Week 1
Eisenmann 2013- Entrepreneurship: A working definition
Harvard Business School: the pursuit of opportunity beyond resources controlled.
They see a change but don’t have the resources.
Practical relevance of Stevenson’s definition: Entrepreneurship is a way of managing that
can be used in many kinds of organizations.
● Pursuit: Focused and fast action. Opportunities don’t last long, so quick results are
needed to attract money or investors. Big companies have more time and resources.
● Opportunity: Must be new or innovative in at least one way:
● New product
● New business model
● Better or cheaper version of something
● New customers for an existing product
It can also be a mix. Just making more profit (like raising prices) is not
entrepreneurship if it’s not innovative.
● Beyond resources controlled: Entrepreneurs start with limited human, social, and
financial capital. Bootstrapping: investing own time/money. Sometimes enough to
become self-sufficient, but high-potential ventures often need external resources for
production, distribution, working capital, etc.
Four big risks: Because entrepreneurs pursue opportunities without having all the needed
resources, they face four main risks. Entrepreneurs must manage these uncertainties,
though some risks are beyond their control.
1. Demand risk: will customers actually buy it?
2. Technology risk: can we actually build it?
3. Execution risk: can we build the right team?
4. Financing risk: can we get the capital?
Catch-22: You need resources to reduce uncertainty and risk, but the resource providers
only want to help when the risk is low. This is where traditional business strategies fail, you
don’t have the resources yet because the risk is still too high.
Example Uber: drivers only join if there are customers, and customers only come if there are
drivers.
1. Lean experimentation: testing hypotheses quickly with a minimum viable product.
(demand)
2. Staged investment: investing step by step, milestone by milestone. (financial)
3. Partnerships: work with other organizations and use their resources to avoid the
costs of ownership. (executive and technologie)
4. Storytelling: inspiring stakeholders with a compelling vision to encourage them to
commit resources. (glue that hold it together)
,Eckhardt 2003- Opportunities and entrepreneurship
Researchers used to study who wants to be an entrepreneur, but now they focus on the link
(nexus) between entrepreneurial people and valuable opportunities. Entrepreneurship
depends on opportunities and is episodic, meaning they appear only at certain times.
Traditional economic theories, like market equilibrium, assume all information is in prices and
no new profits exist. But disequilibrium, a disrupted system with incomplete information,
creates space for profit. Entrepreneurs succeed by discovering or creating opportunities
before others.
Equilibrium theories are limited because they assume:
● Prices show all information, but they miss future technology, demand, or failures.
● Futures markets exist for all goods, while creative activities are uncertain and risky. A
futures market is where people agree now to buy or sell something later at a fixed
price.
● Decisions are always optimal, while entrepreneurs make creative choices.
● Prices perfectly allocate resources, while entrepreneurs exploit temporary
imbalances.
Entrepreneurial opportunities are situations where new goods, services, resources, markets,
or ways of organizing are created by combining means and ends in new ways. They differ
from regular profit opportunities, which only improve existing resources.
The market system coordinates economic activity because prices act as signals, the invisible
hand, but prices have limits:
● Prices do not show all information and give only limited guidance, especially for
finding and using entrepreneurial opportunities.
● Entrepreneurs act when they believe resources can be used in more valuable ways
than others realize. If everyone thought the same, no profit opportunities would exist.
● For existing markets, prices give limited direction: they do not show how to serve new
markets, improve technology, or explain why past attempts failed.
● For future markets, prices do not exist yet, so they cannot guide investments in new
products or innovations.
Hayek showed that prices guide decisions (like saving tin when it is scarce), but this works
only for existing uses. Entrepreneurs also need to look why resources are scarce: new uses
can create profit, while lost supply just limits access. Entrepreneurial profit depends on both
price signals and how they are interpreted.
Entrepreneurial discovery is finding new ways to use means and ends with information not
reflected in prices. Entrepreneurs bring this to the market, which can update prices or create
new markets. They also make expectations about future prices, demand, and markets.
Success depends on guessing correctly, which is hard because future information, customer
preferences, and market reactions are unknown.
Lifecycle of opportunities:
, ● Entrepreneurial profit is usually temporary due to internal and external factors.
● External shocks create opportunities, but new shocks replace old ones.
● Competition reduces opportunities as others copy or learn.
● Owners can raise prices when they see the value of their resources.
● Opportunities last longer if:
○ Imitation is limited (secrets, patents, monopolies).
○ Information spreads slowly or others cannot copy the idea.
Three ways to categorize opportunities
1. Schumpeter locus of change: Locus means the place or part of the value chain
where changes create opportunities.
