Chapter 2
The entrepreneurial
culture
OBJECTIVES
studying this chapter you
will be able to:
•
Recognize the
versatility of the concept of entrepreneurial culture.
•
Characterize the
different types of entrepreneurial cultures in the context of their ecosystems.
•
Recognize that
entrepreneurial culture is molded within entrepreneurship, throughout its
course from the pre-launch stage to the established stages of the business.
•
Acknowledge that an
entrepreneurial culture is shaped and affected by different internal and
external business factors.
•
Describe the different
facets through which entrepreneurial culture may present itself (e.g., the
entrepreneur's behavior, the business idea, the business plan, the business
atmosphere, the team's creativity, among others).
•
Identify the most
important factors in an entrepreneurial culture that lead to accomplishing a
business's goals, and target a business toward adopting the cultural factors
that are relevant to it.
•
Implement the most
relevant factors to the business in order to stimulate an entrepreneurial
culture in the business.
WHAT IS ENTREPRENEURIAL
CULTURE?
Entrepreneurial culture
is a multifaceted concept. Broadly speaking, rather than a job or a •Ikhftiiood, entrepreneurship is a mindset and a lifestyle, and it
is much more than just including we ire entrepreneurs' in a mission
statement.The entrepreneurial culture is an inherent entity aftE'ei within and
directly affected by the environment in which an entrepreneurial venture darts.
It is based on values and norms that guide the general activities and processes
of the venture, .«>d :t activates the development of new,
entrepreneurial-oriented values and norms for use in ieta.1 same
venture. As such, an entrepreneurial culture enables the business to be
dynamic and »ttaf •lar-.e bv inventing and reinventing its internal activities
and processes.
THE RESOURCE-BASED
PERSPECTIVE
In addition to the more
obvious effects, such as sociocultural environment, the presence of potential
entrepreneurs, or the stage of development of the local economy, the
development of an entrepreneurial culture is stimulated by several main sources
(Figure 2.1): the industry's innovation culture, in terms of level of
technological innovation, innovation spirit and tolerance toward innovative
processes; the founder's spirit, including his or her drive to create,
innovate, take risks; employees' innovative and entrepreneurial spirit — it is very difficult to manage a team toward innovation,
creativity or opportunity identification when the team lacks entrepreneurial
spirit. Both country and global cultures have significant, independent impacts
on the business culture, in terms of inventions, new development and
encouragement to develop products or services to satisfy current or potential
needs; the local market's culture, which may differ from the country's or
industry's culture, refers to the customers' willingness and preparedness to
purchase innovation and to the suppliers' willingness to supply it.
Researchers of
entrepreneurship (Kirzner 1997; Acs and Audretsch 2003) argue that an
entrepreneurial culture develops when there is an absence or lack of knowledge
and information in the environment on specific topics, there is room in the
market economy for the growth or establishment of businesses, and there is
demand for certain services and products. Such a phenomenon of environmental
disequilibrium is conducive to the development of an entrepreneurial culture.
One of the main signs of an entrepreneurial culture is the proliferation of
startups in the business environment.
From a microperspective,
the cultural characteristics of entrepreneurs that lead to entrepreneurial
'venture-ism', creativity, risk-taking, and independence are crucial in
determining the entrepreneurial culture within the local environment.The
entrepreneur's talents, accumulated and specific characteristics, which
Leibenstein (1968) calls 'input-completing capacity', ir;;.r:_:u:es another
layer in the development of the entrepreneurial culture. The entrepreneur
iiipo-'t-j tnis capacity, extends the production function, and thus broadens
the existing set of inputs. licit ; resence of spinoffs, different
entrepreneurial projects, innovations and inventions developed inn ventures,
represent, at least in part, the role that entrepreneurs play in the
entrepreneurial ttiare and its outcomes.
In addition to the
surrounding entrepreneurial culture, each business venture also creates, or
<:.:>;. its own culture. This culture is affected not only by the
particular characteristics of the 'ifflffltsririDreneur, but by the stage of
the business: at the launching stage, it is characterized by a vague, lev
icicused, restless and creative-innovative energy, while in the later stages of
development it is laliaracterized by an emphasis on maintenance and quality,
although at these stages as well, limmovative ideas are examined and
implemented if considered worthy (Hofstede 1980a, b, c, 5a. b, 1984, 2001;
Shane 1995; Rodriguez-Pose 1999).
te can distinguish four
main types of entrepreneurial culture — all-inclusive,
stable and balanced, ci. and width-wise — each of which highlights
different characteristics that produce different es in the business and in the
entrepreneurs' daily lifestyle
.1-I-inclusive
entrepreneurial culture. An all-inclusive entrepreneurial culture is a way of life:
the individual's entrepreneurial characteristics are adapted and applied to all
spheres of life. In tils context, entrepreneurship is an ongoing adventure or
exploitation, and the individual utilizes such major personal characteristics
as creativity, innovation, risk-taking, autonomy and proactivity in making
decisions and in carrying them out, not only in business-related matters but
also in personal and family-related issues, such as choice of residence,
children's schools, use of leisure time, etc.
