Part 1

Entrepreneurship
Fundamentals

Content
The rationale of preoccupations regarding
entrepreneurship

The role of entrepreneurs and of small and mediumsized enterprises (SMEs)

Employment, innovation, competition and democracy

Role of entrepreneurship education

Enterprises demography and the profile of

entrepreneur

Demography of enterprises in Europe

Tendencies regarding enterprises natality and mortality
The profile of the entrepreneur

Evolution of conceptual thinking regarding

entrepreneurship
Main paradigms regarding entrepreneurship
Distinction between entrepreneur, capitalist,
manager and inventor

The role of entrepreneurs and

SMEs (1)

Read also Role of entrepreneurship in economic development, Hisrich, Cap1, pag:

14-16

Employment
It is estimated that the activity of entrepreneurs and
(young) SMEs contribute to employment growth by
creating new jobs. Empirical studies have shown,
however, that the link between the creation of new
businesses and the employment rate is not so
obvious (for a review of various studies, see Chapter 2 of the paper
contained in Entrepreneurship and job creation file). From another
perspective, jobs in smaller firms appear to be more
resistant to crises due to these enterprises greater
flexibility.

The role of entrepreneurs and

SMEs (2)
Innovation
It is estimated that the manifestation of
entrepreneurship relies to a large extent on innovation
so as intensifying creation of new businesses as a
result of entrepreneurial activity leads to greater
innovation and enhanced competitiveness. Empirical
studies could not confirm always that new enterprises
and SMEs innovate more than older or larger
undertakings, this being due - according to some
authors (including Peter Drucker) -to the fact that
innovation in small firms has an informal and vague
character and may not be commensurate according
to its real size.

The role of entrepreneurs and

SMEs (3)
Competition
The entry (on the market) of new
enterprises constitute a threat to
incumbents and forces them to watch on
technologies and business models and to
improve their work..
Moreover, the existence of a strong and
dynamic sector of young (often small size)
enterprises stand against the evolution of
industries towards oligopolistic structures,
contributing to maintaining and increasing
rivalry among firms.

The role of entrepreneurs and

SMEs (4)
Democracy

Political democracy depends on economic

democracy, namely the ability of large parts of
the population to access independently to the
resources needed to ensure a normal level of
welfare (for example, in some studies for the
USA this level is judged to be reached if
revenues are higher by 30% than the expenses
for food and lodging). The presence on a large
scale of entrepreneurship in a nondiscriminatory legal framework decisively
contribute (along with the relative growth of
highly qualified specialists - experts and
managers - to increasing the middle class, a
social category that guarantees the
preservation of diversity of options.

Role of entrepreneurship
education
Given that the number
of entrepreneurs is higher in communities
that already have a certain tradition in this area, this fact suggests
that education (in this case it is informal learning, learning
outcomes from others experience) is an important lever for
increasing the entrepreneurial phenomenon.
Therefore, policies aimed at stimulating entrepreneurship put
entrepreneurship education first.
Entrepreneurship education should start as early as possible (from
pre-school) and continued at all levels.
Entrepreneurship education has a horizontal character: it must be
a component of learning in all subjects and curricula.
Consequently, entrepreneurship education is not located solely in
disciplines aimed explicitly at providing knowledge regarding the
entrepreneurial phenomenon, such as the subject
"Entrepreneurship".
The discipline "Entrepreneurship" organizes knowledge and
increase students' ability to sense, understand and interpret the
entrepreneurial phenomena and to perform tasks involving such a
capacity, not only in the context of starting a business on their
own, but also in other professional positions (development /

Role of entrepreneurship
education(2)

Increasing the role of education in developing entrepreneurship is

recognized as a priority among EU policies. (see
EC Communication of 2006 , Oslo Agenda, the study about the
impact of entrepreneurship higer education, pillar 1 of
Entrepreneurship 2020 Action Plan)
Most European students believe that educating students
propensity for innovation and entrepreneurship in universities is
very important

