Dba 403-1 Enterpreneurship

DBA 403: ENTREPRENEURSHIP
UNIVERSITY OF NAIROBI
COLLEGE OF HUMANITIES AND SOCIAL SCIENCES
SCHOOL OF BUSINESS
In collaboration with
CENTRE FOR OPEN AND DISTANCE LEARNING
BUSINESS ADMINISTRATION
DBA 403: ENTREPRENEURSHIP
AUTHOR
JACKSON K. MAALU
REVIEWER
Lecture series: DBA 403: Entrepreneurship
Published by University of Nairobi Council, P. O. Box 30197, Nairobi, Kenya
Printed by College of Education and External Studies, University of Nairobi,
P. O. Box 30197, Nairobi, 2009
© University of Nairobi Council, 2009, all rights reserved. No part of this
Module may be reproduced in any form or by any means without permission
in writing from the Publisher.
LECTURE ONE: NATURE OF ENTREPRENEURSHIP

Lecture Outline
1.1 Introduction
1.2 Objectives
1.3 Overview of Entrepreneurship
1.3.1 Definition
1.3.2 Selected Contributions in Conceptualizing Entrepreneurship

1.4 Theoretical Contribution in Conceptualization of Entrepreneurship
1.5 Summary
1.6 Further Readings
1.1 Introduction
There is a lot of emphasis being placed on entrepreneurship today as a
solution to many societal problems. Research on entrepreneurship has also
grown in leaps and bounds so that today there is immense literature on the
subject of entrepreneurship. In this introductory lecture, we shall introduce
the concept of entrepreneurship and give a brief historical overview
covering the various theoretical views that have emerged so far.
1.2 Objectives
1.2 Objectives
By the end of this lecture, you will be able to:
1. define the concept of entrepreneurship

2. distinguish between the various scholarly contributions
advanced to explain entrepreneurship
3. discuss the general aspects of agreements in defining
entrepreneurship

1.3.1 Definition
Entrepreneurship has been defined in many ways but no universal definition

has emerged yet. It has been researched by many scholars drawn from
various disciplines. The key contributors are mainly drawn from economics,
Psychology, Sociology, History, Anthropology, Business management. This
has complicated the search for a universal definition due to the fact that
each discipline attempts to define the concept from their own perspective.
Comparison of findings therefore become difficult owing to differences in
the conceptual frameworks employed. Despite all that, there are a few
areas of agreement. They all seem to agree that entrepreneurship
involves risk taking, uncertainty, creativity and innovation, perception of
opportunities, change.
Over time scholars have identified entrepreneurship in terms of the

personality, factor of production, the function of uncertainty-bearing,
others with the coordination of productive resources, others with the
introduction of innovation, and still others with the provision of capital.
Entrepreneurship - the personality
The earliest work in the field of entrepreneurship focused on personal

characteristics that distinguished entrepreneurs from non-entrepreneurs.
For example, numerous studies have found consistent relationships between
individual factors, namely achievement locus of control, motivation.
McClelland (1962) identified three behavioral traits associated with high
need for achievement (nAch): (1) taking personal responsibility for finding
solutions to problems, (2) setting moderate achievement goals and taking
calculated risks to achieve them, and (3) desiring concrete feedback
concerning performance. McClelland later reported a series of studies
linking high nAch with entrepreneurship.
Entrepreneurship the resource (factor of production)

The necessity of entrepreneurship for production was first formally
recognized by Alfred Marshall in 1890. In his famous treatise Principles of
Economics, Marshall asserts that there are four factors of production: land,
labor, capital, and organization. Organization is the coordinating factor,
which brings the other factors together, and Marshall believed that
entrepreneurship is the driving element behind organization. By creatively
organizing, entrepreneurs create new commodities or improve "the plan of
producing an old commodity" In order to do this, Marshall believed that
entrepreneurs must have a thorough understanding about their industries,
and they must be natural leaders. Additionally, Marshall's entrepreneurs
must have the ability to foresee changes in supply and demand and be
willing to act on such risky forecasts in the absence of complete
information.
Entrepreneur the innovator
Another modern school of thought claims that the role of the entrepreneur
is that of an innovator; however, the definition of innovation is still widely
debatable. Kirzner suggests that the process of innovation is actually that of
spontaneous "undeliberate learning" (Kirzner, 1985). Thus, the necessary
characteristic of the entrepreneur is alertness, and no intrinsic skills-other
than that of recognizing opportunities-are necessary. Other economists in
the innovation school side more with Mill and Marshall than with Kirzner;
they claim that entrepreneurs have special skills that enable them to
participate in the process of innovation.
Entrepreneurship as a process
A distinctive stream of research has begun to focus on the entrepreneurship

process and de-emphasize distinctive characteristics of the entrepreneur. As
a process, study of entrepreneurship focus on activities relating to idea
generation, opportunity analysis, business planning, resource mobilization
and management of growth.
Take Note
Entrepreneurship has also been viewed variously as:
A Philosophy of Life
● A way of thinking
● A way of acting
● Lots of different professional contexts
● But also a way of approaching personal issues, family

life, community involvement, etc.
Entrepreneurship as an attitude:
● Can affect change
● There is a better way
● Opportunities are everywhere
● Embrace innovation, change & growth
● Failure is learning
Entrepreneurship as a behavior:
● Pursuing opportunity
● Innovating
● Perseverance
● Risk management
1.3.2 Selected Contributions in Conceptualizing

Entrepreneurship
1. Richard Cantillon (1734)
He recognized three classes of economic agents - land owners,

entrepreneurs and labourers. He defined an entrepreneur as one who
engages in market exchange in order to make a profit assuming the
accompanying risk. Entrepreneurs exercise judgments in the face of
uncertainty. Cantillon views the origin of entrepreneurship as there being no
perfect foresight. He emphasized the function and not the personality of the
entrepreneur.
2. Jean Baptiste Say 1800s

He distinguished between profits of those who provide capital and the
profits of the entrepreneur who use it. He defined an entrepreneur as
someone who consciously moves economic resources from an area of lower
into an area of higher productivity and greater yield. An Entrepreneur
redeploys resources in a way to make them more productive and give them
greater value. He views entrepreneurs as change agents in the society.
3. Joseph Schumpeter (1934)
He viewed entrepreneurship against the background of economic

development. He defined entrepreneurs as extraordinary persons who
promote new combinations or innovations to reform or revolutionalize the
patterns of production. In his book entitled "The Theory of Economic
Development", he uses the concept of equilibrium and the circular flow of
economic life to explain the role of entrepreneurs. He observed that
entrepreneurs create and destroy the structures of the equilibrium through
a process defined by carrying out new combinations in production.
According to Schumpeter, entrepreneurs promote new combinations or
innovations to reform or revolutionalize the patterns of production by
exploiting inventions or untried technological possibilities for producing new
commodities or old ones in a new way. Entrepreneurs create monopolistic
positions through these innovations. His work has become a basis of much
research in the area of entrepreneurship where reference has been made to
the Schumpeterian view of entrepreneurship.
4. Theodore Schultz (1975)
Schultz describes entrepreneurship in the perspective of the theory of

human capital (which he pioneered). A critic of the economists' ideas on
entrepreneurship. He defines entrepreneurship as ability to deal with
disequilibria that is caused by economic growth. He observed that in
economic growth, there are many situations of disequilibria and
entrepreneurs act to stabilize these situations. He also recognized
entrepreneurship and its applications in all aspects of life, market as well as
non market situations. Schultz recognized that the stock of entrepreneurs at
any point can be increased in response to the rewards derived from the
services of their abilities. Entrepreneurship which is human capital
Education has a role to play in increasing this stock He views
entrepreneurship as the ability to deal with disequilibria and not ability to
deal with uncertainty.
5. Mark C. Casson (1982)
Casson focused on the behavioural dimension of entrepreneurship. He

proposed the concept of a rational actor model. He defines an entrepreneur
as someone who specializes in making judgmental decisions about the
coordination of scarce resources. He advanced five arguments to support his
views as follows:
i. Entrepreneurship it is a personality quality which enables certain persons
to make decisions
ii. Entrepreneurs have better information than others
iii. Motivated by self interest (rationality)
iv. Different perception of situation from other people.
v. Creates an institution to make markets between him and other

transactors.
6. Israel Kirzner (1985)
Kirzner defines the essence of entrepreneurship as alertness to profit

opportunities. He argues that entrepreneurs develop a vision of the market
as an entrepreneurial process and a learning occasioned by participation in
the market place. Entrepreneurial activities are creative acts of discovery.
He emphasized arbitrating as an aspect of entrepreneurship a point of view
from which he advanced the idea of a "penniless entrepreneur".
6. Stevenson Howard and Salman William (1987)
Their view of entrepreneurship is influenced by the behavioral approach.

They view entrepreneurs in the central function of recognizing and
responding to opportunities. They argue that entrepreneurship is a
situational phenomenon. They present entrepreneurship as a perspective
from which to consider ability of individuals and organizations of all types to
adapt and survive in conditions of rapid environmental changes. From the
above point of view, they distinguished between entrepreneurs and
administrators/managers.
Table 1: Comparison between entrepreneurial and managerial

orientations
ENTREPRENEUR ASPECT MANAGER

Driven by perception of Strategic orientation Driven by resources
opportunities currently controlled
Revolutionary Commitment to Evolutionary of long term
opportunity durations
Multi staged with Commitment to Single staged with
minimal exposure at resources complete commitment
each stage upon decision
Rent with episodic Control of contractual Ownership or employment
ownership resources- decision to of required resources
own or rent/lease
Flat with multiple Management structures Formalized hierarchy
informal networks
Howard (1987) p.
7. Peter Drucker (1980s)
A world renowned scholar of management, Drucker defined an entrepreneur

as someone who always searches for change, responds to it, and exploits it
as an opportunity. He advocated for innovation as a central building block in
entrepreneurship. He focused on the management processes involved in
what an entrepreneur does. He defined entrepreneurship as a process, an
action oriented management style which takes innovation and change as the
focus of thinking and behaviour.
8. Herbert and Link (1986)
In an article entitled "In Search of Meaning of Entrepreneurship", Herbet and

Link defined an entrepreneur as someone who specializes in taking
responsibility and making judgmental decisions that affect the location,
form and use of goods, resources, or institutions. Their focus was on
defining the person who becomes an entrepreneur.
9. Hisrich and Peters (2002)
They define entrepreneurship as the process of creating something new with

value by devoting the necessary time and effort, assuming the
accompanying financial, psychological and social risks and receiving the
resulting rewards of monetary and personal satisfaction and independence.
They focus on the process of entrepreneurship. This definition identified
most of the key elements of entrepreneurship expounded by scholars from
the various fields.
1.4 Summary
Summary
This lecture introduced the concept of entrepreneurship in
its various forms. It views entrepreneurship as a multi
dimensional concept. It is a social and an economic
phenomenon, entrepreneurs are economic agents, as an
approach to wealth creation, and involve individuals who
have a unique psychology/personality.
Intext Question
i. Explain the major characteristics of entrepreneurs
ii. Distinguish between entrepreneurs and managers
iii. Discuss the various scholars who have made significant

contributions in entrepreneurship
Activity 1.1
1. Using Google facility on the internet, search the various
definitions of the term "entrepreneur"
2. Summarize the definitions and compare with what we have

discussed in this lecture.
1.5 References
1.5 References
1. Gartner, W. B. (1988), Who is an Entrepreneur? Is the wrong
question, American Journal of Small Business, 13(1), 11-32.
2. Bygrave, W., and Hofer, C. W. (1991), Theorizing about

Entrepreneurship, Entrepreneurship: Theory and Practice, 15(4),
13-22.
3. Casson, Mark C. (1982) The Entrepreneur: An Economic
Theory, Oxford:
4. Sahlman, William, Stevenson, Howard, Roberts, Michael and

Bhide, Amar. The Entrepreneurial Venture. 2nd nedition.
Boston. Harvard Business School Press, 1999
5 Jeffry A. Timmons and Stephen Spinelli, Jr. New Venture

Creation: Entrepreneurship for the 21st Century / 6th ed.
Boston : Irwin/McGraw-Hill, 2004.
LECTURE TWO: ENTREPRENEURIAL PERSONALITY

Lecture Outline
2.1 Introduction
2.2 Objectives
2.3 Origin of Entrepreneurship in Individuals

2.3.1 Entrepreneurs Are Born (Traits theory)
2.3.2 Precipitating Events Theory (PET)
2.3.3 Beyond Born and made (Venture Theory)
2.4 Entrepreneurial Personality Traits
2.4.1 Locus of Control
2.4.2 Independence and Need for Achievement (n-Ach)
2.4.3 Risk taking
2.5 Role of an Individual's Environment
2.6 Entrepreneurship and Culture
2.7 Summary
2.8 Further Reading
2.1 Introduction
In the previous lecture, we discussed the various contributions that have
been made in attempting to define entrepreneurship. It was observed that
behind every entrepreneurial venture, there is the person. The psychologists
particularly emphasize this personal dimension of entrepreneurship. The
success of the entrepreneurship venture will be greatly influenced by the
personality traits. In this lecture, we discuss the entrepreneurial personality
and how this personality develops in people, the role of the environment
and culture in this process.
2.2 Objectives
2.2 Objectives
At the end of this lecture, you will be able to:
1. Explain the theories on origin of entrepreneurship in

individuals,
2. Identify the traits associated with entrepreneurial
personality,
3. Discuss the role of culture on acquisition and
sustenance of entrepreneurial motivation,
4. Test your own entrepreneurial quotient/motivation.
2.3 Origin of Entrepreneurship in Individuals
In text Question