S'jble and balanced
entrepreneurial culture. Stable and balanced entrepreneurial culture addresses lie
individual entrepreneurs' self- awareness of the areas in which they are
qualified or not qualified, to use their entrepreneurial characteristics for
their venture; it is thus called the ~r.atomy of an entrepreneur. In
those areas in which entrepreneurs are aware of their limitations, nid perceive
themselves as being non- or underqualified, or simply not suited (e.g. ,
impatience ivitli administrative tasks; non -conformity), they hire other
people to carry out the tasks for "•vhich
they are unfit. The consequential result of hiring persons that possess the
complementary personal qualifications is a balanced and stable culture. When
entrepreneurs are unaware of their weaknesses, and how these negatively affect
their business's functioning, an unsteady, unpredictable culture may grow.
Pi^rional
entrepreneurship. Building opportunities from ideas typifies entrepreneurship
practices that evolve into a rational entrepreneurial culture; such a culture
encourages careful assessments of each innovative idea, sometimes with the
assistance of professionals and experts, in order to estimate its application
to the market. As assessments of the feasibility jt the ideas are obtained, the
rational-entrepreneurial culture encourages the people involved in the business
of creating opportunities to implement their innovative ideas through
exploitation. The 'spark' for many entrepreneurs, however, is seeing an
opportunity that does not yet exist. By laying the foundation for the
opportunity's feasibility, a rational-entrepreneurial culture may advance the
business to the achievement of its goals (Boyd and \bzikis 1994).
~>'~idth-wise
entrepreneurial culture. A width-wise entrepreneurial culture is typified by the
entrepreneur's broader vision, and by 'thinking big'; the business or the
entrepreneurial actions are not limited to a single place or product. In order
to identify potential oppor-raruties, the entrepreneurs must be engaged in an
ongoing process of learning about the local and global markets, tastes and new
developments; they have to use multiple and varied means to acquire this
information, such as the internet, attending social and/or professional
conferences, acquiring relevant and useful networks, and more. Such
entrepreneurs may seem constantly agitated and restless in their ongoing search
for relevant information and knowledge. For most of the entrepreneurs who live
in such an entrepreneurial culture, 'climbing the mountain of success' may
appear to be only a stepping stone to reaching higher summits (Stewart and Roth
2001).
The business's
entrepreneurial culture must be led, nurtured, constantly monitored and
adjusted. Much like preparing a culinary dish, establishing an entrepreneurial
culture requires a combination of die right ingredients and the right pace, to
ensure that it develops and manifests itself in the business as expected and
supports the business and entrepreneur's goals. Identifying the entrepreneurial
culture that is best suited to one's intentions is thus crucial for the
business's operation.
PROCESSES THAT STRUCTURE
THE ENTREPRENEURIAL CULTURE
In a survey of seventy
leading entrepreneurs from fortv-eight countries around the world conducted
specifically for this book, the respondents vrere asked to rank me most
important factors in die process that structures their entrepreneurial culture.
As seen in Figure 2.2, identification of opportunities, differentiation,
creative teams, stimulating partners and role models were considered the
most important factors for a vivid, entrepreneurial culture.
Researchers have begun to
stress that the identification of opportunities can lead to a
competitive advantage; die individual entrepreneur's ability to recognize
opportunities is thus a highly beneficial aptitude. Most opportunities do not
appear 'out of the blue', but result from the entrepreneur's •
D Opportunity
exploitation E3 Flexible management 9 Stimulating partners 0 Creative environment
D Vision
IK Creative team
£3 Role models
D Differentiation 0
Creative partners • The best mentor
Figure 2.2 Ranking of the most
important factors in an entrepreneurial culture
to possibilities and
knowledge of how to exploit them, and from fine-tuning the sms needed to identify potential opportunities at an early stage.
The types of exploitable
"unities and the mechanisms available to
look for them delineate the character of the rreneurial culture; for example,
exploiting financial opportunities will generally develop Kit i rniance-oriented entrepreneurial culture.
The exploitation of opportunities to introduce zraducts or develop
new and different products and services will be discussed in the section with
the marketing-related aspects of the entrepreneurial culture, etc.
This also play a major role in shaping the structure and character
of the entrepreneurial .ati'.T.z'e; however, since visions are usually
reflections of dreams, hopes or desires, they are often ifiiinc undefined, and
do not necessarily match the presently accessible or potentially available
«cs«c urces. The vision of a venture should be clearly defined by developing a mission
statement; the fmrpcse of such a document is to put the spotlight on how
the business should be established and •tie,''- order to realize a
profit or a goal. Mission statements set practical goals and these underlie
like }^::ness plan and the practical action plans. The business
culture of the firm is derived from the miki'or: while the behavior, daily
conduct and norms derive from the action plans.