5.2. The importance of fostering innovation and an entrepreneurial mindset among

students and staff by country
Considering the total agree ratio, for the four statements, the smallest variation between
countries was seen in regard to the question concerning the importance of HEIs fostering innovation
and an entrepreneurial mindset among students and staff: a 23 percentage point difference
between countries with the highest and the lowest level of agreement (the highest: 97% in Poland
and Romania vs. the lowest: 74% in Croatia). As well as respondents in Poland and Romania,
students in Slovenia (96%), Iceland (95%), Portugal and Bulgaria (both 93%) gave high levels of
support to the need to foster innovation and entrepreneurial mindsets. An examination of the
proportions of those who were very much in favour of an entrepreneurial education showed a
different hierarchy of countries. For example, those students least likely to strongly agree that it was
important for HEIs to foster innovation and an entrepreneurial mindset were found in the
Netherlands (32%), Denmark (33%), Germany and Estonia (both 34%). In contrast, Iceland (73%),
Bulgaria (71%), Slovenia and Romania (both 69%) and Malta (67%) had the highest levels of strong
agreement in favour of fostering innovation and an entrepreneurial mindset. excerpt from the
survey which can be consulted here

Enterprises Demography

Businesses are born, go through an evolution during their

existence and then "die". By analogy with the demographic
indicators of population dynamics, one may study
phenomena that influence the number of enterprises: birth
and mortality rates, population growth, infant mortality, life
expectancy, etc.
Typically, there is a tendency for a high rate of birth is
accompanied by a relatively high infant mortality rate and a
lower birth rate to be accompanied by greater life
expectancy.
Present policy orientation is to reduce barriers to entry and
exit from the market, with prices that many of the fledgling
businesses will not survive for 1-3 years
Visit the following links: Business demography statistics,
Business demography - regional analysis
Also take a look at Global Entrepreneurship Monitors
Global Report 2014

Entrepreneurs profile
The study of differences between entrepreneurs and
other people went to the psychological, behavioral
and relational characteristics; empirical research also
sought to identify certain causalities related to the
entrepreneur's personal and professional life, with less
conclusive results.
Two of the most recognized theories are:

Psychological theory: the entrepreneur is a man of

exploration, a man of power and a misplaced" (not very
well integrated into society)
The psycho-sociological theory : in addition to
psychological factors mentioned above, other factors
occur, some related to professional education (it is more
likely to start a business in your professional field) and
some related to relationships (relatives, friends,
colleagues) who can stimulate, encourage or help, the
would-be entrepreneur.

Entrepreneurs profile (2)

Hisrich quoting Saras Sarasvathy: specific for
the mentality of entrepreneurs is a process
focused on capitalizing present conditions effectuation process - characterized in that
the developer starts from what he owns (who is
he, what he knows and who he knows) to
choose which direction to turn the initiative
among the possible options;
This approach is different from that focused on
achieving the goal proposed - causal process
where the person first decide a target and
then seek to mobilize the necessary means to
achieve it.
Read: How entrepreneurs think, Hisrich, Cap. 2, pag. 30-33 focusing on 5
principles of effectuation process:

Entrepreneurs profile (3)

Based on the data presented in Chapter 14 of the
paper "Key figures on European business, with a
special feature on the factors of business success" (
attached, pp. 115-130), observe and note the main
differences between the profile of entrepreneurs in
Romania and the European average, the main
motivations of European entrepreneurs, and major
differences in this regard between men and women.

Evolution of conceptual thinking

regarding entrepreneurship
During the history the conceptual thinking has seen
the entrepreneur in different ways reflecting the
current economic, political/institutional and social
conditions
Period
Main cathegories associated with entrepreneurship
Early period

Army leaders (conquerors)

Traders & explorers (Marco Polo)

Middle age

Clerical

XVIIth century

State (Crown) contractors

XVIIIth
century

Business person (possible confusion between entrepreneur and

capitalist)

XIXth century

Head of enterprise (possible confusion between entrepreneur and

manager)

XXth century

Innovator and change agent

For a more sophisticated aproach, please read: Murphy, Liao & Welsch:
A conceptual Histrory of Entrepreneurial Thought, Journal of Management
Theory, vol 12, nr. 1, 2006 (Ataat)

