1. Entrepreneurship:
Theory and Evidence
Giovanni Battista Dagnino
University of Catania
June 8, 2011

2. Agenda
- Insights from 2 Conferences in Sicily
- Basic Data and Essential Indicators
- Demistifying Entrepreneurship: Animal Spirits
- Popular Wisdom, Press and the Entrepreneur(s)
- Strategic Entrepreneurship
- Theories of Entrepreneurship

3. SMS Special Conference
New Frontiers in
Entrepreneurship:
Strategy, Governance
and Evolution
University of Catania
Catania, May 23-25 2007

4. Strategic
ManagemenUniversity of Catania
t
Society
Institutions @ the Conference

5. New Frontiers in
Entrepreneurship:
Strategy Governance
and Evolution
by Giambattista Dagnino,
Rosario Faraci, David
Audretsch e Bob Hoskisson
Catania, May 23-25 2007

6. www.taorminaprivateequity2008.net

7. Taormina, July 18 2008

8. I DATI DI BASE
Camera Commercio Milano 9 Gennaio 2009
- 323 mila le nuove imprese avviate nei primi 9 mesi del 2008
in Italia
- Roma capofila con 24.530 nuove imprese (7,6%), seguita da
Milano
- la Lombardia è prima fra le regioni (16,5%), seguita dal
Lazio (10,3%) e dalla Campania (8,8%)
- fra i comparti produttivi, primo è il commercio (20%),
seconde le costruzioni (16%), cui conseguono i servizi alle
imprese (8%) - l’agricoltura (8%) e il manifatturiero (7%)
ricoprono rispettivamente la quarta e la quinta posizione

9. ESSENTIAL INDICATORS
NEW FIRMS
- Natality rate
- Mortality Rate
- Natality-Mortality = Net growth/decline
- Natality/Mortality rate
- Venture Capital Deals and B-Angels No./Deals
- Incubators Figures and Special Laws Data

10. ESSENTIAL INDICATORS
ESTABLISHED FIRMS
- New Patents
- Newly Funded R&D Projects
- New R&D Centers Established
- Number of New-Hired Researchers
- Knowledge Spillovers and Spin-offs

11. Table 2 - Evolution of European BANs'
Activity
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Number of BANs 66 132 155 177 197 231* 228* 211* 236* 301*
Number of angels 1.487 2.333 3.129 4.347 13.218 12.773 8.227 10.331 15.578
Number of deals 320 416 454 573 600 580 653 843 1.130
Deals/angel 0,22 0,18 0,15 0,13 0,05 0,05 0,08 0,08 0,07
Average amount of the 200.178 177.311 163.011
n/a n/a n/a n/a n/a n/a
deals £ £ £
Source: Elaborations on Eban
(2005), (2008)
* Data refer to Mid-Year

12. As Baumol eloquently remarks, the study
of business without an understanding of
entrepreneurship is like the study of
Shakespeare in which "the Prince of
Denmark has been expunged from the
discussion of Hamlet“
Demistifying Entrepreneurship….

13. ANIMAL SPIRITS

15. ANIMAL SPIRITS
John Maynard Keynes (1883-1946)

16. Popular Wisdom

17. Popular Wisdom

18. Popular Press

19. Popular Wisdom: The Long-Jumper

20. Richard Branson
Renzo Rosso Mario Moretti Polegato

21. Designers Marketing
and and Store
Strategists Managers
TREND
SETTERS
Renzo Rosso (President OPINION
Diesel) “In Diesel we do LEADERS
what we like and what
we would like to wear”
MARKET
Company Mission BULK
Renzo Rosso (President Diesel) “Trendsetters are those
people who have to look within the jacket to know
which brand are they wearing, and that usually buy
in second-hand shops, to be able to mix and match
different pieces of what they like ” Personal interview,
September 2000

22. A. DELL’ACQUA G. ARMANI BURBERRY
Style
REFRESHING
WATERWORLD
Spring/Summer 2005

23. The Rockefeller Brothers
Emma
Adriano Olivetti
Bill Gates

24. MESSRS FIAT
Early days
Valletta
G. Agnelli sr.
Yesterday
Romiti G. Agnelli jr.
Today
J. Elkann
Marchionne

25. Bernie Ecclestone in Formula 1
VALUE CREATED
Extracted US $ 1.4 billion through
a bond offering
Sold 75% non controlling stake
for Us $ 2.1 Billion (thus
valuing the company in
excess for 2.1/.75 and
that is 2.8 billion)
This is consistent with THE TIMES
estimate that in 2002 said
that his net worth was
2.9 billion pounds