1. Are some individuals more entrepreneurial than others?
2. Are individuals born with certain characteristics that

predispose them to entrepreneurial endeavors?
3. What is the role of the environment?
4. Are there some personality traits that can predict success

of an individual in entrepreneurship?
The above questions can be answered by considering the theories that

explain the origin of entrepreneurship in individuals. These theories are
discussed below.
2.3.1 Entrepreneurs Are Born (Traits theory)

Advanced by psychologists, this view holds that entrepreneurs are born with
certain traits that predispose them to become entrepreneurs. They hold
that the entrepreneurial aptitude is inborn in an individual and that their
genetic orientation determines who they become. This view therefore posit
that entrepreneurs are born, not made.
Some of the traits that entrepreneurs possess and that are expected to be
genetically related include restlessness, independence, a tendency to be a
loner, extreme self confidence, innovative, action oriented, high on need
for personal control, highly autonomous. Trait theories suggest that
entrepreneurial aptitude is static-that is, either people are born with the
related characteristics, or they are not. While the majority of theorists
supported this approach at the dawn of entrepreneurial research, some
criticize that it has yet to be empirically proven.
2.3.2 Precipitating Events Theory (PET)

The PET suggests entrepreneurial intention is based on the interaction
between personal characteristics (perceptions, values, beliefs, background)
and environment (situational context).
E = f (Pc, I env.)
Where:
E is Entrepreneurial aptitude
P c is Personal characteristics
I env - Individual's environment
It is based on model of the entrepreneurial event in which entrepreneurship
is defined as "the pursuit of an opportunity irrespective of existing
processes" Unlike the traits models; this approach incorporates the influence
of environment, and the notion that entrepreneurial behavior is planned and
intentional. This approach is process-focused in that the interactions of
several factors are examined in order to predict behavior. Beliefs,
perceptions and assumptions are learned within the context of a given
environment (such as a business or community). These attitudes and
perceptions predict intentions, which in turn influence behavior.
Entrepreneurial intention is thus mediated in the following manner:
Environment or events causes an individual to form perceptions, attitudes
and assumptions. These perceptions then translate themselves into
intentions, or potential. Intentions or potential then are expressed through
behavior.
This model suggests that entrepreneurial characteristics not only can be
learned, but also can vary across individuals and situations.
2.3.3 Beyond Born and made (Venture Theory)

This model offers a more dynamic approach to entrepreneurial behavior. It
explains sustained and repeated entrepreneurial behavior (venturing). In
essence, the model moves beyond attempting to explain why individuals
initiate ventures to why or how entrepreneurs are motivated to continue
with the behavior as a career choice. They conclude that, like the intention
to act entrepreneurially, the decision to continue behavior is influenced by
the interaction of various factors.
These include individual characteristics, individual environment, business
environment, an individual's personal goal set, and the existence of a viable
business idea. Through these interacting factors, individuals make several
comparisons between their perceptions of a probable outcome, their
intended goals, intended behavior and actual outcomes. The model predicts
that when the outcomes meet or exceed perceived outcomes, positive
behavior (continued engagement in entrepreneurialism) is reinforced. It also
predicts that the opposite occurs when the perceived outcomes are not
met. This model clearly incorporates psychological, behavioral and
situational factors.
2.4 Entrepreneurial Personality Traits

Entrepreneurship is a construct viewed differently as a set of personal
characteristics and as a set of behaviors. Is there a typical person who
becomes a successful entrepreneur? Can anyone become or does it require a
certain type of person to make it in entrepreneurship? It is necessary to
identify the personality types who are more likely to give the business the
necessary acumen for success.
Personality traits are constructs used to explain the irregularities in people's

behaviour. They help to explain why different people react differently to
the same situation. Various personality traits have been identified as
important influences in successful entrepreneurship. Three personality
constructs have emerged as "classic" characteristics typically associated with
entrepreneurial personality. These are locus of control, need for
achievement (n-Ach) and risk taking.
2.4.1 Locus of Control
Locus of control is an attribute indicating the sense of control that a person

has over life. It is a measure of the extent to which an individual will take
responsibility for events occurring in their own life. Locus of control enables
an entrepreneur to sustain the drive and energy required to overcome the
inertia in forming and managing a new venture and ensuring its growth. An
entrepreneur requires both internal and external locus of control.
Taking personal responsibility requires knowledge of self i.e. strengths and
weaknesses.
In Text Question

What are your personal Strengths and Weaknesses?
How do you get to know your strengths and weaknesses?
Knowledge of self benefits immensely from feedback from other people.

Joseph Luft and Harrington Ingram proposed the "Johari windows" as a
model for enhancing knowledge of self. Other Characteristics related to
locus of control self confidence, personal judgment, discipline, self starter,
assertiveness and resilience.
2.4.2 Independence and Need for Achievement (n-Ach)
Championed by David McClelland (1962). It relates to need for being one's

own boss and need for an individual to be recognized. He identified three
characteristics present in entrepreneurs as individual responsibility for
solving problems, setting goals and reaching these goals through own effort,
moderate risk taking as a function of skill and knowledge of results of
decisions/tasks accomplished. Other observable characteristics relating to
N-Ach include setting of personal goals, independence, ability to tolerate
stress, focus, and appetite for hard work.
2.4.3 Risk taking
Risk includes financial, psychological and social risks. It is part of

entrepreneurial process. It is calculated risk. Relationship between risk
taking and success in entrepreneurship has not been conclusive as to
indicate the causal relationship. Tolerance of Risk, ambiguity and
uncertainty, limit risk by defining/strategizing ends, limiting risk by
controlling/monitoring means, minimizing the negative effects of stress,
Related characteristics, Opportunity recognition
Focus on opportunity, Let understanding of opportunity guide understanding

of other issues, Knows when to say no, Information seeking, Adventuring,
Courage
2.5 Role of an Individual's Environment

The most influential aspect of an individual's environment is their
immediate family environment. Specific concerns include:
i) Childhood family environment. The family environment can influence an
individual positively or negatively. Scholars have identified the following
components of an individual's family background as having an influence.
● Birth order - this relates to whether an individual is a first born,

middle born or a last born. These positions subject to culture, may
influence the level of dependence or independence, level of
responsibility and even personal values such as leadership.
● Parent occupation - if the parents are entrepreneurs, there is a high
chance that the individual will learn about it and be positively
influenced more than one whose parents are not.
● Social status - the social status may influence aspects of networking,
access to resources and even development of personal confidence.
● Relations with parents - this influences the level of independence of
an individual.
ii) Education
Studies have not established a clear relationship between education and

level of entrepreneurship. However education is important for building self
confidence. Education is a means of developing networks and confidence to
deal with people.
iii) Personal values
An individual's value system influences their attitudes and perceptions. The

perceived entrepreneurial ability will be influenced by the individual's belief
in self and positive attitude towards their environment and
entrepreneurship.
iv) Age
Studies have shown that 22-45 age bracket has been found to be most
entrepreneurial
Most people start enterprises within this age. What do you think is the role
of age in entrepreneurship?
v) Work history
Refers to past work experience. Dissatisfaction with one's work motivates

launch of own enterprise. Managerial experience gained from past work
becomes critical in growing the enterprise.
vi) Gender and entrepreneurship
May differ in reasons and type of businesses started. Women tend to start
businesses to support family welfare and that are related to their roles in
the family like child rearing, home organization, beauty and health,
education among others. Gender can also be used to explain the differences
in start up financing. Women mainly prefer to use informal sources with
minimal risk exposure. It is thanks to women that the innovative MFI group
guarantee mechanisms have been discovered. Women start businesses when
a little older than men. This could be explained by the family
responsibilities. Other gender issues:
Sustaining Entrepreneurial Motivation
i) Use of role models and mentors - Role models and mentors are
individuals influencing an entrepreneur's career choice and style. Provides
support capacity as a mentor during launch and after. They also provide
information, advice and guidance. There is need for a close role model who
is available as needed.
ii) Moral support networks - Gives psychological support. Includes spouse,

children, friends or other relatives.
iii) Professional support networks - Gives advice and counsel in business

activities. Include associates, trade associations, clubs, alumni associations
etc.
2.6 Entrepreneurship and Culture

Entrepreneurs are humans in a society which defines culture. Culture is
expressed in both values and judgments of individuals. Culture determines
the creation of businesses. It determines the worthiness of entrepreneurship
as a rewardable achievement. In the US for instance entrepreneurship is
considered an outcome of the high need for achievement which is rewarded
through the "celebrity" status that an individual attains upon success.
Cultural factors include that have an influence on entrepreneurship include:

religion, personal relations (collectivity, masculinity), attitude towards risk,
networking, among others. Religion for example shapes culture. It leads to a
view of the world. Carl Max a Germany sociologist attributed the industrial
revolution of Europe and America to the Protestant Ethics. Culture also
influences the beliefs that the future will be different from the present and
that it will be created by us.
2.7 Summary
Summary
The entrepreneurial personality is composed of three classic
entrepreneurial characteristics. Locus of control, N-Ach, and
Risk taking. These three aspects have been subject of debate
in entrepreneurship for many decades.
A rising trend in the number of entrepreneurship education

initiatives supports the idea that entrepreneurs can be made,
and thus the sentiment that entrepreneurship can be taught.
Currently, entrepreneurship centers are opening worldwide
offering programs or majors in entrepreneurship.
It is suggested that economic shifts have sparked the

increased interest in entrepreneurship. Entrepreneurialism is
mediated by an atmosphere that fosters innovation and
change and provide appropriate mentors and role models.
Information cues about the norms and culture of a given
environment appear to be important, informal sources of
education for would-be entrepreneurs.
Intext Question
a) What is the influence of gender on entrepreneurship?
b) Explain the role of the personal background environment in

developing the entrepreneurial personality
c) Using the Entrepreneurship Test Tool attached to this

session notes, complete the self assessment of your
entrepreneurial quotient.
Activity 2.1
i. From your immediate community, interview at least five
persons that you believe are entrepreneurs and document
their views on what led them to become entrepreneurs.
ii. Compare the list you develop with the various theories
discussed in this lecture
iii. Using the "Johari Windows" (Joseph Luft and Harrington

Ingham) frameworks to analyze your own personal SWOT as
an entrepreneur.
2.8 Further Reading
2.8 Further Reading

Hornaday R.W.; (1992). Thinking about Entrepreneurship:
A Fuzzy Set Approach Journal of Small Business
Management, Vol. 30,
Kirzner, I. (1979) Perception, Opportunity and Profit.

Chicago University Press.
McCormick, D. (2001). "Gender in Small Enterprise

Development: An Institutional Analysis" in Samantra P.C
and Raj Kumar Sen (Eds). Realizing African Development
- Millenial Analsysis. CIADS in collaboration with IIDS
221A India
Whickam, P. (2006). Strategic Entrepreneurship. FT-

Prentice Hall, London.
The Entrepreneurship Test Tool
Do you have what it takes to succeed as an entrepreneur?
The Entrepreneur Test Source: Managing a Small Business
The first question you should answer when you are thinking of going into
business is "Am I the type?" You will be your most important employee. It is
more important that you rate yourself objectively than how you rate any
prospective employee. Appraise your strengths and your weaknesses. As a
prospective operator of your own business, acknowledge that you are weak
in certain areas and cover the deficiency by either retraining yourself or
hiring someone with the necessary skill. The questions in this test indicate
to what extent you have the personal traits important to a business
proprietor.
Instructions: Read each question and tick on one of the suggested answers.

Respond by marking the answer that most accurately describes your
behaviour, feeling or attitude as it actually is, not as you would like it to be,
or think it should. You must be absolutely honest with yourself in order to
get a valid score.
Q1. Are You a Self-Starter?
a) If someone gets me started, I keep going all right.
b) I do things my own way. Nobody needs to tell me to get going.
c) Easy does it. I don't put myself out until I have to.
Q2. How Do You Feel About Other People?
a) Most people bug me. I don't like people.
b) I can get along with just about anybody.
c) I have enough friends and I don't need anybody else.
Q3. Can You Lead Others?
a) I can get people to do things if I drive them.
b) I can get most people to go along with me without much difficulty.
c) I usually let someone else get things moving.