● New products or services
● New geographic markets
● New raw materials
● New production methods
● New ways of organizing, like internet businesses without physical offices.
2. Sources of entrepreneurial opportunities
● Information asymmetry vs. external shocks
Information asymmetry: This is when people do not have all the information or
make mistakes about the market, you know something what others don’t.
Think about bitcoin. It can also be about different assumptions of value, like
diamonds. Entrepreneurs can see these gaps and create opportunities.
External shocks: These are big changes outside the market, like new
technology, laws, or rules, that create new opportunities for entrepreneurs.
You also have xploitation of market inefficiencies, this is when entrepreneurs
see waste or mistakes in the market and create new means-ends. For
example, making soap from orange peels from a supermarket.
● Supply-side vs. demand-side changes
Supply-side changes: Changes in how things are made, such as inputs,
production methods, organization, or products.
Demand-side changes: Changes in what customers want, their tastes,
culture, or behavior that current products cannot meet.
● Productivity improving vs. rent-seeking opportunities
Productive entrepreneurship creates value for society and improves
efficiency.
Rent-seeking only makes profit for the entrepreneur without social value, like
crime.
● Catalysts of change
Factors that drive change and create opportunities. Technological, political,
regulatory, and demographic changes.
3. Initiator of the change: This means who causes the change that creates
opportunities. The type of initiator affects how opportunities are discovered, their
value, and how long they last. For example, technological opportunities can come
from universities creating new knowledge or from existing companies using
knowledge in new ways. Different actors can start changes:
● Non-commercial actors: government, universities, research institutes.
● Existing commercial actors: established companies, suppliers, customers.
, ● New commercial actors: independent entrepreneurs, companies entering new
markets.
Conclusion
Entrepreneurship research should focus on opportunities, not just types of entrepreneurs.
Unique information and market instability create chances, and changes in society, politics,
rules, and technology are important.
Lecture
Entrepreneurship is about what you do, not who you are. It’s not about personality or risk
attitude.
Entrepreneurship is pursuit of opportunity beyond resources under control. - US
Entrepreneurship is when you act upon opportunities and ideas and transform them into
value for others- EU. Nobody buys something when there is no value back for yourself.
It is all about: wants the customer to pay more than it cost to make, willingness to pay
(WTP).
Eisenmann 2013- Entrepreneurship: A working definition
Harvard Business School: the pursuit of opportunity beyond resources controlled.
They see a change but don’t have the resources.
Practical relevance of Stevenson’s definition: Entrepreneurship is a way of managing that
can be used in many kinds of organizations.
● Pursuit: Focused and fast action. Opportunities don’t last long, so quick results are
needed to attract money or investors. Big companies have more time and resources.
● Opportunity: Must be new or innovative in at least one way:
● New product
● New business model
● Better or cheaper version of something
● New customers for an existing product
It can also be a mix. Just making more profit (like raising prices) is not
entrepreneurship if it’s not innovative.
● Beyond resources controlled: Entrepreneurs start with limited human, social, and
financial capital. Bootstrapping: investing own time/money. Sometimes enough to
become self-sufficient, but high-potential ventures often need external resources for
production, distribution, working capital, etc.
Four big risks: Because entrepreneurs pursue opportunities without having all the needed
resources, they face four main risks. Entrepreneurs must manage these uncertainties,
though some risks are beyond their control.
1. Demand risk: will customers actually buy it?
2. Technology risk: can we actually build it?
3. Execution risk: can we build the right team?
4. Financing risk: can we get the capital?
Catch-22: You need resources to reduce uncertainty and risk, but the resource providers
only want to help when the risk is low. This is where traditional business strategies fail, you
don’t have the resources yet because the risk is still too high.
Example Uber: drivers only join if there are customers, and customers only come if there are
drivers.
1. Lean experimentation: testing hypotheses quickly with a minimum viable product.
(demand)
2. Staged investment: investing step by step, milestone by milestone. (financial)
3. Partnerships: work with other organizations and use their resources to avoid the
costs of ownership. (executive and technologie)
4. Storytelling: inspiring stakeholders with a compelling vision to encourage them to
commit resources. (glue that hold it together)
,Eckhardt 2003- Opportunities and entrepreneurship
Researchers used to study who wants to be an entrepreneur, but now they focus on the link
(nexus) between entrepreneurial people and valuable opportunities. Entrepreneurship
depends on opportunities and is episodic, meaning they appear only at certain times.
Traditional economic theories, like market equilibrium, assume all information is in prices and
no new profits exist. But disequilibrium, a disrupted system with incomplete information,
creates space for profit. Entrepreneurs succeed by discovering or creating opportunities
before others.