SUMMARY
Entrepreneurial culture
evolves from the influence of several main sources: the sociocultural iewcr
mmeiit, the stage of development of the local economy and the personal traits
of the majority W ;:= entrepreneurs. Each type of entrepreneurial culture
reflects one of the many possible iCBCG.~:riations of its sources. An
entrepreneurial culture in which the business economy is open auc iranaged
by people who are overall more creative and risk-taking would be considered a •MC-jre and developed one, while one operating under similar
economic and resource conditions, llbioit managed by people who are overall
less creative and less risk-taking might be considered more "jpiAT-r.ed'
and less creative. Most important, the entrepreneurial culture is critical to
the tdirs c-' 'i'Dment and evolution of the businesses operating within it, and
is reflected throughout the BnrrerDreneurial process. The more dominant the
entrepreneurial culture, the more transparent iiits -i_":uence, both
within and outside the businesses, and in most of the businesses' processes.
CASE STUDY 2.1 Leonidas, Israel
Shlomi and Osnat Zingler,
Israeli franchisors of Leonidas Belgian Chocolates, opened their chocolaterie
in Israel in 2005. They hoped to break into the Israeli market with a very
up-market, fine-quality product - high-priced artisan chocolates, produced in
accordance with the demanding quality standards of the Leonidas head company in
Belgium. To penetrate the market with such a luxury product, at a time when the
Israeli economy was still coming out of a minor economic recession, was a very
ambitious goal, and the potential clients' anticipation of 'something new' in
the realm of chocolates was still unclear. A survey made prior to launching
Leonidas, Israel produced mixed results regarding the maturity level of
Israelis vis-a-vis their lifestyle as a whole and specifically with regard to
fine chocolates. Some respondents stated that they would be willing to pay for
high-quality chocolates, while others were unsure or were unfamiliar with
Leonidas's reputation; and some were unwilling to pay 'high prices' for an
unnecessary product such as fine chocolate. However, a small but nevertheless
sufficiently 'arge proportion of the respondents were keen on being able to
further satisfy their desire for luxury items, and quality chocolate was viewed
as a desirable luxury item.
The Zinglers followed all
of the predetermined steps of their very structured business plan, but they
remained concerned with how to ascertain their Israeli clients' tastes, and
especially with how to differentiate themselves from the other artisan chocolateries
that had begun to spring up in well-to-do Israeli cities. Follow-up surveys
ard in-depth individual interviews of the potential clientele indicated that
there was an incipient tier-, a no: for products that are innovative rather
than 'more of the same'; this clientele wanted things that were pleasurable,
and that emphasized their high lifestyle. At this point, the Zingiers's
creative thinking led them to change their mission statement from Ho sell
high-quality chocolaies' :o 'to sell fine experiences', thus transforming their
merchandise from 'a product' to ''sens^a anticipation'. They believed that this
would differentiate them from other chocolateries.
The Zinglers decided to
establish their choco:aiere ir a prosperous suburb of Tel Aviv,
and to furnish it, with attractive elegance, around themes of sensual
experiences. This was very risky, as the rental cost in a high-market location,
as well as the cost of the planned decor, was very high. The Zinglers were also
unsure as to whether their venture would succeed at all, and if so, how
successful it might be. Osnat - who at the age of tv.eive had disobeyed her
parents and secretly sold her own handicrafts - decided at this point that they
should take a chance '. . . although Leonidas seemed too big for us: a
hundred-year-o'd tradition of chocolate production, with more than ninety types
of chocolates and a large number of other complementary products'. In addition,
according to Osnat's husband Shlomi, 'it's difficult to penetrate the food
market in Israel since a considerable part of the population is religiously
observant and eats only foods that have kosher approval, and we had to take
this central issue into consideration as well'.
The Zinglers decided that
differentiating themselves by the quality of their products and decor was not
enough. They decided to treat their clients as guests: 'We love to host friends
and relatives in our home, so this was very natural for us,' says Osnat.
'In Belgium, where we spent three years working in an Israeli company, we
always talked about the professional and personal service suppliers provided.
We felt that we had to adopt this way of doing things, to bring it here,'
reveals Shlomi. 'Our main guideline,' adds Osnat, 'is to always treat our
clients as very welcome guests.'
NOTE
1 Hofstede (2001)
measured an aspect of entrepreneurial culture- individualism versus
collectivism - in different countries and showed that entrepreneurship declines
when collectivism is emphasized. Shane (1992) related cultural norms to levels
of innovation and economic development.
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