Q4. Can You Take Responsibility?
a) I'll take over if I have to, but I'd rather let someone else be responsible.
b) There's always some eager beaver around waiting to show off. I say, let
him.
c) I like to take charge of and see things through.
5. How Good An Organizer Are You?
a) I like to have a plan before I start. I'm usually the one who lines things
up.
b) I do all right unless things get too complicated. Then I may cop out.
c) I just take things as they come.
6. How Good a Worker Are You?
a) I can't see that hard work gets you anywhere.
b) I'll work hard for a time, but when I've had enough, that's it.
c) I can keep going as long as necessary. I don't mind working hard.
7. Can You Make Decisions?
a) I can if I have plenty of time. If I have to make up my mind fast, I usually

regret it.
b) I can make up my mind in a hurry if necessary, and my decision is usually

O.K.
c) I don't like to be the one who decides things. I'd probably blow it.
8. Can People Trust What You Say?
a) I try to be on the level, but sometimes I just say what's easiest.
b) They sure can. I don't say things I don't mean.
c) What's the sweat if the other fellow doesn't know the difference?
9. Can You Stick With It?
a) If I make up my mind to do something, I don't let anything stop me.
b) If a job doesn't go right, I turn off. Why beat your brains out?
c) I usually finish what I start.
10. Can You Keep Records?
a) Records are not important. I know what's needed to be known without

keeping records.
b) I can, but it's more important to get the work out than to shuffle
numbers.
c) Since they are needed I'll keep records even though I don't want to.
Answers to the Quiz. Mark your self
Q1. b Q2. b Q3. b Q4. c Q5. a Q6. c Q7. b Q8. b Q9. a Q10.c
Grading
Score 100
Excellent! A perfect score. You are a born entrepreneur. If you are not
presently running your own business you should definitely start one -- the
sooner the better. You are on the way to fame and riches.
Score 91 – 99
Very good. You definitely have what it takes to succeed in a business of your
own. Don't hesitate, your way to business success is wide open.
Score 72 - 90
Good. You have the qualities of a successful entrepreneur with some weak
spots. Read the interpretation below to identify your deficiency. You should
be able to cover that deficiency by either retraining yourself or hiring
someone with the necessary skill.
Score 40 - 71
So so. The prospect of your success in a business of your own is

questionable. You have some deficiencies that might out-shadow some good
traits you have. If you still want to go on with it, be sure to call up all the
persistence you can get. You are going to face some tough adversity on the
way.
Score 40 and below
Unsatisfactory. Forget your dreams of being your own boss, it's not for you.
You'd better keep your comfortable and secure job. Why bother with all the
risks and hustles of starting a business.
LECTURE THREE: CREATIVITY, INNOVATION AND IDEA
GENERATIONS
Lecture Outline
3.1 Introduction
3.2 Objectives
3.3 Creativity
3.3.1. Creative Process
3.3.2 Methods of Improving Creativity
3.4 Innovation
3.5 Summary
3.6 Further Reading

3.1 Introduction
There is no discussion about entrepreneurship that would avoid the subject
of creativity and innovation. Success in entrepreneurship is highly
influenced by the level of innovation the entrepreneur introduces to the
process. Innovation is the basis for creating and sustaining competitive
advantage in business.
3.2 Objectives
3.2 Objectives
By the end of this lecture, you should be able to
1. Define the twin terms of creativity and innovation
2. Explain the factors that influence creativity and innovation in

individuals
3. Apply the methods used to enhance creativity in idea

generation
3.3 Creativity
Create: Bringing forth that which never existed. Synonyms for create:
conceive, discover, design, father, imagine, initiate, invent set up, produce,
etc. Creativity (or creativeness) is a mental process involving the
generation of new ideas or concepts, or new associations between existing
ideas or concepts.
Creativity is the ability to bring forth something new into existence while
Innovation is the process of doing new things. Innovation is the
transformation of creative ideas into useful applications. Creativity is then a
prerequisite to innovation
Creativity + commercialization = innovation
In text Question

Are some people more creative than others? What explains the
differences if any?
3.3.1. Creative Process

David Holt (2002), identifies five basic stages in the creative process
Idea germination (recognition):
The seeding stage. This stage is characterized by interest in or curiosity
about some specific problem or area of study.
Preparation (rationalization)
Conscious search for knowledge about the idea
Seeking information about possible solutions
Incubation (fantasizing)
Allowing the rational idea to incubate in the subconscious mind to find
resolution
Subconscious assimilation of the information
Assimilation into own system
Illumination (realization)
Recognition of the idea as a feasible one
Occurs when the idea resurfaces as a realistic creation
Verification
Application or test to prove that the idea has value
Is the development stage of refining knowledge into application
Many ideas will fall by wayside when verified
Outcome is opportunities
3.3.2 Methods of Improving Creativity

a) Brain storming. The purpose of brainstorming is to generate maximum
number of ideas. It is best handled in a group setting. Basic rules in
brainstorming are no criticism, no justification, no silly or weird ideas, no
experts. The purpose is quantity ideas not quality. Arising from the many
ideas, there could be possibility of combination of ideas into one.
b) Attribute listing. This is a technique based on identifying the attributes
of an item and using these attributes to identify variety of applications. E.g.
used tyre.
c) Lateral thinking. This was developed by Edward DeBono. It is about
thinking outside the box. Many times when faced with a problem, people
tend to look for solutions within the familiar processes. This tends to limit
their search and hence difficulties in being creative.
d) Matrix thinking. This involves thinking in many dimensions.
e) De-framing. Example of De-framing is the development of Bullet Trains in
Japan. OLD WAY: One car with a big engine pulls the train. Bigger engine is
necessary for speed. The track follows the terrain. NEW WAY: Put an engine
in every car. Speed results from the sum of the engines. Level the terrain
3.4 Innovation
Innovation is the creative regeneration and application of new ideas that
can achieve significant improvements in a product, activity, structure,
program or policy. Components of innovation include subject of innovation -
product, service, activity, structure, program, policy etc., New ideas,
Application - put to work, exploited, practically implemented and
Significant change - not just minor incremental change, something
important
3.5 Summary
3.5 Summary
Creativity and innovation are cornerstones of
entrepreneurship. Creativity is prerequisite to innovation
and that innovation is a critical skill opportunity
recognition.
While not all people can be equally creative, an individual

can greatly improve their creativity via a number of
techniques discussed above.
Intext Question
i. Distinguish between creativity and innovation
ii. Discuss the stages in the creative process
Activity 3.1
i. Using the example of a used tyre, identify up to 50
different useful applications that you can put a used tyre.
ii. Repeat this activity with about five of your friends and
observe the difference.
3.6 References
3.6 References
1. Jeffry A. Timmons and Stephen Spinelli, Jr. New Venture
Creation: Entrepreneurship for the 21st Century 6th ed.
Boston: Irwin/McGraw-Hill, 2004.
2. Sexton, D.L & Bowman-Upton, N.B. 1991. Entrepreneurship:

Creativity and Growth. New York: McMillan.
LECTURE FOUR: OPPORTUNITY RECOGNITION AND
ANALYSIS
Lecture Outline
4.1 Introduction
4.2 Objectives
4.3 Definition of Opportunity
4.3.1 Patterns of Opportunities
4.3.2 Windows and Corridors of Opportunities
4.4 Methods of Opportunity
4.5 Opportunity Analysis
4.5.1 Qualitative Methods
4.5.2 Quantitative Methods
4.6 Summary

4.1 Introduction
In lecture three we covered creativity and innovation. As a logical
development from there, this lecture will focus on opportunity recognition
and analysis. It is critical that an entrepreneur carefully evaluates the value
of an idea before they invest in it. The lecture therefore introduces the
concept of opportunity, windows and corridors of opportunities as well as
methods of feasibility assessment.
4.2 Objectives
4.2 Objectives
By the end of this lecture, you will be able to
1. Explain the sources of business opportunities
2. Discuss concepts of windows and corridors of

opportunities
3. Identify the methods of opportunity analysis

4.3 Opportunity Analysis
Entrepreneurs are driven by opportunities. Opportunity identification is one
of the most critical stages in the entrepreneurial process. It starts with an
entrepreneur generating ideas. An idea is not an opportunity. An
opportunity has the qualities of
being attractive,durable, timely and anchored in a product or service which
creates or adds value for its buyer or end user.
Opportunities emanate from a variety of sources. Key among them are:
1. Recognizing human needs. Human needs exist at various levels.

According to Abraham Maslow, human needs exist at five levels with
the most basic being the physiological needs and the highest level
being the self-actualization needs.
Figure 1: Maslow's Human Need Frameworks
Source: http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs
An unsatisfied need is an opportunity waiting to be exploited. Opportunities
may arise from the physiological needs like food, drink, sex etc. May also
arise at safety level, belongingness needs, esteem or even at the self
actualization levels.
2. Recognizing trends e.g. demographic, knowledge trends, climate

trends etc.
Trends can be a great source of business opportunities. A business idea

based on a current trend will be fashionable and will attract customers. The
"in-thing" concept implies that people have certain needs that are based on
the current trend.
Take Note
Be careful of Fads
A fad is a short lived business opportunity which makes

people wildly excited for a little while. A fad can be a gold
mine as long as you plan for a short business cycle to get in
and get out. It is prudent to plan for a quick payback period
during the introductory stage. Fads are common in fashion
clothing. Some fads turn into long lasting good volume
businesses.
Starting a business based on a trend enables an entrepreneur to benefit

from the "tail wind" advantages of the new development. The trend gives
you a push in the right direction. Think of the many business opportunities
that have arisen from the developments in ICT. Think of the opportunities
emerging from the regional economic integration EAC, COMESA, ECOWAS,
SADC etc.
1. Varied and widely traveled background. You can borrow ideas and

import them to your own situation. You can also transfer knowledge
from one area to your own.
2. Other ways of identifying opportunities
● Convert hobby into a business

● Analyze linkages to existing businesses
● Analyze events for possible opportunities
● Profiting from waste
● Revisiting projects/businesses that have failed
● Adding a service to existing products, etc.
4.3.1 Patterns of Opportunities
The first step in opportunity analysis is to identify it. An opportunity is the
chance to do something in a way which is both different, better than the
way it is done at the moment. Some common patterns which opportunities
take shape include:
● New products - physical devise to satisfy a need or solve a problem.

● May be based on existing or new technology New service
● New means of production to deliver added value to customers
● New distribution route adding convenience, less time etc
● Improved service to existing products
● New relationship with customers e.g. kiosks vs. supermarkets
4.3.2 Windows and Corridors of Opportunities

Window of opportunity
A window is a time horizon within which opportunities exist before
something else happens to eliminate them. Windows open and shut. A
unique opportunity does not last forever as it attracts competitors who end
up saturating the market especially if it is easy to enter the market
Corridor principle
This principle suggests that opportunities evolve from entrepreneurs being
positioned in similar or having had experience in related ventures so that
when a window opens, it is easy for them to move in quickly. When one
opens a venture, related opportunities do emerge to find them ready to
take advantage. This means entrepreneurs who are active and watching for
changes are more likely to recognize opportunities when they occur.
Opportunities occur to those who are actively seeking them and not just by
luck.
4.4 Idea Feasibility Assessment
Purpose of feasibility assessment is to evaluate the viability or the do-ability
of the business idea. It will show why if actually initiated, it should have a
reasonable chance of success. Feasibility assessment should address the
pertinent questions that might be raised in preliminary discussions with the
prospective principals, investors, advisors, suppliers or even buyers.
Feasibility Dimensions
a) Technical feasibility - relates to the engineering aspects of the idea. Is

the idea capable of being offered sustainably, does the technology exist to
enable the production or development of the product or the service.
b) Market feasibility - does the market exist and is it large enough to sustain
a meaningful business
c) Economic feasibility - does the idea indicate a business that can be

offered at a reasonable scale to deliver sufficient returns.
d) Competitive feasibility - who else is in it and what will be the basis of

developing competitive advantage.
e) Management team feasibility - does the management capacity exist to

exploit the idea.
f) Personal feasibility - is the idea worth a chunk of your life? Is it an idea

you would wish to be associated with?
g) Legal and political feasibility - does it meet the legal and political
threshold for acceptability and sustainability in case of change of legal or
political regimes?
h) Financial feasibility - what resources does it require and how can they be
accessed?
4.5 Methods of Opportunity Analysis
4.5.1 Qualitative Methods
Relate to questions of who, what and why?. Examples: Who are the
customers? How are they defined as a group? What are their needs? What do
they buy? How do they buy? What are their attitudes towards current
offering? Methods of collecting such data include actively listening to the
customers, in-depth interviews, focus group discussions, usage and
awareness studies, product trials.
4.5.2 Quantitative Methods
These relate to establishing the value of opportunity and efforts in

exploiting it. They are questions of how much, how many etc. Quantitative
methods are used to support qualitative data to establish the investment
required and the worthiness of the opportunity. Methods include user audits
to establish how much they buy - size of market, distributor audits to
determine frequency of buying and general movement of the product,
manufacturer output records etc.
4.6 Summary
Summary
In this lecture, we have covered the various sources of
business opportunities. The lecture identified human needs
as key source of business opportunities.
The lecture also identifies the various feasibility

assessment methods that one can employ to analyze the
value and the do-ability of a business idea. These methods
are both quantitative as well as qualitative.
Intext Question
i. Distinguish between an idea and an opportunity
ii. Discuss the various sources of business opportunities
Activity 4.1
1. Develop a profile of Human needs for your immediate
community based on the Maslow's framework and identify at
least five business opportunities implied by the needs at each
level of the hierarchy.
4.7 Feferences
4.7 Feferences
1. Hisrich Robert D., Michael P Peters. And Dean A
ShepherdEntrepreneurship. 6th Edition. McGraw Hill. 2007
2. Holt, David H. Entrepreneurship: New Venture Creation.

Prentice Hall India, New Delhi 2002.
3. Birley S. and Daniel F. Muzyka, Mastering Enterprise.