26. THE COIN’S FLIPSIDE

27. THE COIN’S FLIPSIDE
?

29. Two Extremes Views
The emerging
art of
entrepreneuring
It’s
Recurring Impossible to
Eternal Teach!!
Principles

30. Strategic Entrepreneurship
A new approach that involves simultaneous opportunity-seeking
and advantage-seeking behaviors and results in superior firm
performance. Small entrepreneurial ventures are effective in
identifying opportunities, but are less successful in developing
competitive advantages needed to appropriate value from those
opportunities. In contrast, large established firms are relatively
more effective in establishing competitive advantages, but are
less able to identify new opportunities

31. Strategic Entrepreneurship
Strategic entrepreneurship is the integration
of entrepreneurial (i.e., opportunity seeking
actions) and strategic (i.e., advantage-
seeking actions) perspectives to design and
implement entrepreneurial strategies that
create wealth
Strategic entrepreneurship is entrepreneurial
action that is taken with a strategic
perspective
Multidisciplinary roots……

32. Strategic Entrepreneurship
Venkataraman and Sarasvathy (2001) use a metaphor
based on William Shakespeare’s renown drama
Romeo and Juliet
They suggest that strategic management research
that does not integrate an entrepreneurial perspective
is like ‘the balcony without Romeo’
They argue that entrepreneurship research without
integration of a strategic perspective is like ‘Romeo
without a balcony’
In the words of Venkataraman & Sarasvathy,
entrepreneurial action is the ‘Romeo on the balcony’

33. Theories of Entrepreneurship
Schumpeterian Approach
Entrepreneurial Opportunities
Entrepreneurial Action and
Hypercompetition

34. The Schumpeterian Approach
An entrepreneur is an individual who has a
definitive action-plan and strategy to realize a
business venture
Creativity is the trait that evolves new and unique
ideas and innovation
It requires seeing and conceptualizing things from
newer and unexplored angles
Innovation is the ability to apply creative solutions
to problem to enhance organizational productivity
It is imperative for the entrepreneur to apply
innovation towards accomplishment of long-term
business goals

35. The Schumpeterian Approach
Creative Destruction
In Schumpeter's vision of capitalism, innovative
entry by entrepreneurs was the force that
sustained long-term economic growth, even as it
destroyed the value of established companies that
enjoyed some degree of monopoly power
Just as older behemoths perceived to be juggernauts by
their contemporaries (e.g., Montgomery Ward, Kmart,
Sears) were eventually undone by nimbler and more
innovative competitors, Wal-Mart faces the same threat
Just as the cassette tape replaced the 8-track, only to be
replaced in turn by the compact disc, itself being
undercut by MP3 players, the seemingly dominant Wal-
Mart may well find itself an antiquated company of the
past. This is the process of creative destruction

37. Types of Innovation-Generating
Creative Destruction in an Industry
- New markets or products
- New equipment
- New sources of labor and raw materials
- New methods of organization or management
- New methods of inventory management
- New methods of transportation
- New methods of communication (e.g., the Internet)
- New methods of advertising and marketing
- New financial instruments
- New ways to lobby politicians or new legal
strategies (though many economists would argue
that this last is not a genuine example of creative
destruction!)

38. Entrepreneurial Opportunities
The field of entrepreneurship concerns the scholarly
examination of how, by whom, and with what
effects opportunities to create future goods and
services are discovered, evaluated, and exploited
(Venkataraman, 1997)
Consequently, the field involves the study of sources
of opportunities, the processes of discovery,
evaluation, and exploitation of opportunities, and
the set of individuals who discover, evaluate, and
exploit them (Shane and Venkataraman, 2000)

39. Entrepreneurial Opportunities
The problem with this approach is that
entrepreneurship involves the nexus of two
phenomena:
• the presence of lucrative opportunities and
(b) the presence of enterprising
individuals

40. Entrepreneurial Opportunities
Sets of research questions about
entrepreneurship:
(3) why, when, and how opportunities for the
creation of goods and services come into existence
(2) why, when, and how some people and not other
discover and exploit these opportunities; and
(3) why, when, and how different modes of action
are used to exploit entrepreneurial opportunities

41. Entrepreneurial Opportunities
Peter Drucker (1985) has described three
different categories of opportunities:
(3)the creation of new information, as occurs with
the invention of new technologies;
(2) the exploitation of market inefficiencies that
result from information asymmetry, as occurs
across time and geography; and
(3) the reaction to shifts in the relative costs and
benefits of alternative uses for resources, as
occurs with political, regulatory, or demographic
changes

