B205B Block 03 Week 01

ARAB OPEN UNIVERSITY- FACULTY OF BUSINESS STUDIES – OPEN UNIVERSITY
COURSE B205B
ARAB OPEN UNIVERSITY – FACULTY OF BUSINESS

B205B EXPLORING INNOVATION & ENTREPRENEURSHIP
BLOCK 03 –CONTEXT & VARIETY
ARAB OPEN UNIVERSITY- FACULTY OF BUSINESS STUDIES – OPEN UNIVERSITY COURSE B205B
B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

2 BLOCK 3 CONTEXT AND VARIETY CASES
3.1 DIMENSIONS OF CONTEXTS IN ENTREPRENEURSHIP AND INNOVATION
Introduction
This reading outlines the main dimensions of contexts and how each
affects entrepreneurship and innovation.
It covers some of the core concepts needed for analyzing the opportunities,
challenges and risks that different types of enterprises face and why they
need to adopt certain strategies to succeed in various contexts.

Introduction & Review

 Different types of innovation include those associated with particular outputs, such as: product,
service, process and organizational innovation,
and those related to its scale or scope, such as: incremental and radical innovation.
 Different varieties of entrepreneurial activity, include corporate, lifestyle, portfolio, rural, serial,
social and technological entrepreneurship.
 A given example of innovation or entrepreneurship may belong to more than one category. For
example, some innovations involve both products and processes, and some entrepreneurial
activities can be both rural and technological.
4 B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

BLOCK 3 CONTEXT AND VARIETY CASES
3.1: Models for analyzing context in entrepreneurship and innovation
 Academics who study entrepreneurship and innovation have provided various definitions and
types of context,
 They have also explained how each type of context can affect entrepreneurship and
innovation.
 This section will provide a summary of how four academic studies have explained the
relationship between context and entrepreneurship and innovation.
 Based on the studies we will present a framework which identifies types of context and
associated contextual influences on entrepreneurship and innovation.
5 B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

BLOCK 3 CONTEXT AND VARIETY CASES
1. First Study by Zahra, Wright and Abdelgawad (2014), examines the relationship between context
and entrepreneurial behavior. The authors define context as the ‘natural setting’ of an enterprise or an
entrepreneur, which helps us ‘to understand the origins, forms, functioning and diverse outcomes of
entrepreneurial behavior’.
• They identify six dimensions of context (temporal, spatial, social, industry, organizational, institutional)
each of which can affect entrepreneurial behavior.
• The study depicts entrepreneurial behavior as the perceptions, beliefs, motivation, judgement or actions
of an entrepreneur in deciding to pursue an entrepreneurial opportunity, when and how to create a new
enterprise, and what expected goals or outcomes to target.


2. Second Study by Welter (2011), examines the contexts in which entrepreneurship take place and
defines context as the ‘circumstances, conditions, situations, or environments that are external to the
respective phenomenon and enable or constrain it’.
• According to Welter, context matters because it affects entrepreneurial and innovative behavior by
providing a combination of entrepreneurial opportunities, challenges and risks to individual
entrepreneurs.
• This means that context can either be an asset (enabling individuals to identify and pursue
entrepreneurial and innovative opportunities) or a liability (posing challenges and risks to
entrepreneurship and innovation).


Second Study by Welter (2011), Welter distinguishes between the ‘where’
and ‘when’ dimensions of context. ‘
• Where’ signifies the place of an entrepreneur, enterprise or innovation (e.g.
country, political system, local neighborhood), while,
• ‘when’ signifies temporal and historical contexts (e.g. historical inﬂuences
on the nature and extent of an enterprise and changes over time).
3.1: Models for Analyzing Context in Entrepreneurship and Innovation
• The third and fourth studies examine how context affects entrepreneurial innovation
through influences on the entry and post-entry behaviors of entrepreneurs.
3. Autio, Kenney, Mustar, Siegel, and Wright (2014) argue that the effects of context on
entrepreneurs and entrepreneurial behavior in turn determine the types of innovation the
entrepreneur undertakes and/or the performance of the enterprise created.
• They also examined technology context as distinctive to those mentioned earlier.
4. Finally, according to Garud, Gehman and Giuliani (2014), context can be used to
identify and explain the conditions and possibilities for undertaking entrepreneurial
innovations.
• Here an entrepreneurial innovation can be a new enterprise, a new or upgraded
product or service, a new approach to achieving the survival or growth of an
enterprise.
• These studies suggest that some features of a given context represent entrepreneurial
opportunities that are awaiting discovery.
• Entry behavior then includes discovering and pursuing the opportunity and
choosing a particular type of new venture to create.
• Once the new enterprise is operating, context can affect the outcomes (success or
failure) by opening up additional opportunities and/or posing challenges and risks.
• Here post-entry behavior includes the strategic choices made by the entrepreneur,
such as whether to undertake other types of innovation and/or expand the size of
the business.
SECTION 3.1 DIMENSIONS OF CONTEXTS IN ENTREPRENEURSHIP
AND INNOVATION
3.2: Dimensions of Contexts and Contextual Influences on