Main paradigms regarding

entrepreneurship

A paradigm is defined as A theoretical construct shared by a

significant number of researchers(>20); Concept, model, theory,
resulting from intellectual interpretation of an object or notion
The succession of paradigms is specific to mature sciences; in
entrepreneurship paradigms coexist, which is a situation specific for
"teenage" or pre-paradigmatic stage.
Currently, there are four coexistent paradigms about
entrepreneurship:

The opportunity paradigm

The organization-creation paradigm
The value-creation paradigm
The innovation paradigm

The business opportunity paradigm

An opportunity means a favorable occasion which arose at the

suitable time, place and circumstances
"Entrepreneurship is the process of creating or identifying an
opportunity and pursuing it, regardless of the actual resources
available(Jeffry A. Timmons, 1994)
Two senses
The objective vision: an opportunity exists objectively and the
entrepreneur has the required sensitivity to perceive it
The constructivist vision: the opportunity is the creation of the
entrepreneur who has the ability to combine different elements of the
objective reality in a new and useful manner

The entrepreneurs approach is described as a process of

identifying, evaluating and exploiting the opportunity where the focus
is either on the opportunity itself (causal process), either on the
entrepreneur capacity (effectuation process).

The organization-creation paradigm

Main representative: William B. Gartner: I think that those who are familiar with some

According to this paradigm, the entrepreneur is the person who

mobilizes the talents and abilities of other people, provides the
necessary endownment and cause them to work jointly for the
achievement of a product/service of a certain value.
This paradigm can also be found at Ronald Coase, when talking
about The nature of the firm, indicating that businesses are the fruit
of entrepreneurs who prefer to organize production in order to avoid
transaction costs which otherwise would be incurred in connection
with the use of the market mechanism for purchasing the same
goods or services.
The organization is not an exclusive attribute of the entrepreneur,
but rather, an attribute of the manager. Hence the confusion
between entrepreneur and manager should be avoided, making
use of the feature of novelty, which is specific for the entrepreneur

of my previous writings on entrepreneurship are aware that the domain of entrepreneurship that interests me is
focused on the phenomenon of organization creation ( Gartner, W.B.: Aspects of organizational emergence, in Bull, I.;
Thomas, H.; Willard, G.: Entrepreneurship perspectives on theory building, Pergamon, 1995, p. 69 )

The value-creation paradigm

According to this paradigm, the entrepreneur
conducts actions that have as their purpose the
creation of new, superior value. This paradigm is
reflected in the definition of the enterprise given
by Franois Perroux: an enterprise aim is to obtain
a positive difference between the value of output
and the cumulated value of all inputs employed
to creat that output.
The limits of this paradigm are given by the fact
that additional value can be obtained by other
means as well. Must be made, therefore, the
distinction between entrepreneur and capitalist.

The innovation paradigm

Joseph Schumpeter-considered father of modern
theories about entrepreneurship advocated, in his
works, that a nation's progress through innovation and
technological change, is due to people with "wild
spirit", namely the entrepreneurs.
Another very influential author who believes that the
entrepreneur and entrepreneurial approach are rooted
in innovation is Peter Drucker, the author of a work of
reference in the field: Innovation and
entrepreneurship: practice and principles (1985)
(translated in Romanian in 1993): "innovation is the
specific instrument of entrepreneurs, the mean by
which they exploit change as an opportunity for
different businesses or services
According to this paradigm, the entrepreneur watches
over opportunities to generate innovations and
creates conditions of valorization (organization) in
hope of a reward (new additional value)

The interdependence of
paradigms
1. To exploit a business opportunity it
is necessary to structure resources
in some form of organization.
2. The organization cannot exist
sustainably without generating the
amount required for the acquisition
of resources and the reward of
stakeholders.
3. The new, additional value can be
created through innovation
4. Innovation is successful when it
exploits (or generate) an
opportunity in the economic and
social environment.
5. Exploitation of any innovation
requires a new organization, and
the existence of the organization is
offering creative interactions
required for innovation.
6. An opportunity is only going to be