Financial Times/Pitman, 1997.
4. Timmons, Jeffrey A., New Venture Creation:

Entrepreneurship in the 21st Century. Irwin Boston 1999.
5. Wickham, A. Philip. Strategic
Entrepreneurship. 4th Edition. FT-Prentice Hall 2006
LECTURE FIVE: BUSINESS PLANNING

Lecture Outline
5.1 Introduction
5.2 Objectives
5.3 Overview of Business Planning
5.4 Role and Benefits of a Business Plan
5.5 Writing a Business Plan
5.6 Components of a Business Plan
5.7 Tailoring a Business Plan
5.8 Presenting a Business Plan
5.9 Summary

5.1 Introduction
A lot of emphasis has been placed on business planning as a way of
promoting entrepreneurship. In Kenya, there are a number of business
planning competitions that have been organized by various bodies for start
ups and small and medium entrepreneurs. Examples of these are Chorabizna
(2008) and Jitihada (2009) by the ministries of Youth Affairs and
Industrialization respectively. Through business planning, one is expected to
articulate their business concept and develop a road map to implementation
of the same. This lecture focuses on various aspects of business planning.
5.2 Objectives
5.2 Objectives
1. Explain the role of business planning in entrepreneurship
2. Discuss the components of a business plan...
3. Prepare a bankable business plan based on their own idea

5.3 Overview of Business Plan
A business plan is like a map. It tells you where you are going and how you
plan to get there. The process of doing the plan also clarifies the degree of
commitment you have to the business and opportunities and threats that
exist.
It is a document that convincingly demonstrates that your business can sell

enough of its products or services to make a satisfactory profit and be
attractive to potential stakeholders like bankers, investors/partners,
suppliers etc. If properly prepared, it can help you to notice that you may as
well forget about the whole idea. In other words, it is a sanity check for
business ideas. A business plan is a selling document.
5.4 Role and Benefits of a Business Plan

Entrepreneurs prepare business plans out of own accord or at times at the
instigation of some stakeholders like financiers. Many entrepreneurs resist
preparing a business plan as they consider it a waste of time or they think
they already know what need to be done.
Broadly, a business plan serves the business in the following roles.
1. Acts as a tool for analysis:
● It articulates vision
● Acts as a checklist for ensuring enterprise heading right direction
● Inculcates discipline in gathering information by entrepreneur
2. As a tool for synthesis
● Provides action plans in a unified way

● Ensures actions are appropriate for strategy
3. As a tool for communication
● Communicates enterprise potential

● Addresses concerns of stakeholders
4. As a call to action
● Gives details of activities to be undertaken and expected outcomes

● Sets priorities for achieving vision
5. Management development tool

● Gives manager opportunity to figure out problems and solutions
● Goal and direction giver
Beyond the broad roles of a business plan, it can serve the enterprise in
more specific ways.
1. It can be used as a means of assessing the potential of the business in

financing decisions. Many financiers will require that before they
make the decision to finance your business, you have a business plan
that shows clearly the financial potential that indicate how you will
be able to repay.
2. Used in seeking investing partners - partners are a source of finance
and advise for the business. A business partner will be interested in
demonstrated potential for growth of the business.
3. Arranging strategic alliances - many times, the business will require
the input of other stakeholders. These are arranged through alliances
like between small & larger enterprise, local and international
businesses etc.
4. Obtaining large contracts. Large contractors will need evidence that
the business has the capacity to deliver on orders. This can be
demonstrated through a well prepared business plan. A business plan
act to reassure them.
5. Attracting key employees - a start up or a small business may not be
able to attract key employees because of their inability to offer
attractive packages. One way of overcoming this challenge is by
demonstrating that the business has potential for growth and hence
can assure them of good future prospects. This can be done through a
well prepared business plan demonstrating the growth path.
6. Completing mergers and acquisitions - a well prepared business plan
can be used as a negotiation tool
5.5 Components of a Business Plan
A business plan is a written statement covering all major aspects of your
proposed business operation. Each business plan will be unique as not two
businesses are the same. However certain basic questions should be
addressed specifically in every business plan.
There are no hard and fast rules about what should be included, but the
contents should be tailored to reflect the needs of the venture it
represents. There are a number of websites that can facilitate the
preparation of a business plan. These sites carry templates, toolkits and
sample business plans that one can use to structure and develop their own.
Examples include: www.sba.com, www.sme-solutions-
center.com, www.bplans.com.
A well prepared business plan considers both the content as well as the
outlay of the plan. It would include the following components.
Cover page - which carries the title, name, address, date, purpose
Executive summary - includes a 1-2 pages overview, strategies for market

services, growth potential, management future, mission, plans, date
started, financial plans, ownership, markets, and products.
Table of contents - this is a logical arrangement of the sections covered in

the document complete with their page numbers.
The more substantive content includes the following.
1. Business Description
This section describes the business in details including the industry

background, the company profile and SWOT. The products or services are
carefully described to indicate the customer value proposition and not just
the physical attributes of the products.
2. Market analysis
The purpose of this section is to estimate the market share and sales level
for the business. A good beginning point is to describe the market in terms
of customer characteristics.
You also need to describe the total market size and trends - nature of
market; size, number and buying capacity. Describe the competition in
terms of their numbers, strength and their plans. Based on the data on
market size and competitor share, you estimate your own market share and
sales including a justification why you think you will gain the share.
3. Marketing plan
In this section you describe the overall marketing strategy including pricing
strategy and policies, sales tactics - personal selling; retailers; distributors
etc, Service and warranty policies, advertising and promotion as well as
distribution plan.
4. Design and development plans
Development status and tasks - how the product works or how service is
used. Included in this section are development difficulties and risks, product
improvements and new products. If new, describe tests done and results
etc., costs, proprietary issues.
5. Manufacturing and operation plan

Included here is a discussion on geographic location - advantages and
disadvantages of location, facilities and capacity improvements - how to
acquire the ; costs etc; expansion plans, operations strategy and plans -
manufacturing process; make or buy; quality control; inventory mgt and
problems etc; compliance to environmental regulations, approvals etc.
6. Management team
Included here is a discussion on ownership, organization structure and

operation.
Key management personnel - key management roles; employ or consult;

resumes; salaries etc., management compensation - key management
compensation; directors; other investors, incentive plans e.g. stock options,
supporting advisors and services - accounting; auditing; tax; BOD
qualifications.
7. Financial analysis
The purpose of this section is to demonstrate the economic sense of the

business. It attempts to answer questions of how much should be produced
before break even, what profit levels are expected. Specific computations
include:
● Break even analysis (fixed and variable costs)

● Gross and operating margins
● Profit potential and durability
8. Financial plans
This section provides the projected financials for the business. It is

expected to demonstrate that the business makes financial sense and gives
an indication of the profit levels over time. Presented here include:
Pro forma cash flow analysis - 12 months, first year
Projected income statement - 1 year
Projected balance sheet - time 0 and end of year 1
9. Proposed company financing
The proposed financing is a summary of all the financial needs indicated by

the various activities under each of the earlier sections of the plan. It also
provides an indication of the application of the funds to ensure financial
health through proper matching of needs and sources.
● Desired financing (needs)

● Capitalization (sources)
● Uses of funds (uses)
10. Critical risks and assumptions
An honest indication of the assumption and potential risks/problems is

important for the reader. It adds to the credibility of the plan.
● Potential price cuts by competitors

● Unfavorable industry trends
● Costs overshooting estimates
● Sales projections not achieved
● Delays in acquisitions of technology
● Unfavourable economic trends.
11. Supporting documentation (appendices)
a) Lists of assets
b) Specifications - technical specializations
c) Photos of products
d) Suppliers agreements
e) Customer agreements
f) Licenses, permits, patents, lease agreements
g) Contracts - consultants, attorneys etc
h) References - resumes etc.

5.6 Writing a Business Plan
There is no "right" way of writing. Some people start by sketching out the
document and follow with detailed discussion of the sections. It is also
possible to write chapter by chapter until you complete. The style that one
employs is more often influenced by personal preferences.
A business plan is rarely right first time. Many times you will go over the
document several times before it is ready for sharing with other people. You
may give someone else to critique the ideas and flow of your plan.
Whichever style employed, determine the priority issues in each area of the
plan (success factors) and emphasize on them. Include as much of
supporting material as possible. These are necessary to enable you to
support your statements in the document. Do not make unsupported
statements.
Presentation of the document is very crucial. Look for ways of making your
plan to stand out. Make it business like - neatly typed, bound, etc.. Tend to
details e.g. proof read to ensure no typographical errors and limit access. It
is advisable to get a professional reader or editor to attend to the
communication aspects of the plan.
5.7 Tailoring and Presenting a Business Plan

Business plan should sell the business to the various constituencies
important to you. You should write a plan tailored to the interests/needs of
the expected reader. Each of the various groups looks for different things in
a business plan. Investors want evidence of market growth and company
ability to grow.
Bankers want evidence of adequacy of cash flows to repay the loan and
existence of assets that can be liquidated to recover outstanding loan in
case of cash flow difficulties. Strategic partners are interested in find new
products/lines that can be integrated into their existing offering.
Large customers want evidence that the company will be around long
enough to continue to offer the products/service. Key employees want to
see company track record as evidence of security and opportunity
5.8 Presenting a Business Plan - Tips

i. Keep it short and to the point
ii. Use visual aids

iii. Involve several members of the management team
iv. Try to demonstrate your product/service
v. Justify clearly your financial data
vi. Try to anticipate and understand your audience expectations and focus

on them in your presentation
vii. Observe the basic rules of communication e.g. language, media,

message packaging, non-verbal clues etc.
5.9 Summary
Summary
In this lecture, we have explored the meaning and contents
of a business plan. We have outlined the basic and the
substantive contents of a business plan that would ensure
that the plan is exhaustive enough. It is emphasized that
the contents of a business plan must be tailored to the
needs of the business. These need include financing
decisions, valuation of the business, attracting key
stakeholders and managing the enterprise successfully. Also
outlined are tips on writing and presenting a business plan.
In text Question

Outline the components of a business plan
Discuss the value of a business plan to a start-up business.
How can you cater for all the varied interests in one business
plan?
Activity 5.1
Identify a business of your choice and develop an outline of
a business plan for it.
5.10 Further Reading

1. Jeffry A. Timmons and Stephen Spinelli, Jr. New
Venture Creation : Entrepreneurship for the 21st
Century / 6th ed. Boston : Irwin/McGraw-Hill, 2004.
ShepherdEntrepreneurship. 6th Edition. McGraw Hill.
2007
3. Holt, David H. Entrepreneurship: New Venture
Creation. Prentice Hall India, New Delhi 2002.
4. Birley S. and Daniel F. Muzyka, Mastering
Enterprise. Financial Times/Pitman, 1997.
5. Timmons, Jeffrey A., New Venture Creation:
Entrepreneurship in the 21st Century. Irwin Boston
1999.
Entrepreneurship. 4th Edition.FT-Prentice Hall 2006

LECTURE SIX: FINANCING A BUSINESS VENTURE
Lecture Outline
1.1 Introduction
1.2 Objectives
1.3 Overview of Business Financing
1.4 Debt Financing
1.5 Equity Financing
1.6 Sources of Business Finance
1.7 Considerations in choosing Sources of Finance
1.8 Factors Constraining Financing of Business
1.9 Principles of Fundraising
1.10 Summary

6.1 Introduction
Once you prepare a business plan, the next challenge is to mobilize
resources for the implementation of the plan. A good business plan which is
not backed by adequate resources is only a dream. A business requires
different types of capital including financial, physical capital, social capital,
human capital, intellectual capital. These are necessary to ensure the idea
is actualized. Financial capital will more often than not facilitate
acquisition of the other types of capital. This lecture therefore focuses on
mobilizing financial capital for a business.
6.2 Objectives
6.2 Objectives
1. Explain the types of financing of a business - debt and

equity
2. Discuss challenges facing entrepreneurs in raising capital

for their business
3. Determine the various sources of financial capital for

entrepreneurs
6.3 Overview of Business Financing

How business start-ups are financed is one of the most fundamental
questions of enterprise a new business venture. Financial capital is one of
the necessary resources required for enterprises to form and subsequently
operate.
The importance of the financing decision of new businesses consequentially

has important implications for the economy; given the role new enterprise
plays in employment growth, competition, innovation and export potential.
Additionally, capital decisions and the use of debt and equity at start up
have been shown to have important implications for the operations of the
business, risk of failure, firm performance and the potential of the
business to expand in the future.
In deciding how to finance your business, you need to consider certain

questions: How much control of your new business can you comfortably give
up? Which facts that will debt and equity financiers be interested in? How
do debt and equity requirements differ? How highly leveraged do you want
your company to be? (the higher the amount borrowed compared to the
amount of equity, the higher the leverage).
6.4 Debt Financing

Debt is a direct obligation to pay something (cash) to someone (an investor
or lender). In exchange for having lent you money. An investor will expect
to be paid interest. Obviously, this means that you will repay more money
that you have borrowed. Therefore, an important feature of debt financing
is the interest rate you will be charged.
Interest Rate and Risk
The interest rate usually reflects the level of risk the investor is undertaking
by lending you money. Investors will charge you lower interest rates if they
feel there is a low risk of debt's not being repaid. Investors will raise
interest rates if they are concerned about your ability to repay the debt or
if you have a history of slow payments to lenders as shown on your personal
or business credit reports.
What do debt lenders look for?
A debt lender will evaluate your loan request by considering answers to

several key questions: Can you offer reasonable evidence of repayment
ability either established earnings (for an existing business) or income
(profit & loss) projections (for a new business)? Do you have sufficient
management experience to operate the business?
Do you have enough equity in the business? Equity provides what lenders call
a cushion for creditors. Do you have a reasonable amount of collateral
(assets to be acquired, residential property equity, etc)?
Advantages of Debt Financing
● Control of your company

● Financial freedom
Disadvantages of Debt Financing
● Having to make monthly payments on a loan.