Entrepreneurship and Innovation
This section provides a detailed description of each type of context
identified by the four studies reviewed in section 1, and introduces
illustrative examples of the contextual influences on entrepreneurship and/or
innovation.
AND INNOVATION
3.2: Dimensions of Contexts and Contextual Influences on Entrepreneurship and Innovation
• Temporal context: This concerns the effects of time and history on entrepreneurial behavior
and innovation. To understand the role of temporal context, look for changes that have occurred
in an enterprise over time, the reasons for the changes and the associated effects on the
enterprise. For example, consider the stages of an enterprise life-cycle described in Reading 2.5
(Block 2). As an enterprise evolves from start-up, establishment and growth, existing sources of
financing may no longer be accessible and the entrepreneur may need a new source of venture
financing. There may also be changes in ownership and governance of the enterprise, which
can affect the way decisions are made in the enterprise
AND INNOVATION
• Temporal (Time-based) context: Changing regulations and market conditions require
entrepreneurs to adapt what they do to be able to succeed. It is important to recognize that not
all entrepreneurs wait for changes to occur before taking actions. Research shows that the
actions of some entrepreneurs can also change the temporal content of their enterprises (Autio
et al., 2014).
For example, the development of digital platforms by some entrepreneurs causes other small
enterprises to consider using such platforms to manage different parts of their operations
(Ngoasong, 2015).
AND INNOVATION
• Spatial or geographic context: This dimension highlights the role of geography on entrepreneurial
behavior and innovation. Geography has two components.
The first is the location of an enterprise in communities, neighborhoods, regions (e.g. rural vs. urban),
nations or global reach. Individuals have to make choices about where to set up a new enterprise and this
depends on the attractiveness of the location (e.g. the presence of key stakeholders such as customers,
partners and suppliers) and access to resources (e.g. financing and government support).
Some countries are well placed geographically and thus, benefit from the advantages that come from their
location.
Other countries are located in less attractive regions which deprive them of key resources, factors of
production or international markets.
AND INNOVATION
3.2: Dimensions of Contexts and Contextual Influences on Entrepreneurship and
Innovation
• Spatial or geographic context: This dimension highlights the role of geography on
entrepreneurial behavior and innovation. Geography has two components.
 The second component of the geographic context is the localization or concentration of
favorable regulations, laws and networks that support and encourage entrepreneurship
and innovation.
For example, the European Union supports cross-cultural learning, trade, outsourcing and
collaborative ventures among entrepreneurs across member countries.
AND INNOVATION
Innovation
• Spatial or geographic context: Similarly, the creation of industry

clusters, such as Silicon Valley in the USA and One Nucleus
(biotechnology cluster) in the UK reduces the physical distance between
an enterprise and its network of partners and helps entrepreneurs to make
maximum use of networking in creating and operating their enterprises.
AND INNOVATION
• Institutional context: This refers to the formal and informal political, economic, legal and socio-
cultural rules that govern the conduct of people in a society (North, 1990).
Formal rules are political and economy-related rules which create or restrict opportunities for
entrepreneurship and innovation.
A formal institution can be an organization, such as government ministries, regulatory bodies and
local government offices that develop and/or implement policies.
Formal institutions can also take the form of laws and regulations for market entry and exit,
intellectual property rights, employment, competition, rules encouraging/restricting access to
government support.
AND INNOVATION
• Institutional context: Informal rules tend to operate through established social norms and
perceptions of legitimacy and social desirability which include the norms and attitudes of a
society, influence opportunity recognition of (potential) entrepreneurs as well as opportunity
exploitation and access to resources.
For example, although some countries have equal laws for both men and women, research suggests
that men tend to have more preferences than women due to societal perceptions of women as
housewives (Welter, 2011).
Entrepreneurs need to be aware of these different components of an institution to be able to make
decisions that enhance their chances of success.
AND INNOVATION
• Industry and technology context:

 Industry context includes industry sectors and industry structures and affects the scope for
entrepreneurial entry, the nature of entrepreneurial activities and the strategies that entrepreneurs
adopt to sequence their entry into industries and markets.
• Knowing when to enter an industry can affect new venture survival and success.
For example, Garud, Gehman and Giuliani (2014) show how the nature and scope of opportunities in
the software industry are very different from those in the pharmaceutical industry. Software developers
believe that the number of transistors on a silicon wafer is expected to double every 18 months and this
is what guides the sequencing of their activities.
AND INNOVATION
• Industry and technology context: In contrast, the pharmaceutical industry focuses on the
Food and Drug Authority’s regulatory requirements when producing and commercializing
pharmaceutical products.
 Technology context is the architectural attributes of the technology around which the
entrepreneurial action takes place (Autio et al., 2014).
• Reading 3.3 elaborates the technology context in greater detail focusing on how developments
in information and communication technology has created opportunities for the creation of
digital enterprises.
AND INNOVATION
Innovation
• Social context: The immediate social setting in which a person (or people) live, where
an enterprise is created and operates or where an innovation takes place. A social
context can be networks in entrepreneurship and innovation.
• Networks consist of relationships that members within a given society or community
have developed over time and which guide relationships among and between people.
Industry clusters, industry parks and industry associations are examples of formal
networks that are regulated by governments.
AND INNOVATION
Innovation
• Social context: Enterprises within these networks benefit from sharing facilities and
infrastructure that support operations, interactions that facilitate organizational learning
and collaborative activities (e.g. between universities, research centers and local industries)
that enable the development of innovations and new venture creation.
• Another example of networks are community associations in which people from given
communities or ethnic groups voluntarily come together to mobilize resources to develop
their home towns or local communities.
AND INNOVATION