Equilibrium theories are limited because they assume:
● Prices show all information, but they miss future technology, demand, or failures.
● Futures markets exist for all goods, while creative activities are uncertain and risky. A
futures market is where people agree now to buy or sell something later at a fixed
price.
● Decisions are always optimal, while entrepreneurs make creative choices.
● Prices perfectly allocate resources, while entrepreneurs exploit temporary
imbalances.
Entrepreneurial opportunities are situations where new goods, services, resources, markets,
or ways of organizing are created by combining means and ends in new ways. They differ
from regular profit opportunities, which only improve existing resources.
The market system coordinates economic activity because prices act as signals, the invisible
hand, but prices have limits:
● Prices do not show all information and give only limited guidance, especially for
finding and using entrepreneurial opportunities.
● Entrepreneurs act when they believe resources can be used in more valuable ways
than others realize. If everyone thought the same, no profit opportunities would exist.
● For existing markets, prices give limited direction: they do not show how to serve new
markets, improve technology, or explain why past attempts failed.
● For future markets, prices do not exist yet, so they cannot guide investments in new
products or innovations.
Hayek showed that prices guide decisions (like saving tin when it is scarce), but this works
only for existing uses. Entrepreneurs also need to look why resources are scarce: new uses
can create profit, while lost supply just limits access. Entrepreneurial profit depends on both
price signals and how they are interpreted.
Entrepreneurial discovery is finding new ways to use means and ends with information not
reflected in prices. Entrepreneurs bring this to the market, which can update prices or create
new markets. They also make expectations about future prices, demand, and markets.
Success depends on guessing correctly, which is hard because future information, customer
preferences, and market reactions are unknown.
Lifecycle of opportunities:
, ● Entrepreneurial profit is usually temporary due to internal and external factors.
● External shocks create opportunities, but new shocks replace old ones.
● Competition reduces opportunities as others copy or learn.
● Owners can raise prices when they see the value of their resources.
● Opportunities last longer if:
○ Imitation is limited (secrets, patents, monopolies).
○ Information spreads slowly or others cannot copy the idea.
Three ways to categorize opportunities
1. Schumpeter locus of change: Locus means the place or part of the value chain
where changes create opportunities.
● New products or services
● New geographic markets
● New raw materials
● New production methods
● New ways of organizing, like internet businesses without physical offices.
2. Sources of entrepreneurial opportunities
● Information asymmetry vs. external shocks
Information asymmetry: This is when people do not have all the information or
make mistakes about the market, you know something what others don’t.
Think about bitcoin. It can also be about different assumptions of value, like
diamonds. Entrepreneurs can see these gaps and create opportunities.
External shocks: These are big changes outside the market, like new
technology, laws, or rules, that create new opportunities for entrepreneurs.
You also have xploitation of market inefficiencies, this is when entrepreneurs
see waste or mistakes in the market and create new means-ends. For
example, making soap from orange peels from a supermarket.
● Supply-side vs. demand-side changes
Supply-side changes: Changes in how things are made, such as inputs,
production methods, organization, or products.
Demand-side changes: Changes in what customers want, their tastes,
culture, or behavior that current products cannot meet.
● Productivity improving vs. rent-seeking opportunities
Productive entrepreneurship creates value for society and improves
efficiency.
Rent-seeking only makes profit for the entrepreneur without social value, like
crime.
● Catalysts of change
Factors that drive change and create opportunities. Technological, political,
regulatory, and demographic changes.
3. Initiator of the change: This means who causes the change that creates
opportunities. The type of initiator affects how opportunities are discovered, their
value, and how long they last. For example, technological opportunities can come
from universities creating new knowledge or from existing companies using
knowledge in new ways. Different actors can start changes:
● Non-commercial actors: government, universities, research institutes.
● Existing commercial actors: established companies, suppliers, customers.
, ● New commercial actors: independent entrepreneurs, companies entering new
markets.
Conclusion
Entrepreneurship research should focus on opportunities, not just types of entrepreneurs.
Unique information and market instability create chances, and changes in society, politics,
rules, and technology are important.
Lecture
Entrepreneurship is about what you do, not who you are. It’s not about personality or risk
attitude.
Entrepreneurship is pursuit of opportunity beyond resources under control. - US
Entrepreneurship is when you act upon opportunities and ideas and transform them into
value for others- EU. Nobody buys something when there is no value back for yourself.
It is all about: wants the customer to pay more than it cost to make, willingness to pay
(WTP).