● The difficulty in obtaining them.
6.5 Equity Financing

Equity financing involves no direct obligation to repay any funds. It involves
selling a partial interest in your business. What do equity investors look for?
Equity investors buy part of your company by supplying some of the capital
your business requires. They are interested in the business's long-term
success and future profitability. Equity investors can resell their interest in
your company to other investors.
Advantages of Equity Financing
● No repayment of the money invested by them (unless a payoff

agreement is made at the time of investment).
● This can be important when cash is at a premium.
● Also, your idea for making your business successful may carry more
weight with a potential equity investor than with a debt investor.
● In addition, can be a good source of advice and contacts for your
business.
Disadvantages of Equity Financing
● You give up some control over your business.

● You may find your equity investors do not always agree with your
plans for the business.
● Tends to be very complicated and invariably will require the advice
of lawyers and accountants.
6.6 Sources of Capital

1. Entrepreneur's own capital. This may be from personal savings,
redundancy package, sale of own assets.
2. Informal investors. May be from family, friends, etc. Expectations on
returns and when they will gain is negotiated informally.
3. Informal capital networks. Based on groups of people sharing some
situation e.g. displaced, alien etc. Examples of these are the informal
Asian community networks in Kenya.
4. Business angels. These are individuals or small groups of individuals
who offer capital for new ventures.
5. Retained earnings. Profit ploughed back into the business for existing
businesses
6. Commercial bank loans. These could be normal lending programs or
special lending programs. May include: overdraft, loan for purchase
of asset, working capital
7. Microfinance Institutions. - these have grown to become major
players in financing sector. Their focus on SMEs and sometimes
specific segments of the population make them unique institutions
supporting entrepreneurship.
8. Venture capital. They fund new innovative businesses in return for
ownership stake. Operate more like mutual trust funds.
9. Public floatation. Regulated by the Capital Markets Authority.
Conditions apply.
10. Government - through development finance institutions e.g. ICDC,
IDB, AFC, etc.
6.7 Considerations in Choice of Source of Finance

1. Suitability. The type of funds should harmonize with the kind of use it
is being sought for.
2. Volume and stability of income. This will determine your ability to
repay.
3. Control. The source should leave the owner with ability to have
reasonable control over the business.
4. Flexibility. The source should be adjustable as need arises.
5. Economic factors e.g. level of business activity, capital markets, tax
developments.
6. Characteristics of industry e.g. seasonality, level of competition,
regulation, growth potential.
7. Characteristics of business including legal form, size, status in the
industry, credit status.
6.8 Factors Constraining Lending to Enterprises in Kenya

1. Inadequate pool of loanable funds. Due to insufficient savings
occasioned by more consumption than saving (note: changed
situation).
2. Heavy government borrowing - to finance budget deficit - this leads
to further reduction in loanable funds.
3. Stringent financial regulations - introduced by central bank of Kenya
as part of the financial regulatory framework. This has restricted
entry of smaller banks and increased requirements for borrowing.
4. Underdeveloped financial infrastructures - like venture capitalism
and capital market.
5. Restrictive regulations by the Capital Market Authority.
6.9 Principles of Fund Raising

1. Ability to ask - be clear about what you want from the financier (a
good business plan will help to do this).
2. Personal approach - decisions are based on relationships, cultivate a
trust relationship.
3. Credibility - good PR and credibility is extremely critical.
4. Understanding the financier's needs.
5. Target the right person who will make the decision.
6. Right timing.
7. 80/20 rule.
8. Negotiate carefully all agreements - avoid over-committing yourself.

6.10 Summary
Summary
This chapter examined the challenges of raising finances for
a business. It discusses the dual concepts of debt and equity
as well as the possible sources of finances for a business. It
examines the issues that entrepreneurs need to consider
before making a choice of a particular form of financing.
Intext Question
i. Distinguish between debt and equity financing
ii. Discuss the stages challenges of raising finances for a

start-up
iii. Discuss the factors constraining lending in Kenya today.
Activity 6.1
Collect a brochure on and SME financing product from one of
the financial institution in your local township. Identify the
conditions indicated and discuss with two to five
entrepreneurs on their comments about the product.
6.11 References
6.11 References
1. Walker, E.W. & William Petty. 1996. Financial
Management of the small Firm. New Jersey: Prentice Hall.
2. Johnson, Susan and Ben Rogaly. 1997. Microfinance and

Poverty Reduction. UK/Ireland: Oxfam Publications.
LECTURE SEVEN: STRATEGY FOR A NEW VENTURE
Lecture Outline
7.1 Introduction
7.2 Objectives
7.3 Liabilities of Newness and Size
7.4 Developing an Entrepreneurial Vision and Mission
7.5 Entrepreneurial Strategies for Business Entry and Survival

7.1 Introduction
Once you have identified the relevant resource and mobilized the same, the
next challenge for the entrepreneur is the entry into the business and
survival in the first few years. Studies indicate that majority of businesses
fail within the first five years. This failure rate can mitigate by choosing the
right strategy and pursuing it. This lecture will explore some of the
challenges and strategies that a new venture can apply to overcome the
threat of failure.
7.2 Objectives
7.2 Objectives
By the end of this lecture, you will be able to:
1. Explain the liabilities of newness and size
2. Discuss the qualities of an entrepreneurial vision
3. Critically evaluate the various options for new firm entry

into a market
7.3 Liabilities of Newness and Size
One of the key challenges of a new venture is to enter and establish in the
market. New ventures have two critical liabilities: Liability of Size and
Liability of newness. The "liability of newness" concept includes small size as
one reason for the high risk of failure of new businesses largely due to
resource constraints, lack of economies of scale, lack of right image in the
eyes of the stakeholders and lack of learning/experience. The new firm can
only overcome these liabilities by building on the assets of newness and
size. The assets of newness and size are innovation, focus, energy and fact
that they do not have liabilities of history.
To overcome the liabilities and successfully enter the market, the firm must
craft a strategy. Critical components of strategy for a new venture include
entrepreneur's vision, business mission and choice of market entry
strategies. These are discussed in details below.
7.4 Vision and Mission

Entrepreneurial Vision
It is a positive picture of the eventual situation that will hold. It is a mental

image of the destination rather than the route to get there. It is the
entrepreneur's view of the new world that he wants to create.
Role of an entrepreneur's vision
i. It provides a sense of direction
ii. Helps in defining goals
iii. Provides a sense of warmth and encouragement

iv. It guides the generation of the business strategy.
v. It is used to communicate what the entrepreneur wishes to achieve to

others.
vi. It can attract and maintain people in the business.
How does it develop?
i. Develops from ideas on how things can be better
ii. May present itself suddenly or emerge over time
iii. Through communication with oneself
iv. Through questioning issues of new value, stakeholders, relationships etc.
How can it be shared with the business stakeholders?
i. Describing it as a dream of things to come
ii. Breaking the vision into goals (bits)
iii. Telling it as a story and how others will be involved
iv. Packaging it a benefits to stakeholders
2. Mission Statement
Is a formal statement defining the purpose of the business and what it aims
to achieve.
It defines the nature of business, what it is aimed at, and how it aims to
achieve it.
Role of a mission statement
i. It captures the entrepreneur's vision
ii. Defines the scope of the business
iii. It clarifies strategic options.
iv. It provides a constant point of reference during periods of change.
Components of a mission statement
● Product/service scope
● Customer groups served
● Benefits offered to customers
● Innovation on which business competitive advantage is built.
● Aspirations of the business.
7.5 Entry Strategy for a New Venture

A Strategy is the pattern of actions that define a business. Every
entrepreneurial venture is different and each has its own strategy.
Entrepreneurial ventures adopt a number of generic strategies in order to
establish themselves in the market place.
1. Product - market domain
The entrepreneur must select the product domain in which to establish their
venture. This defines the scope of the product they wish to offer to what
market segments. May be:
i. Focused entry - addressing a single well-defined product market domain.
ii. Product spread - offering a wide range of products in a single well-

defined market.
iii. Customer spread - delivering a single or narrow range of products to a

wide base of customers.
iv. Broad or scattered entry - wide product range to a wide customer base.
2. Competitive approach
How the venture will attract customers and give value beyond the
competitors offering. This is defined by:
i. Offering a new product or service
ii. Offering greater value
iii. Creating new relationships
iv. Being more flexible
v. Being more sensitive
Choice of strategy is influenced by characteristics of the product market

segment, resources available or that can be acquired, capability of the
entrepreneur.
7.6 Summary
Summary
In this lecture, we have examined the challenges that are
facing new and small businesses in developing their
strategies. These challenges are referred to as "liabilities".
The new firm need to craft a powerful market entry
strategy either based on product - market domain or based
on developing a competitive environment.
Intext Question
i. Discuss the key challenges facing start-ups and small firms
in Kenya today.
ii. Critically examine the role of innovation in drafting a

strategy for a new venture.
Activity 7.1
Identify a small firm in the nearby township to you and conduct an
interview with them to establish the strategies they use for their
business.
7.7 References

ShepherdEntrepreneurship. 6th Edition. McGraw Hill. 2007
2. Holt, David H. Entrepreneurship: New Venture

Creation. Prentice Hall India, New Delhi 2002.
3. Birley S. and Daniel F. Muzyka, Mastering Enterprise.

4. Timmons, Jeffrey A., New Venture

Creation: Entrepreneurship in the 21st Century. Irwin
Boston 1999.
LECTURE EIGHT : MANAGING GROWTH OF A BUSINESS
Lecture Outline
8.1 Introduction
8.2 Objectives
8.3 Overview of Business Growth
8.4 Business Growth Stages
8.5 Why Entrepreneurs Fail as Managers of Growth
8.6 Entrepreneurial vs. Professional Management
8.7 Summary
8.8 Further Reading
8.1 Introduction
Having discussed the strategies that entrepreneurs use to overcome the
liabilities of newness and growth in Lecture 7, this lecture advances the
discussion to look at the management of growth after survival at the early
stages. The lecture focuses on the stages and the transitions that are
necessary to sustain growth of the business.
8.2 Objectives
8.2 Objectives
1. Explain the stages in the business growth
2. Discuss why entrepreneurs fail as managers of growth...
3. Demonstrate the business transition from entrepreneurial to

professional management
8.3 Overview of Business Growth

One of the defining factors of a good entrepreneurial idea is its potential for
growth.
An entrepreneurial venture that is well managed will naturally grow. Growth

may be gradual, or fast, depending on several factors; markets growth rate,
environment and management capability. Business growth can be measured
in terms of employment, assets value, sales turnover, or market share.
Growth of a business can take many forms. Opening branches, new lines of
business, merging with another firm, buying other business are all examples
of business growth strategies. Growth requires very careful thought and
research. If not properly managed, it can lead to demise of the business.
Growth leads to strain on the resources; staff, finances, supplies, equipment
etc. Growth can also lead to emergence of competition and changes in the
market conditions.
If growth is well managed it can be very rewarding to an entrepreneur,

leading to achievement of the entrepreneur's goals. It creates more jobs,
recognition, image of the business is improved, and wealth is created. It is
also argued that businesses become more valuable as they grow. This
assumption draws support from studies of experience curves, which indicate
that unit manufacturing costs decrease with accumulated volume. These
cost savings may come from learning how to use resources more
productively. The PIMS literature extends this idea, arguing that higher
volumes imply higher market shares and, hence, higher profits. The "liability
of newness" concept includes small size as one reason for the high risk of
failure of new businesses. As these businesses mature and grow, they begin
to enjoy economies of scale, such as quantity discounts and more efficient
use of people and equipment.
In contrast to these linkages between increased volume and increased

wealth, anecdotal evidence reveals that increases in size are not always
related to increases in net worth. A successful entrepreneur can become
insolvent from higher costs and unexpectedly low additional demand.
Microeconomic theory offers a way to reconcile this apparent inconsistency.
Theory states that a firm will maximize profits if its output stands at the
level at which marginal costs equal marginal revenue. There exist "local
optima," output levels that maximize profitability within particular volume
ranges.
8.4 Business Growth Stages

The popular S-curve which is most applied to explain product life cycles has
been equally applicable in explaining the growth path of a business. In this
context, the curve has six stages as shown in Figure ___ below.

