ARAB OPEN UNIVERSITY- FACULTY OF BUSINESS STUDIES – B205B

ARAB OPEN UNIVERSITY – FACULTY OF BUSINESS

B205B EXPLORING INNOVATION & ENTREPRENEURSHIP
BLOCK 03 –CONTEXT & VARIETY
SECTION 3.3
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Introduction
 Advances in the development of information and communication technologies (ICTs) is transforming
business practices and creating opportunities for new types of entrepreneurial activities in emerging
markets.
 One such type of entrepreneurial activity is digital entrepreneurship.
 In this reading, we first define digital entrepreneurship and explain how it is different from traditional
entrepreneurship.
 Then we use practical examples to explain why and how traditional and digital enterprises adopt and
use different components of ICTs.
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What is digital entrepreneurship?

 Digital entrepreneurship is the practice of pursuing new venture opportunities presented by
new media and internet technologies (Davidson and Vaast, 2010).
 It is similar to traditional entrepreneurship in that it consists of identifying and pursuing
entrepreneurial opportunities, creating a new enterprise and generating a financial and/or
social return (Davidson and Vaast, 2010).
 The main difference stems from the fact that in digital entrepreneurship ‘some or all of the
entrepreneurial venture takes place digitally instead of in more traditional formats’ (Hair,
Wetsch, Hull, Perotti and Hung, 2012).
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What is digital entrepreneurship?
 The extent to which an enterprise may be considered as pursuing digital entrepreneurship
depends on the degree to which its key functions – production, marketing, distribution
and stakeholder management – take place on digital platforms (Hair et al., 2012).
 This dependence on digital platforms is what makes digital entrepreneurship unique from
all other types of enterprise. This suggests that digital businesses face unique challenges
and opportunities with mode of entry, methods of producing and delivering
products/services, capturing payments/revenues, and managing stakeholder relationships.
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 What is digital entrepreneurship?

The following illustrates the distinctiveness of digital entrepreneurship, and provides examples of the
types of enterprises that can be classified under each of the three categories of digital enterprises.
• A. Traditional small enterprises that do not rely on digital technology
• Small enterprises whose main activities do not use digital technology can be seen as undertaking
traditional entrepreneurship.
 A study by Kyobe (2004) surveyed 99 small businesses in South Africa to understand how and why they
use information and communication technologies (ICTs). Ten of the managers said they did not use
computer systems at all while a few managers said they made very limited use of ICTs.
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 What is digital entrepreneurship?
• A. Traditional small enterprises that do not rely on digital technology
 For example, travel firms that used telephones to make bookings and reservations for clients found
it a very slow and costly process.
 Medical consultants who used old computers and keep patient records on manually maintained
cards found decision-making slow and complex. Small motor spare part shops and car dealers
possessed database packages, but could not develop even simple databases for their parts, while
advanced payments were carried out using simple electronic calculators.

These are examples of enterprises whose core activities do not rely on digital technology and
cannot be considered as pursing digital entrepreneurship.

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 What is digital entrepreneurship?
• B. Adopting and using digital technology to improve performance
 Advances in ICTs have caused many traditional enterprises to embrace digital technology. In
the Kyobe (2004) study mentioned earlier, some respondents reported that adopting and using
ICTs to organize more of their functions and networks with suppliers, financiers and customers
enabled improvements to be made in customer services and costs reductions.
 For example, managers of accounting and auditing firms reported that they used IT systems to
generate financial and management information, which they provide to customers in time.

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 What is digital entrepreneurship?

• B. Adopting and using digital technology to improve performance
 Managers of hardware stores said they use database systems that allow users to access
information on parts and this enabled the stores to process orders in time.
 Managers of travel agencies said they use automated booking and reservation systems to
advice clients on the possibility of cheaper fares.
These enterprises are moving towards digital entrepreneurship in the sense that they are adopting and
using digital technology to innovate their operations and thereby reducing costs, improving internal
operations and customer services (Davidson and Vaast, 2010).
However, the managers refuse to describe their business as digital businesses (Kyobe, 2004).
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 What is digital entrepreneurship?

• C. Digital enterprises
Digital enterprises go beyond simply adopting and using ICT tools to improve isolated
functions.
They use digital technology as the infrastructure to support their entire operations as well
as to manage stakeholder interactions. It is nearly impossible to disentangle business and
social processes from their underlying IT infrastructures.

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What is digital entrepreneurship?
• C. Digital enterprises
Information and communication technologies (ICTs), and especially the internet provide ‘opportunity to gain more
efficient access to more, and more geographically distant, prospective customers and other potential stakeholders than
is possible in an offline environment’ (Reuber and Fischer, 2011).
Digital enterprises rely on the ICT infrastructure to manage the entire value chain of their activities.
One of the major challenges facing digital enterprises when attempting to manage the entire value chain of their
activities is logistics and transportation challenges because they increase the complexity of the value chain (Cho,
Ozment and Sink, 2008).
This complexity increases because although some digital enterprises are based in a single country, their online
presence gives them a global reach where they can easily access a wide range of customers and partners.

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 What is digital entrepreneurship?

• The following table (Table 3.1) provides examples of enterprises that can be considered
as examples of digital enterprises.
• All the enterprises were founded after 2000 and the founders give credit to the growth in
the information and communication technologies for their successful start-up and
establishment

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• Table 3.1 Examples of digital enterprises

Company name Nature of digital enterprise

Produces an online accounting software system designed to connect

business owners, staff, book-keepers, accountants, and other financial
advisers to the same financial system over the Internet, employing the
Xeroa software as a service (SaaS) model. The product is sold to small and
medium-sized businesses in New Zealand, the United Kingdom, and
Australia. The company has partnerships with banks to ensure that
payments are managed online.

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Table 3.1 Examples of digital enterprises

Company name Nature of digital enterprise

Tomizone Offers an easy, low-cost broadband Internet connection with wi-fi (the
international standard for wireless broadband), integrated into an easy-to-use,
world-class management platform. The company has developed several
valuable international partnerships that enabled them to work on distribution of
its hotspot software inside a range of products produced by partners. The
company is now an international company with seven employees at its
headquarters in New Zealand and has offices and partners in Australia, Fiji and
India.

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Table 3.1 Examples of digital enterprises

Company name Nature of digital enterprise

SimWorksa: A privately held company specializing in the development of

innovative mobile antivirus applications. SimWorks signed a deal
with the Australian mobile operator Optus, and they began work
on the development of a personalized mobile application.

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What is digital entrepreneurship?

• Conclusion
In this reading we defined digital entrepreneurship.
We looked at a number of cases to explain how it is different from traditional
entrepreneurship and how entrepreneurs and owner-managers of small enterprises adopt and
use of different components of ICTs to improve the performance of their enterprises.
Given the advances in the development of information and communication technologies,
transforming business practices using ICTs is seen as innovative and entrepreneurial in
today’s society.

ARAB OPEN UNIVERSITY- FACULTY OF BUSINESS STUDIES – B205B