Opportunity
paradigm

Organizationcreation
paradigm

5
4

2
6

The paradigm
of innovation

Value creation
paradigm

The links between the four

paradigms of entrepreneurship
Adaptation: Verstraete et Fayolle, Paradigmes &
entrepreneuriat, Revue de l'entrepreneuriat, vol 4,
nr. 1, 2005, page 44

The distinction between

entrepreneur and capitalist
The entrepreneur attract, organizes and coordinates
activities and resources to produce, in a self
maintained system, something new, of value to
society, and hoping to get a reward (moral or material)
The capitalist aims to achieve a gain at the expense of
the resources that it holds in the property (capital).
To some extent, the entrepreneur can be seen as a
creator, while the capitalist can be seen as a
speculator (fortune seeker).
Whereas capital is a necessary factor in the
entrepreneurial approach and the exploitation of
opportunities through innovations often offers the
biggest gain to the holder of equity, in practice the
distinction between entrepreneur and capitalist is not
always very clear. As a result it is proposed the
concept of creative or enterprising capitalist.

The distinction between

entrepreneur and manager
The entrepreneur proposes new solutions capitalizing
on opportunities, while the manager makes use of
known, verified solutions

The distinction between

entrepreneur and inventor
Inventor creates something new, but, typically, and
unlike an entrepreneur, is not sufficiently concerned of
its applicability; also, more often than not, the
inventor does not see commercial earnings as a
measure of success.
Read also Entrepreneurs versus inventors in Hisrich, Cap.1, pag. 9

Part 2
Innovation and creativity
in entrepreneurship

Traits of creativity

Creativity is a predisposition to generate and promote new

in all its forms.
Creativity is the basis of innovation, which is, in turn, the
engine of progress, and the most important factor of
competitiveness
Innovation is also a defining characteristic of
entrepreneurship.
Creativity is a human characteristic, present at birth.
Not all people are equally creative.
Creativity can be educated.
Creativity can be stimulated, in particular through group
techniques.
Superior intelligence is useful for creativity, but above a
certain threshold inhibits creativity.
Creativity excels in problem identification, compared to
problem solving.

The process of creativity

The process includes the following stages of
creativity.
Preparation
When one gathers information, makes observations, defines the
problem, delineated, outlines a hypothesis.

Incubation
conscious preoccupation ceases and searching is transferred into
the subconscious.

Illumination
Takes place in the subconscious, rely on inspiration or intuition and
consists of a synthetic knowledge of the solution, which clears up
all aspects of the problem. Imagination plays an important role

Verification
consists in transforming the intuited solution in something
effectively applicable

Take a look at the presentation The human brain (in Romanian)

Creativity methods

Read paragraph Creative problem solving in Hisrich, cap.

5, pag. 144-148
To see an expanded classification of creativity tools, please
visit Creativity tools section on mindtools.com
Take also few minutes to listen the speech of Ken Robinson
at TED: Do schools kill creativity? https://
www.ted.com/playlists/171/the_most_popular_talks_of_all

Innovation and its

significance

Innovation means the process of transformation of new

ideas into commercial outcomes by using new processes,
products or services in ways better and faster than the
competition.
To understand what are the main types of innovation, how
to recognize in practice the novelty of a product or service
and how to classify new products, read the paragraph
Innovation n Hisrich, Cap. 5, pag. 148-152
To understand the dimensions of interest for innovation,
read "Manifesto" European ambassadors of creativity and
innovation
In order to understand the challenges that lie in front of
public policies at European level with regard to innovation,
read (at least) the introduction and pages 7-9 of the
document "
Reviewing Community innovation policy in a changing world

Systematic innovation
The concept of systematic innovation was introduced and
explained by Peter Drucker in his Innovation and
Entrepreneurship.
Systematic innovation = process permanent lookout over
"sources of innovation opportunities":