8.5 Why Entrepreneurs Fail as Managers

The very traits that lead people to start the business i.e. ambition,
creativity, self-confidence, obsession, etc. can lead to problems for the
business at the growth stage. Growth requires a radical shift in management
style. Growth pushes most entrepreneurs to areas that they are not good at.
Success often encourages most entrepreneurs to bite off more than they can
chew. Obsession with control is one observable feature of most
entrepreneurs, which becomes a major liability in managing growth. Some
opt not to grow at all for fear of losing control, yet others may opt for
opening other small businesses. These are defeatist moves. The better
option is to recruit and hand over management to professionals (what role
then does the entrepreneur play in the business?).
8.6 Entrepreneurial vs. Professional Management
Entrepreneurial Management is the style of managing typically used when an
enterprise is small. It is characterized by centralized decision making and
informal controls. Professional Management on the other hand is
characterized by delegation of responsibilities and decision making authority
as well as formal control systems.
8.7 Summary
Summary
An entrepreneurial venture that is well managed will naturally
grow. Growth may be gradual, or fast, depending on several
factors; markets growth rate, environment and management
capability.
The very traits that lead people to start the business i.e.
ambition, creativity, self-confidence, obsession, etc. can lead
to problems for the business at the growth stage. Growth
requires a radical shift in management style.
Businesses go through various stages of growth along the S-

curve from start up to maturity and decline. Management of
growth would prevent a business from declining and collapsing.
Entrepreneurs need to recognize when growth demands that

they make a transition from the entrepreneurial style of
managing to professional management.
Intext Question
i. Explain the meaning of growth of a business
ii. Discuss the various stages a business will go through in

growth path.
iii. What challenges do entrepreneurs face in making the

transition from entrepreneurial to professional management?
Activity 8.1
Use research to identify three examples of founding
entrepreneurs that stepped aside once the firm had grown to
a certain size and brought in professional manager. What
relationship did the entrepreneur continue to have with the
firm after transition?
8.8 References
8.8 References
Hisrich Robert D., Michael P Peters. And Dean A

ShepherdEntrepreneurship. 6th Edition. McGraw Hill. 2007. Ch.
14 and 15
Holt, David H. Entrepreneurship: New Venture Creation.

Birley S. and Daniel F. Muzyka, Mastering Enterprise.

Timmons, Jeffrey A., New Venture Creation: Entrepreneurship

in the 21st Century. Irwin Boston 1999.
Wickham, A. Philip. Strategic
LECTURE NINE: NEGOTIATION AND DEAL
STRUCTURING
Lecture Outline
9.1 Introduction
9.2 Objectives
9.4 Negotiation Process
9.5 Negotiating Tactics
9.6 Application of Negotiation in Entrepreneurship
9.7 Summary
9.8 Further Reading

9.1 Introduction
This lecture demonstrates the concept and application of negotiation in
various activities in entrepreneurship. The concept is applicable in
entrepreneurship and is a critical skill that entrepreneurs require for their
day to day decisions in managing the business
9.2 Objectives
9.2 Objectives
1. Explain the meaning of negotiation
2. Discuss process of negotiation...
3. Demonstrate the key features of effective negotiation
4. Explain how negotiation can be applied in entrepreneurship
9.3 Overview of Negotiation

Entrepreneurs are endlessly negotiating with customers, suppliers large
shareholders, creditors, prospective joint ventures and strategic partners
with people inside the business like employees, fellow partners. Whenever
parties with different interest and perceptions depend on each other for
results, negotiation matters. In entrepreneurship, deal making should be
made a core competence. Knowledge of basic principles in negotiating can
greatly enhance your chances of success in an entrepreneurial venture.
Negotiation situations:-
● Financing
● Premises and facilities
● Orders
● Human resources
● Contracts/tenders
● Acquisitions/mergers
Negotiating
Is a process of bringing about agreement via conference, discussion and

compromise. Is the art of reaching an agreement by resolving differences
through creativity. Negotiating is best understood as a means of advancing
the full set of interests by jointly decided action - where the outcome is
"win-win" situation.
Negotiating differs from bargaining or haggling in many ways. Chief among
them is that bargaining focus on winning irrespective of the outcome to the
other party. It is normally for one-shot situation. Negotiating is applicable
only when there is win-win expectation. It is for establishing long term
mutually beneficial relationships.
Interest - Interest is whatever is at stake that you Care about. May be

tangible and intangible. Not necessarily selfish. It is the raw material for
negotiating
Issue - The specific item in the table for negotiation.
Position
Your stand on an issue. Positions changes during the negotiating process
First position is the aspiration. Aspirations are normally expressed as the

first offers in the negotiation process.
ZOPA
Zone of Possible Agreement. Also known as the contract zone.
BATNA
Is the course of action you would take if proposed agreement were not
possible e.g. walk away and source alternatives or even do without. It sets
the value threshold in terms of your interests. Also sets the negotiating
base.
9.4 Negotiating Process

The expected outcome of a negotiation process is some form of a deal. Each
party enters the negotiation table with two critical positions - aspiration
and negotiating base. As the negotiation starts and proceeds, each party
yield some grounds in terms of their aspirations and starts to move towards
their negotiating base. This is demonstrated in Figure 3 below. Eventually,
the deal is struck when the negotiating bases overlap within the shaded
zone of possible agreement.
9.5 Negotiating Tactics
Necessary to avoid over-committing oneself at very early stages. Use de-
committing strategies like:-
1. Responding that the offer is too high "without disclosing your position
2. Bluffing offers - e.g. " this is really my last offer"
3. Use of commitment to 3rd parties e.g. bosses etc
4. Alternative offers - higher or others are interested
5. Company policy
6. Precedence - last time the deal was better.
Other Elements that Affect Negotiation
Subtle verbal and body language can make a difference in how your
negotiation progresses. Use the word "and" instead of "but". This helps to
send the signal that you are interested in other party and are seeking
common ground. A lack of facial expressions, vocal intonation, and other
cues can result in a negotiation breakdown. Constantly reiterate your
interest in the other side's concerns and your determination to find a
mutually satisfactory resolution.
1. Personalities: be conscious of aspects of your personality such of

your own needs and interpersonal style as well as other person's
personality.
2. Your own personality and style: how much you trust the person; how
much you want to conceal or reveal
3. Physical space: Sometimes where the negotiation takes place can be
important; are we negotiating in a space we are uncomfortable and
other is comfortable?
4. Past interaction: If there is a history of conflict resolution with this
person, think about how this history might affect the upcoming
negotiation.
5. Time pressure: Think about whether time pressure will affect the
negotiation and whether you need to try to change this variable?
6. Subjective utilities: Be aware that people place very different values
on elements of a negotiation. Finding out what is "value" is one of the
key parts of negotiation.
Common Mistakes in Negotiating
i. Ignoring conflicts of interests and perceptions of stakeholders
ii. Failure to uncover underlying interests of stakeholders
iii. Mistake of assuming that clear vision, official mandate, clear

communication is all you need to effect change
iv. Forgetting interests and opinions of other stakeholders
v. Forcing people to take your position

9.6 Summary
Summary
Negotiation may be defined as process of bringing about
agreement via conference, discussion. Negotiating is best
understood as a means of advancing the full set of your
interests by jointly decided action
It is important for an entrepreneur to recognize negotiation

situations - any situation which is both interdependence and
potential conflict, identify the stakeholders and the issues,
uncover the people's interests - learn all you can about the
full set of interests behind the stakeholder positions.
Understanding interests alone is not enough. Understand

stakeholders' alternatives to agreement and estimate their
likely positions. Recognize that negotiation is an on-going
process.
Intext Question
i. Distinguish between bargaining and negotiating
ii. Discuss the stages in the negotiating process
Activity 9.1
Identify an occasion when you are involved in negotiating and
note down the parties involved, and the process followed.
Did the process follow the stages we discussed in this
lecture?
9.7 References
9.7 References
1. Craver CB: The Intelligent Negotiator. Roseville, CA,
Prima Lifestyles, 2002
2. Fisher R, Ury W, Patton B: Getting to Yes: Negotiating

Agreement Without Giving In. New York, NY, Penguin
Books, 1991
LECTURE TEN: FAMILY BUSINESS DIMENSION OF
ENTREPRENEURSHIP
Lecture Outline
10.1 Introduction
10.2 Objectives
10.3 Overview of Family Business
10.4 The Complex Nature of Family Businesses
10.5 Intergenerational Transition of Ownership and Management
10.6 Summary

10.2 Objectives
10.2 Objectives
1. Explain the complex relationships in a family business
2. Discuss the challenges of intergenerational transition of

ownership and control
3. Discuss the structures that can facilitate business transition

in family businesses
10.3 Overview of Family Business

Simply defined as any business in which majority of ownership and control
lies in within a family in which two or more family members are involved. It
is a dual system of the family and the business. Over 60% of the world
businesses are family businesses. A family business is special by nature
because of the interlocking roles and responsibilities.
In a family business major policy-making decisions and significant proportion

of the jobs are held by the members of the extended family. Effective
decision-making is centered in the family and the business goals are
oriented towards the interest of the family. Local examples of family
businesses include the Chandaria Industries, House of Manji Biscuits, East
Africa Spectre, Alliance Hotels, Brookside Diaries, among others.
Family businesses are complex and vary over a range of characteristics

however, for a public or private business to be considered a family business,
family members must have a controlling ownership interest and be actively
involved in the business at the strategic level and thereby influence its
strategic direction.
There are different types of family businesses depending on involvement of

family. Active family business - these are characterized by direct
supervision of operations by family members. Ownership of the firm is
controlled by family members and family members are employed by the
business although the business may have non-family members. Absentee-
owner family firms - these are controlled jointly by family members who do
not work in the business or supervise its operation. Non-family members run
the firm for the family.Latent family firm - it is where apparently only one
family member is involved usually as the CEO. However other family
members may become involved in the business at sometime in the future.
Advantages of a family business

1. It facilitates quick unified decision making since key decision makers
are all members of the same family.
2. It allows for the mobilization of large amounts of resources and it
promotes a sense of ethnic solidarity.
3. It guarantees access to trusted personnel. The family partners know
each other and as to who should be managing director, finance
manager etc. There is much trust and this favours their ability to
work as a team.
4. There is also a high sense of responsibility and members of the family
are motivated and easily accepted as principals of the business to
both suppliers and customers (since) they usually share the same
name.
5. The family members also translate their family culture to be the
culture of the organization for example a family that is achievement
oriented loyal to each other and careful about money and its
management can translate these qualities into the culture of the
firm.
Disadvantages of family business
1. It may not be able to obtain the most talented persons for positions
within the company. It is hard to find experts in all the fields of
business within the family.
2. With growth in size the success for family business tend to be
undermined as the business becomes more complex and therefore
needs to hire more outsiders. In the long run family businesses have
more outsiders and changes to become a professional company.
3. During the initial stages, the goals of the family and the goals of the
venture are the same, survival and growth of the venture. When the
venture grows it leads to the needs of acquiring managerial and
technical expertise, which must be recruited from outside hence
introducing non-family members into the venture.
4. Family business have paternalistic cultural patterns that produces an
over reliance of the founder who may be risk averse and inward
looking such that the firm is often slow to adapt to the changing
environment.
Take Note
Take note of the possible Role Conflicts
FAMILY BUSINESS
ROLES
10.4 Complex Nature of Family Business
Recognition of the family as a dual system is not enough to understand the
issues involved. Actually there are three systems instead of two namely the
family, ownership and business management. The three systems interact
and influence each other in many ways. The figure below illustrates the
three systems interaction.
Figure 4: The 3 Circle Model of Family Business
Insert the chart here
While this model is very elegant and illustrates the complexity in a family
business, it is more of a static picture of the situation. It does not capture
the dynamics in each of the systems over time. Each of the three systems
overlaps and goes through transition over time.
Issues Facing Family Businesses
Participation - who can join the family management, what are the entry
requirements, how are assignments determined, what are the titles and
ranks in the business. How to do away with incompetent members, what is
the role of non-family members in the business, how will you maintain
fairness?
Compensation and ownership - how are people to be evaluated and paid,

who owns the business, and how are returns and dividends determined?
Non-family relationship - how will family treat outsiders, reward and

promotion of non-family members, how will professional culture be
intertwined with family culture.
Family relationship - how do we deal with intergeneration conflicts sibling

rivals, relationship by marriage etc.
Business responsibilities - how should family business represent the business,

how much information can be shared outside the family, etc. The Family
Business is so much more than just a business. It is a stew of family
relationships based on love and resentment. The primary challenge faced by
family businesses is to match family values to business goals. As incremental
generations join the business, relationships become entangled and often
lead to conflicts in all areas of operations.60 to 70 per cent of all business
enterprises are family owned but less than 10 per cent of all family
businesses survive to the 3rd Generation.
There are other several challenges faced by family businesses: Conflicts,

accountability, management of Human Resources, Power and control,
children - incremental generations. Thus the need for professionalizing the
business by; Managing succession, Ownership issues, and Protection of
wealth
10.5 Intergenerational Transition of Ownership and

Control
Difficulties of Transition in Family Firms
Lack of transition planning. Many of them do not plan for the transition.
This possibly emanate from little desire on the part of the owner to transfer
the firm. Other cases due to lack of viability of the firm. In addition
reluctance of the off springs to join the firm and difficulties in choosing a
successor.
Challenges in choosing a successor
i. Fear of death
ii. Reluctance to let go
iii. Identifying the right qualities and the person
iv. Personal loss of identity
v. Fear of losing work activity
vi. Feeling of jealousy/rivalry towards the successor.
Structures to facilitate transition
There are three components to family governance:
1. Periodic assemblies of the family - all families in business can

benefit from this activity.
2. Family council meetings - for those families that benefit from a
representative group of their members doing planning, creating
policies, and strengthening business-family communication and bond.
3. A family constitution - the family's policies and guiding vision and
values that regulate members' relationship with the business. This
written document can be short or long, detailed or simple, but every
family in business benefits from this kind of statement.
4. Business Strategic plan - this will set out the vision and the goals of
the business which should guide whoever takes over the running of
the business.
5. Independent Board - this will infuse best practices and will guide the
decisions in the business even if the family is not capable of providing
a strong leadership.
10.6 Summary
Summary
In this lecture, we defined a family business and
indicated the complex nature of a family business. The
overlapping roles and responsibilities for the players in a
family business present a challenge in managing a family
business.
This lecture also outlined the three systems model of a

family business i.e. family, ownership and management
systems. Success of family firms also is determined by
their ability to go through intergenerational transition
successfully. The structures that can facilitate
intergenerational transition have been presented as
family councils, strategic plans, estate plans, and
independent boards.
Intext Question
i. Define a family business and indicate the uniqueness of such
businesses.
ii. Discuss the challenges that family firms face in making

intergenerational transition of ownership and control.
Activity 10.1
Carry out a brief survey of family firms in your location and
document the characteristics of these firms
10.7 References
1. Gersick, K., Davis, J., Hampton, M., and Lansberg, I.