42. Entrepreneurial Opportunities
- Disequilibrium (Schumpeter)
- Discovery (Kirzner)
- Asymmetries of Information and Beliefs
- Intuition and Foresight
- Duration of an Opportunity

43. Entrepreneurial Opportunities
- Optimization and Mechanical Calculations
(Baumol)
- Counterfactual Thinking
- Information Corridors
- Cognitive Properties and Individual Differences
(Simon & March)

44. Entrepreneurial Action
and Hypercompetition
The Dynamics of Entrepreneurship
Successful Entrepreneurs and Intrapreneurs
Compete Against Much Larger Rivals
Entrepreneurship and Temporary Advantages

45. Successful Entrepreneurs and
Intrapreneurs Compete Against
Much Larger Rivals

46. Successful Entrepreneurs and
Intrapreneurs Compete Against
Much Larger Rivals

47. Successful Entrepreneurs and
Intrapreneurs Compete Against
Much Larger Rivals
How Do They Do it?

48. Successful Entrepreneurs and
Intrapreneurs Compete Against
Much Larger Rivals
White Space and Attacking the Center of Gravity

49. White Space Capitalizes on the Four
Driving Forces of Hypercompetition
Fragmenting and Escalating
Customer Demands
Falling
Entry
n Barriers
Accelerating e t itio
p
c om
Technological y per
H
Change
Rising Deep
Pockets

50. Finding White Space
Jim Stengel, Head of Marketing at P&G:
Follow Seven Principles
• Really watch the consumer closely to
see what he does, not what he said
• Identify an unmet need and consumer
psychology behind it
• Create truly category-building
innovations, not just another flavor of
ice cream
• Look for partners to satisfy the
consumer need if unable to leverage
core technologies
• Leverage your brands
• Large launch, Leverage Distribution
Muscle
• Manage the pipeline

51. White Space Avoids Competition
$100 MM New Markets Identified Unfilled Consumer Need
Swiffer (and Swiffer vac) Mopping with water is too much
trouble
Wiping up the small pile of dirt
left behind
Febreze Scentstories x Artificial smell of existing air
(“Scent player” with fan fresheners
and 5 alternating scents) Strong smell at the source only
Same smell is monotonous
Crest WhiteStrips xCoffee/smoking stains on teeth
Dentist too expensive
Tide with Downy x Forgetting to add softener to
laundry cycle
Mr. Clean Auto Dry Carwash x Water spots spoil car shine after
(nozzle filters out minerals causing spots) washing

52. Entrepreneurship is the Source of
Temporary Advantage
Stability and Traditional Sustainable Advantage
Period
Competitive of Advantage
Advantage Launch Slow Counter
Attack
Time
Disruption and Unsustainable Advantage
Short Period
Competitive of Advantage
Advantage Launch
Rapid Counter
Attack or Disruption
Time

53. Temporary Advantage is the New
Source of Strategic Dominance
Long-Term Advantage
Advantage
Time
A Series of Advantages
Advantage
Time

54. Sequences of Temporary Advantages
Must be Planned by Entrepreneurial
Firms
Advantage
Four Virtually Time
Simultaneous Doing
Organizations
Setting Up
Set Your Time Planning
Pacing Interval
Envisioning

55. This Changes the Level of Turbulence
Frequency of Disruption
Low High
Equilibrium Fluctuating Equilibrium
Fluctuating
Competence Equilibrium
Turbulence Equilibrium
Turbulence
Neutral/ (Stability) (Near
Enhancing Time Equilibrium)
Time
Type of
Disruption
Punctuated Equilibrium Disequilibrium
Punctuated
Competence Equilibrium
Turbulence Disequilibrium
Turbulence
Destroying
(Periodic (Chaos)
Time
Disequilibrium)
Time
Turbulence is Disruption of the Status Quo

56. This Changes the How Firms Compete
The Frequency of Change and Strategy
Low High
Fluctuating
Competence Equilibrium
Equilibrium
Neutral/ Strong Barriers &
Enhancing Leverage & Layer
Monopoly Power
Core Competencies
Type of
Disruption
Punctuated Disequilibrium
Competence
Equilibrium
Destroying Hypercompetitive
Strategy as Strategies
Revolution
The Nature of Change Changes the Nature of
Competition

57. What is Your Dream?

59. Entrepreneurship:
Theory and Evidence
Giovanni Battista Dagnino
University of Catania
dagnino@unict.it
May 28, 2012