovators for the Public”, is credited for using the words Social Entrepreneurship.

Tyson (2004) describes it broadly as a social mission of finding innovative ways to solving social problems that are not being or cannot be addressed by either the market or the public sector.

Gordis (2009) describes it as “organizational ventures (nonprofit and for-profit) that bring about communal or social change”.

The conditions that brought about the emergence and enthusiam about social entrepreneurship were not unconnected with the failures of organized for-profit businesses in social responsibilty (Tyson, 2004; Smiddy, 2011). Also implicated as a precipitating factor for the emergence of social entrepreneurship in its contemporary form was the economic downturn that impaired access to grants and private donations by the traditional not-for-profit organizations.

Ashoka Organization (2007) defines social entrepreneurs as individuals with innovative solutions to society’s problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale changes”

• Encourage social innovation
• Create an enabling environment for social innovation entrepreneurship
• Reward social-entrepreneurial initiatives for exceptional performance
• Scale successful approaches
• Produce knowledge

• -Entrepreneurs’ Social Networks
• -Prior Experience
• -Existence of a Similar Business
• -Hobby/Personal Interest
• -Market Research
• -Electronic and Print Media

(a) the founding and formation of a new venture, or (b) the significant improvement of an existing venture

Initial New Venture Ide -> Potential New Venture Opportunity -> Decision to Start a New venture

Scanning for Business opportunities cover:
a) Technology, basic research and development, application of research and development;
b) Government regulations;
c) Economic conditions;
d) Buyer strengths;
e) Demographic, economic, attitudinal, awareness, educational;
f) Labour markets;
g) Competitors; and
h) Supplier strength

Opportunity identification has five stages that lead to ‘recognition’. The five stages are discussed in relationship with the process of opportunity identification.
These stages are:
a. preparation
b. incubation
c. insight
d. evaluation
e. elaboration

Preparation: Preparation stage is that knowledge and experience exercised just before the opportunity discovery process.
Incubation: Incubation stage is the part of the opportunity identification process that involves the consideration of a concept or a specific problem ordinarily not subjected to conscious or formal analysis by a businessman or his team.
Insight: Insight stage occurs at the moment a fundamental solution suddenly becomes recognized unexpectedly.
Evaluation: Evaluation stage is about investigating if the recognized and developed ideas are feasible, if the businessman has the required abilities to realize the ideas and if the idea is sufficiently innovative for prospects.
Elaboration: Elaboration is that stage that exposes the opportunity/ideas to external analysis with the tedious and time–consuming options selection, choice decision and organization of resources

Business Opportunity Search results could be classified into three types, these are the:
(a) recognized type
(b) discovered type
(c) created/enacted type

Recognized Type: For opportunities that are recognized, deductive reasoning is used to either actively or passively filter for venture worthy ideas.
Discovered Type: In this type of opportunity, when only the demand exists, but supply does not, and vice versa, then the non-existent side has to be discovered.
Creation/Enactment Type: This type of opportunity is based on the principle of enactment where the entrepreneur creates new means and new ends by using effectual reasoning.

There are five factors that influence identification of opportunities. These are:
a. Entrepreneurial Alertness
b. Prior Knowledge
c. Discovery versus Purposeful Search
d. Networking versus Solo Entrepreneur
e. Creativity

• Manpower (Men or the employees)
• Money (Financial Resources) Materials (Physical Resources)
• Machinery (Technology and Equipment) Time as a Resource

1. Macro Economic Analysis
2. Sectoral Analysis
3. SWOT Analysis
4. Product/Service

-The entrepreneur’s background
-The business influence
-and The general business environment.