(1997).Generation to generation: Life cycles of the family
business.Boston, MA: Harvard Business School Press.
2. Birley, S. (1986). Succession in the family firm: The

inheritor's view. Journal of Small Business Management,
July, 36-43.
3. Lansberg, I. (1999). Succeeding Generations. Realizing the

dream of families in business. Boston: Harvard Business
School Press.
LECTURE ELEVEN: ENTREPRENEURSHIP POLICY IN

KENYA
Lecture Outline
11.1 Introduction
11.2 Objectives
11.3 Historical Perspective of Entrepreneurship
11.4 Entrepreneurship Policy Environment in Kenya
11.5 Role of Government in Entrepreneurship Promotion
11.6 Summary

11.1 Introduction
This lecture discusses the environment for entrepreneurship in Kenya. Since
independence, the government has been making policies aimed at
supporting the SMEs. How effective have these efforts been and what
actually should be the role of government?
11.2 Objectives
11.2 Objectives
1. Explain the historical development of entrepreneurship in

Kenya
2. Discuss government policy on promotion of entrepreneurship

in Kenya
3. Explain the role of government in entrepreneurship

11.3 Historical Perspective of Entrepreneurship in Kenya
Before independence, the economic and political scene was dominated by
the white colonialists and settlers. The African was relegated to a poor
third position after whites and Asians. Immediately after independence the
government embarked on the Africanization of the economy. Sessional
Paper No.10 of 1965 African socialism was the first real step in this
direction. This saw the redefinition and creation of other organizations to
support the goal e.g. ICDC, IDB etc. Focus was mainly on financial
institutions that provided capital for business.
11.4 Entrepreneurship Policy Environment in Kenya

Since independence, the government has recognized the potential of
entrepreneurship and particularly the small and medium enterprises sector
in employment creation and poverty reduction in its numerous policy
documents. The Sessional paper No. 1 of 1986 on economic management for
renewed growth, Sessional paper No. 2 of 1992 on small enterprises and Jua
kali development in Kenya and the economic recovery strategy for wealth
and employment creation 2003-2007 recognizes the need to establish and
maintain a conducive environment for of MSEs into medium sized enterprises
that have more capacity to produce high quality products and creates
sustainable employment opportunities.
Development of entrepreneurship and that of the micro small and medium

enterprise sectors have remained intertwined. This is largely due to the
realization that the bedrock of entrepreneurship in emerging markets is the
micro, small and medium enterprise sector. The Kenya government has
since 1970s recognized that and developed appropriate policy guidelines.
Despite the numerous policy prescriptions the sector has underperformed
giving rise to need for drastic change of attitude towards this sector. This
demands policy re-evaluation that will lead to restructuring of the sector for
sustainable growth, and renewed government commitment to provide
necessary support and impetus for its development.
In this regard, the Government through Sessional Paper No.2 of 2005

identifies what it considers to be its role in promoting entrepreneurship in
Kenya. This is the most recent policy prescription by the Kenya government
and it is discussed below
Success of this framework is pegged on the following guiding principles:
● Government involved in the MSE sector is to create an enabling

environment to increase the competitiveness of MSE in Kenya so that
it contributes to economic growth, employment creation and poverty
reduction.
● Recognition of the importance of MSE sector in terms of creating
decent employment, income generation, promotion of creativity and
innovation and generation of output hence the need to integrate it
into broader economy.
● Government to play a facilitative and catalystic role rather than
engaging in direct intervention in the market.
● Priority will be given to interventions that remove barriers in order to
open up markets for MSEs.
● Government in full consultation with all stakeholders in the sector
will pursue an implementation framework that is specific and
sustainable.
● Government will continue pursuing macro-economic policies that will
facilitate generation of high and sustainable aggregate demand, while
keeping inflation and interest rates low.
● Commitment by all stakeholders' promotion of gender equity in MSE
sector.
Legal and regulatory environment
Government is committed to continue with legislative reforms, which

encompass review and updating of the existing pieces of legislation and
enactment of new laws. The regulatory reforms are geared towards
development of laws and regulations, which are dynamic, responsive to
needs of the MSEs and supportive to the growth, and development of the
sector.
Licensing and regulation
Licensing services will be decentralized to cut down on time and cost that
entrepreneurs incur to acquire the licenses. Licensing fee structure will be
reviewed to make it affordable and supportive to MSE operator.
Business registration
Government will decentralize registration of businesses. It will undertake

computerization of the process and network the activities in all relevant
offices.
Local government reforms
The local authority byelaws will be reviewed and standardized to make

them supportive to the promotion of business and consistent with the
changing socio-economic environment.
Land laws
Laws governing land ownership will continue to be reviewed for

simplification and harmonization with other relevant pieces of legislation.
Specifically the physical planning Act 1996 will be affected to encourage
local authority to earmark land for MSEs development.
Micro and small enterprise Act.
The Act will provide the legal and institutional framework for
implementation of MSE policies.
Markets and marketing
● The growth and development of the MSE sector depends on the

existence of the vibrant market for products and services.
Government will allocate 25% of its procurement to the sector.
● Government will encourage sub-contracting arrangement between
large and medium firms this will be achieved through provision of
incentives such as tax rebates, and duty waivers to encourage the
large firms to participate in the arrangement.
● In order to encourage the citizens to embrace the need to purchase
local products the government with collaboration with MSE
stakeholders will spearhead "buy Kenyan build Kenya" sensitizing
campaigns to influence the change of mindset and attitudes towards
local products.
● For international markets measures will be put in place to improve
product design and development, commission market research and
support appropriate packaging of goods and services so as to respond
to the needs of the international customers.
● The government will facilitate marketing of MSE products in both
local and international markets. Specifically export promotion
council, exhibitions, catalogues of goods produced, trade fairs, media
and MSE websites.
Business linkages
Weak business linkages are one of the causes of poor market access by MSEs.
Government will therefore provide incentives to the private sector to invest
in areas that enhance development of business linkages between MSEs and
large enterprises. Ministry of finance will work out modalities for providing
appropriate incentives to both large and small firms to encourage
market/supply linkages with MSEs
Financial Services
● The government recognizes that access to credit and financial

services is key to growth and development of any enterprise more so
the MSEs. In this regard, the government will promote development
of financial service sector by providing incentives to attract savings
and investment and development of venture capital.
● The central bank of Kenya will develop appropriate performance
standards and regulations that recognizes the special nature of micro
finance institutions (MFI)
● The government will enact the micro finance bill, which will provide
a legal framework for the operation of MFIs. The policy whose aim
will be to broaden the provision of financial services to the majority
of Kenyans especially the rural and urban poor, including MSEs.
● The government will amend specific laws that inhibit those
organizations that mobilize savings in the country to offer credit. E.g.
Kenya posts office savings bank, Saccos etc.
● The government recognizes the role of the development financial
institutions in providing long-term finance for development of the
sector. To enhance this role the government will restructure and
strengthen their capital base so as to improve their ability to offer
credit to MSEs.
Skills and Technology

To address the problem of weak technology the government will review the
current modes of technology acquisition and transfer into the country,
define laws and provide legislation that would regulate and promote local
and international technology transfer, encourage partnership through sub-
contracting, franchising and licensing and vet and register of imported
technologies to discourage dumping of obsolete and dangerous technologies
which hinder innovation.
Infrastructure development
The government in collaboration with relevant stakeholders will encourage

more private sector participation in development and management of
market stalls and worksites for MSEs.
Business management and entrepreneurship skill acquisition
Business management and entrepreneurial skills are critical in the growth

and development of MSEs. In order to improve and promote the acquisition
of entrepreneurial skills the government will encourage universities,
polytechnics, technical institutions and other MSE support organization to
develop certified demand- driven course on entrepreneurship and business
management. In order to develop a widespread enterprise culture, the
government will introduce entrepreneurial development programmes in
schools and other training institutions.
Gender equity
In order to ensure gender equity the MSE policy will be gender responsive as
it is pro-poor. The policy framework will galvanize the creative and
productive potential of women who constitute the bulk of the country‘s
labour force.
The government will undertake measures to identify gender-related

constrains and opportunities that affect equal participation of both women
and men at the local institutional and policy levels.
In order to address gender disparities, the government will pursue policies

to empower women, increase their access to credit by encouraging them to
form Saccos to promote networking with formal banks and MFIs and build
institutional capacity of support organization for gender mainstreaming.
Information management and dissemination
Policy on information management for MSEs seeks to improve the gathering,

processing and packaging of information in line with the needs of specific
MSEs. In this connection, the government will encourage private sector
investment in information centers for MSEs and support stakeholders'
initiatives targeting dissemination of information generated in the sector.
Tax regime
The reforms are aimed at improving transparency and efficiency of taxation,

strengthening tax collection and harmonizing the tax system. Mechanism
will be put in place to ensure that the MSE can pay tax that allows them to
fulfill their tax obligation and thrive at the same time.
Formal and informal entry barriers
To address this problem the government will work closely with the private
sector and other stakeholders to ensure promotion of good governance,
ethical trading and rule of law.
Health and safety in workplaces
To ensure improved working condition in the MSE sector measures will be

put in place to ensure that order, occupational safety, hygiene and
environmental management principles
11.5 Role of Government in Promoting Entrepreneurship

The role of government in promotion of entrepreneurship has been
identified as one of developing an enabling environment for entrepreneurs
to prosper. The government has no business being in business i.e. the
interventionist role that the government played in the years after
independence where it established business organizations (parastatals) is no
longer sustainable. Owing to the failure of government in business,
privatization efforts are at top gear in Kenya like it is in most other
emerging economies.
It has been argued that the social role of government would not allow it to
carry out business successfully. This has been evidenced by the involvement
of the political system in the operations of the government institutions. This
presents therefore that the government should facilitate and not implement
entrepreneurship.
11.6 Summary
Summary
This lecture identified the role of government as one of
facilitation and not implementation. The government should
provide an enabling environment for entrepreneurs to
innovate and create wealth. Their role should policy
development and not implementation. Specific policy
interventions by the Kenya government in the recent past
have been outlined.
Intext Question
i. Explain the role of government in entrepreneurship
ii. Discuss the nature of the policy environment in Kenya
Activity 11.1
Access the Sessional Paper No. 2 of 2007 and critically
examine the policy environment covered therein.
11.7 References
11.7 References
1. McCormick, D. Alila P.and Omosa M.(eds)
(2007). Business in Kenya:Institutions and
Interactions. University of Nairobi Press. Nairobi.
2. GOK (2005). Sessional Paper No. 2. Government

Printer.
LECTURE TWELVE : CONTEMPORARY ISSUES IN
ENTREPRENEURSHIP
Lecture Outline
12.1 Introduction
12.2 Objectives
12.3 Intellectual Property Protection and Entrepreneurship
12.4 Ethical Considerations in Entrepreneurship
12.5 Summary