The unforeseen-unexpected success, failure, unforeseen

external event unexpectedly;
Incongruence of reality as it is in fact and reality as it is
claimed that it is, or as it should be;
Necessity of the process, i.e., a situation where a need felt
cannot be solved by "known solutions";
Changes in industry structure or demand, regardless of the
causes which have generated them creates an opportunity for
introducing innovations with relatively small risk;
Demographic changes-an obvious source of opportunities for
innovation;
Changes in receptivity and understanding - or, in other terms,
changes in the system of values and lifestyle changes;
New knowledge, scientific or non-scientific, making it possible
to obtain new solutions/inedited in combination with
knowledge already accumulated

Important principles of
innovation
innovation must aim at supremacy,
from the very beginning
innovation must meet the existing
need, not a future needs.

Instruments for the protection

of intellectual property rights
Why should intellectual property be protected?:

read at least sections 1 and 2 of the document "

An Industrial Property Rights Strategy for Europe 07
08

Also read about Open source din Wikipedia

http://en.wikipedia.org/wiki/Open_source

Ideas are not protected but only the form

(perceptible to the senses) under which they
apply
For a presentation of IPR instruments please take a look at EU
IPR Helpdesk Introduction to Intellectual Property
and Intellectual Property Rights

Data and statistical analyses

relating to innovation
Several regular studies monitor the
evolution of innovation in Europe:
Innovation Union Scoreboard
EU Regional Innovation Scoreboard
Trends and challenges in public sector inn
ovation in Europe

Part
3
The business model and
financial issues in business
planning

The business model

Through business model means a conceptual tool that allows understanding the
logic of specific businesses that it creates, proposes to its clients and deliver
some value to generate a profitable and sustainable stream of revenue.
To define the business model should be considered the following:

The product
Customer relation interface
Management of skills, activities and partnerships
Financial arrangements

Understanding the structure of generic business models and their typology is

useful for creating a new and innovative business approach
A useful and currently in fashion way of representing the main components of
a generic business model, as well as an instrument for assembling your would-be
entrepreneurial venture is The Business Model Canvas
For a way of using the concept of Business model for entrepreneurial business
innovation you can read Sustainable Value Creation
For understanding the common traits and differences between commercial (for
profit) and social (not for profit) entrepreneurship see the paper on
social and commercial entrepreneurship

Considerations on the financial

structure of the enterprise
The distinction between the cost of investment
and recurrent costs
The distinction between fixed and variable
costs
The distinction between equity and liabilities
Control of the relationship between the Return
on assets ratio and the cost of debt
Control of the relationship between duration of
receipt of invoices and payment of suppliers
Asset Turnover control

Policy instruments
supporting start-ups and
SMEs

Business Incubators
EBN
Business Innovation Centers
Seed-money and guidance (BusinessEBAN
Angels)
EVCA-InvestEurope
Venture Capital (Risk Capital) FNGCIMM
Loan Guarantees (Guarantee
Funds)
Gofundme, kikstarter, crestemidei
Crowdfunding
Micro-loans
Informal credit

Advantages and disadvantages of

subsidies
State aid policy allows subsidy schemes for the creation of new
enterprises and small and medium enterprises ("de minimis"
rule)
Benefits
Incentive effect
Support to the objectives of public policies (education, innovation, competition,
employment, local development, social responsibility)
Leverage effect
Risk mitigation effect and reduction of the cost of capital (enable the initiation of business
not very secure or that does not promise an exceptional profitability)

Disadvantages
Cheap money generate weak business
Bureaucracy
Constraints
Corruption

Part 4
The business environment
and EU context for
entrepreneurship and
innovation

The business environment

descriptors

EU context and policies for

entrepreneurship and
innovation

The framework describing the EU

context and policies related to
entrepreneurship and enterprises is
described http://ec.europa.eu/growth/index_en.htm (see
next slide)

Please, screen policies under each tab: Single market, Industry, Entrepreneurship
and SMEs, Access to finance for SMEs, Sectors

Main documents

Entrepreneurship action plan

EU Industrial policy
Small Business Act Review
Horizon 2020
EU program for SMEs COSME leaflet,
webpage