Innovation
• Social context: A third category of networks is household and family networks, which
influence an individual’s ability to identify and pursue entrepreneurial opportunities.
• A good illustration of this is family businesses in which family members can leverage
resources to identify and pursue a range of entrepreneurial opportunities. Entrepreneurs can
use their membership in the three categories of networks to access start-up or working capital
and information about potential clients for their enterprises (e.g. Ngoasong and Kimbu, 2016).
AND INNOVATION
• Organizational context: This dimension captures the culture, practices, knowledge and skills
within an organization and how each of these affects the entrepreneurial innovation of the
owners, managers and/or employees and their working relationship with the rest of society (e.g.
Autio et al., 2014).
• The focus here is on organization, ownership and governance. Different organizations have
different objectives, resources and capabilities, which have implications for the nature of
entrepreneurial and innovative activities.
• For example, given the social mission of social enterprises, their ownership and governance may
prevent venture capital companies from investing.
AND INNOVATION
• Organizational context: In terms of ownership, private and listed corporations (including initial
public offerings), family and non-family firms, venture capital (VC) or private equity ownership,
non-VC or private equity ownership, and single and group ownership structures are all distinct.
• There are also variations in ownership structures within each of these categories. The choice of
ownership affects the ways in which the enterprise is structured and governed.
For example, an enterprise that is founded by two unrelated individuals (co-founders) may approach
succession decisions differently compared to a family business. Similarly, as an organization evolves,
different demands arise regarding the nature of governance of the venture and, in particular, the role
and composition of the board of directors.
AND INNOVATION
Summary
• This reading described meaning, dimensions and importance of contexts in entrepreneurship and
innovation.
• This framework shows how context affects entrepreneurship/innovation through contextual
influences on entrepreneurs and the enterprise they create.
• Analyzing the effects of contexts on an entrepreneur or an enterprise, requires considering all the
various dimensions of context and contextual influences.
• The reading also enables you to analyze the contextual influences of a specific dimension of
context on entrepreneurship and/or innovation.
AND INNOVATION
• References
• Autio, E., Kenney, M., Mustar, P., Siegel, D. and Wright, M. (2014) ‘Entrepreneurial innovation: the importance of context’, Research Policy, vol.
43, no. 7, pp. 1097–1108.
• Garud, R., Gehman, J. and Giuliani, A.P. (2014) ‘Contextualizing entrepreneurial innovation: a narrative perspective’, Research Policy, vol. 43,
no. 7, pp. 1177–88.
• Ngoasong, M.Z. (2015) ‘Digital entrepreneurship in emerging economies: the role of ICTs and local context’, 42nd AIB-UKI Conference, 16–18
April 2015, Manchester Metropolitan University, UK .
• Ngoasong, M.Z. and Kimbu, A.N. (2016) ‘Informal microfinance institutions and development-led tourism entrepreneurship’, Tourism
Management, no. 52, pp. 430–39.
• North, D.C. (1990) Institutions, Institutional Change and Economic Performance, Cambridge, Cambridge University Press.
• Welter, F. (2011) ‘Contextualizing entrepreneurship: conceptual challenges and ways forward’, Entrepreneurship: Theory and Practice, vol. 35,
no. 1, pp. 165–84.
• Zahra, S.A., Wright, M. and Abdelgawad, S.G. (2014) ‘Contextualization and the advancement of entrepreneurship research’, International Small
Business Journal, vol. 32, no. 5, pp. 479–500.

B205B Block 03 Week 01

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ARAB OPEN UNIVERSITY- FACULTY OF BUSINESS STUDIES – OPEN UNIVERSITY

ARAB OPEN UNIVERSITY – FACULTY OF BUSINESS

B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

Introduction & Review

4 B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

5 B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

3.1: Models for analyzing context in entrepreneurship and innovation

B205B - EXPLORING INNOVATION & ENTREPRENEURSHIP

3.1: Models for analyzing context in entrepreneurship and innovation

3.1: Models for Analyzing Context in Entrepreneurship and Innovation

3.1: Models for analyzing context in entrepreneurship and innovation

3.1: Models for analyzing context in entrepreneurship and innovation

3.2: Dimensions of Contexts and Contextual Influences on

• Spatial or geographic context: Similarly, the creation of industry

• Industry and technology context:

3.2: Dimensions of Contexts and Contextual Influences on Entrepreneurship and

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