12.1 Introduction
This lecture covers the twin issues of IPP and ethics in entrepreneurship.
These issues are highly debated in entrepreneurship without a clear
direction on how they can effectively be handled.
12.2 Objectives
12.2 Objectives
1. Explain the nature of intellectual property
2. Discuss the role of intellectual property protection in

promoting entrepreneurship
3. Identify the ethical issues in entrepreneurship

12.3 Intellectual Property Protection
A property is something that can be owned that has commercial value.
Intellectual property is the property of the mind and therefore it is
intangible. Examples of intellectual property include: patents, trademarks,
copyrights or trade secrets. It can only be protected and made into tangible
things e.g. documents. Two branches of law that protects intellectual
property Industrial property law and Copyrights law.
Industrial property - Covers inventions through patents, Trademarks of

service marks, Industrial designs and Utility models.
Copyrights - Relate to artistic literacy written creations or works such as

poem, novels, music, paintings, cinematography work, photographic,
sculpture and computer programmes.
Protection prevents anyone from using that property unless they have
permission. Violation of such rights (infringement could lead to prosecution
by owner). A copy right protects original works of authorship. The
protection in a copy right does not protect the idea itself, and thus it allows
someone else to use the idea or concept in a different manner.
Intellectual Property Protection in Kenya
In the nineties, emerging countries realized how important intellectual

property rights were and therefore started to draft intellectual property
legislation as well as adhering to the Trade Related Aspects of Intellectual
Property Rights (TRIPs) agreements. On its part Kenya has enacted several
laws such as Revenue Authority Act, Customs Management Act, Copyright
Act, Seeds and Plant Varieties Act, Trademarks Act, Industrial Property Act,
and anti-counterfeit Act that impose heavier penalties on those infringing
intellectual property rights. Other countries in Africa are also reviewing
their legal frameworks. Such initiatives, together with action-oriented plans
by Governments, sends the appropriate signals to all those involved in
counterfeiting.
Kenya has enacted the Counterfeit Act 2008 which prohibits trade in
counterfeit products as a measure of reinforcing intellectual property rights
and creates the anti counterfeit agency whose functions include
enlightening and informing the public on matters relating to counterfeiting,
combating counterfeiting, trade and other dealings in counterfeit goods in
Kenya and coordinating with other national, regional and international
organizations involved in combating counterfeiting. It defines intellectual
property rights to include any right protected under the Copyright Act, any
plant breeders right granted under the seeds and plant varieties Act, any
right protected under the trademarks Act and any right protected under the
industrial property Act.
The penalties for being in possession or in control of counterfeit goods

include destruction of the goods and tools for their manufacture at owners
cost, and or imprisonment for a period of between five and fifteen years or
to a fine between three and five times the prevailing retail value of the
goods. An owner with respect to property protection right includes a person
who has capacity in law to enforce the intellectual property right in his own
name.
The process of applying for the registration of intellectual property rights

commences with an application to the Kenya Industrial Property Institute
(KIPI) accompanied by a search fee to ensure that no such registration is
existing. Once the search is through the applicant is then informed of the
outcome and given a stipulated period of say one month to pay for the
registration of the property right accompanied by the document which is
subject to registration in a metal plate. The intention of the registration of
property right is then put in the Kenya gazette to allow any party who might
feel aggrieved to raise a complaint. If there is no objection within a period
of 30 days the registration is then effected for a period of 7 years after
which it is renewable for a period of 14 years and is renewable for the same
period thereafter.
KIPI (Kenya Industrial Property Institute)
KIPI was initially referred to as Kenya Industrial Property Office (KIPO)

started as a government department under ministry of trade and Industry. In
its current status, it was created in 1989 through an Act of Parliament. The
functions of KIPI include:-
a) Examine and grant rights, patents, certificates of registration for

innovations, trademarks etc
b) Screens technology transfer agreements and licences including royalties
c) Disseminate patent information to the public
d) Promote inventiveness in Kenya through awards, prices etc.
e) Run a patents documentation center for innovations from all over the
world.
Is Intellectual Property Protection Necessary for Innovation?

The advocates of intellectual property protection argue that it guarantees
market for the innovator and so enable them to recoup their investment in
R&D. Protection allows the innovator time to charge a premium to recover
whatever their investment in the product. They further present that it
promotes discovery and inventions by the innovators. An example would be
investment in developing a drug for HIV/AIDS. If assured of market
protection, pharmaceutical companies would work hard to get a cure for
such societal problems.
Those who oppose the idea of IPP present counter arguments that IPP is
costly. The registration and enforcement may cost amounts that are beyond
the benefits of the idea. They also argue that innovation is a natural
curiosity process - pure science and therefore does not require any
protection. Others have further argued that innovations are for the benefit
of humanity and hence restriction compromise human welfare. In addition,
it has been argued that open access encourages generation for new
knowledge as is the case with the internet which is open and has led to
generation of immense innovations based on it.
There are also some natural protection mechanism which exist that can be
useful instead of protection e.g. Imitation lag - time lag between innovation
and limitation, reputational advantage associated with being the innovator
where consumers associate you with quality and existence of natural
advantage associated with learning curve (racing down the "learning
curves").
12.4 Ethical Issues in Entrepreneurship

Ethics refers to what is right or wrong. It is the study of whatever is right
and good for humans. Business Ethics on the other hand is concerned with
investigation of business practices in light of human values. (Hisrich &
Peters 2002). The term ethics was developed from the Greek word "Ethos"
meaning custom and usage. The Greek Philosophers Socrates (469 - 399
B.C), Plato (427 - 347 BC), and Aristotle (384 - 32 BC) are widely credited in
the documented scholarly literature for providing the earliest writing on
ethics.
In very simple terms Ethics are -"Standards of conduct that guide decisions
and actions, and hence tell us how to act in ways that meet the standard set
based on duties derived from core values." Therefore, ethics is basically
what is good and just. There are three main branches of Ethics: The Meta
ethics; Normative ethics and Descriptive ethics.
Business ethics is broken down into corporate ethics, labour ethics, and
ethics of economic systems, trade ethics, consumer ethics and professional
ethics.
Ethical Challenge:
The globalization of the world economy crucially driven by world trade,

demands increased mobility and flexibility from the working population.
This leads to more migration and increases demand on long-term human
partnership and family structures. Job mobility result in and calls for
relational mobility. Among the consequences of this are increases in
marriages where the partners live in different places for job reasons.
Divorces, migration, conflicts, violence, as well as new forms of gender
specific role division and a digital gap increases. For these reasons trade
ethics must also take into account the social effect on relationships of the
job mobility increased by world trade and promote relationship friendly job.
Kenya has been greatly affected by this as a result of brain drain.
Another ethical challenge is that of fair pay which aims at safeguarding the
people's existence. When, a recipient of a salary in full employment
receives income either in monetary terms or otherwise that person is able
to safe guard his interests and that of his/her dependants. Questions have
been raised as to what is adequate minimum wage. The available literature,
qualifies minimum wages if it can satisfy the following dimensions. Food
stuffs, clothing, housing, education and access to information, health, and
relationships and security. In Kenya, minimum wage has been benchmarked
at US $ 1 per day or approximately Sh.75. However, given that 56% of the
Kenyan population which is approximated 34 million as per 1999 census,
lives below poverty line is a clear indicator that the subsistence minimum
threshold does not hold.
Fair Profit
Most of the economic units are established with the notion of making a
profit. As such, profit is neither good nor bad. However, four questions are
ethically significant. How profit is made? What does it consist of? How high
is it? What is it used for? The fairness of the profit will therefore be
determined on how the above questions elicit answers.
Fair Trade
Fair trade has generally been defined as the organization of trade according
to the fundamental values, particularly justice, freedom, sustainability and
peace. It is a more equitable distribution of revenues generated by
international trade relations. People working in economically disadvantaged
regions such as Kenya ought to have product offered to them at fair
condition. Fair trade activities promote sustainable development, which call
for social justice, economic development, the protection of the
environment and the preservation of cultural diversity and which if at all
possible, strengthen trades in and in between countries. The social and
environmental standards aimed at fair trade are compatible with national
Law and the connections and whatever possible, transcend those. Fair trade
is inspirited by the active participative and shared responsibility of everyone
involved in the trading chain.
12.5 Summary
Summary
Intellectual property protection has elicited a lot of
debate regarding its role in promoting entrepreneurship in
developing countries. Some scholars have argued that
continued enforcement works more to the disadvantage of
the developing countries and to the advantage of those
who have the capacity to continue developing and
enforcing IP. This lecture has examined the various types
of IP and its role in entrepreneurship.
The lecture also outlines the ethical concerns in

entrepreneurship which is yet another topical subject in
entrepreneurship. Some entrepreneurial practices border
on being unethical and therefore entrepreneurs need to
appreciate the concerns about ethics. An entrepreneur can
not afford to be unethical.
Intext Question
What do you understand by IPP?
How is IPP facilitated in Kenya?
Identify and discuss at least five unethical practices

associated with business persons in Kenya?
Activity 12.1
Visit a region where there is a heavy concentration of
entrepreneurs like Gikomba market in the city and interview
at least 10 entrepreneurs to assess their level of awareness
of the need intellectual property protection.
12.6: References
12.6 References
ShepherdEntrepreneurship. 6th Edition. McGraw Hill. 2007.
1 Holt, David H. Entrepreneurship: New Venture Creation.

2 Timmons, Jeffrey A., New Venture Creation:

Entrepreneurship in the 21st Century. Irwin Boston 1999.
3 Wickham, A. Philip. Strategic
a) Key Course References
Blackwell, E. 1993. How to prepare a Business Plan. Kogan Page: Nichols.
Burch, J.G. 1986. Entrepreneurship. New York: Wiley.
Druker, P.F. 1994. Innovation and Entrepreneurship. Oxford: Butterworth-

Heinmann.
Hisrich Robert D., Michael P. Peters and Dean A.

Shepherd, Entrepreneurship. 6th Edition. McGraw Hill. 2007
Johnson, Susan and Ben Rogaly. 1997. Microfinance and Poverty

Reduction. UK/Ireland: Oxfam Publications
Martin, C. 1996. Owning and Operating a Service Business. Crisp

Publications.
McCormick D., Alila P., Omosa M. Business in Kenya: Institutions and

Interactions. University of Nairobi Press 2007
Sexton, D.L & Bowman-Upton, N.B. 1991. Entrepreneurship: Creativity and

Growth. New York: McMillan.
Timmons Jeffry A and Stephen Spinelli, Jr. New venture creation:

entrepreneurship for the 21st century 6th ed. Boston : Irwin/McGraw-Hill,
2004.
Vesper, K.H. 1990. New Venture Strategies. Englewood Cliffs: Prentice-Hall.
Walker, E.W. & William Petty. 1996. Financial Management of the small

Firm. New Jersey: Prentice Hall.
Wickham, A. Philip. Strategic Entrepreneurship. Financial Times Publishing.
2006.
Zimmerer, Thomas W. & Scarborough, Norman M. 1998. Essentials of

Entrepreneurship and Small Business Management. New Jersey: Prentice
Hall.
Journals and Periodicals
● Journal of Small Business Management - Journal of International

Council of Small Businesses
● Journal of Business Venturing. Eisvier.
● Academy of Entrepreneurship Journal
● Entrepreneurship Theory and Practice - Journal
● Global Entrepreneurship Monitor Reports - London School of
Economics
● Frontiers of Entrepreneurship Research - Babson College and
Kauffman Foundation

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DBA 403: ENTREPRENEURSHIP

LECTURE ONE: NATURE OF ENTREPRENEURSHIP

1.3 Overview of Entrepreneurship

1.3.2 Selected Contributions in Conceptualizing Entrepreneurship

1.6 Further Readings

1. define the concept of entrepreneurship

1.3 Overview of Entrepreneurship

Entrepreneurship has been defined in many ways but no universal definition

Over time scholars have identified entrepreneurship in terms of the

Entrepreneurship - the personality

The earliest work in the field of entrepreneurship focused on personal

Entrepreneurship the resource (factor of production)

Entrepreneur the innovator

A distinctive stream of research has begun to focus on the entrepreneurship

● Lots of different professional contexts

● But also a way of approaching personal issues, family

● Can affect change

● There is a better way

● Opportunities are everywhere

● Embrace innovation, change & growth

1.3.2 Selected Contributions in Conceptualizing

He recognized three classes of economic agents - land owners,

2. Jean Baptiste Say 1800s

3. Joseph Schumpeter (1934)

He viewed entrepreneurship against the background of economic

4. Theodore Schultz (1975)

Schultz describes entrepreneurship in the perspective of the theory of

5. Mark C. Casson (1982)

Casson focused on the behavioural dimension of entrepreneurship. He

ii. Entrepreneurs have better information than others

iii. Motivated by self interest (rationality)

iv. Different perception of situation from other people.

v. Creates an institution to make markets between him and other

6. Israel Kirzner (1985)

Kirzner defines the essence of entrepreneurship as alertness to profit

6. Stevenson Howard and Salman William (1987)

Their view of entrepreneurship is influenced by the behavioral approach.

Table 1: Comparison between entrepreneurial and managerial

ENTREPRENEUR ASPECT MANAGER

7. Peter Drucker (1980s)

A world renowned scholar of management, Drucker defined an entrepreneur

8. Herbert and Link (1986)

In an article entitled "In Search of Meaning of Entrepreneurship", Herbet and

9. Hisrich and Peters (2002)

They define entrepreneurship as the process of creating something new with

ii. Distinguish between entrepreneurs and managers

iii. Discuss the various scholars who have made significant

2. Summarize the definitions and compare with what we have

2. Bygrave, W., and Hofer, C. W. (1991), Theorizing about

4. Sahlman, William, Stevenson, Howard, Roberts, Michael and

5 Jeffry A. Timmons and Stephen Spinelli, Jr. New Venture

LECTURE TWO: ENTREPRENEURIAL PERSONALITY

2.3 Origin of Entrepreneurship in Individuals

2.3.2 Precipitating Events Theory (PET)

2.3.3 Beyond Born and made (Venture Theory)

2.4 Entrepreneurial Personality Traits

2.4.1 Locus of Control

2.4.2 Independence and Need for Achievement (n-Ach)

2.4.3 Risk taking

2.5 Role of an Individual's Environment

2.6 Entrepreneurship and Culture

2.8 Further Reading

1. Explain the theories on origin of entrepreneurship in