Do entrepreneural activities lead to Georgia's economic development?

While I was discussing the relationship between entrepreneurship and economic development in my previous post, I tried to link the issue to my country’s economic stand. My country, Georgia is developing on a rapid rate. Many foreign investments have been made during last 4-5 years. Gross Domestic Product (GDP) has been increased for the previous few years. After many years of Georgia being in budget deficit, the country has a budget surplus at the present. As a student majoring in business administration, I was always interested in the mechanisms our government could use to foster economic development. Now, when I understand the significance of entrepreneurial activities in a country for its economic development, I realize that our government has been trying hardly to encourage small businesses or start-ups in the country. This conclusion can be made from the activities and programs government has been initiating and exploiting. For example, there was a huge simplification made in tax policy, by and large taxes were decreased and certain types of tax exemptions were introduced. Another important case to be mentioned is that the government introduced several competitive programs for financing subsidies, particularly in agriculture. As a result of support from the government, we have now factories that produce fruit juices from the citruses Georgia is endowed with. Despite the efforts of the government to motivate and support entrepreneurship in Georgia using various mechanisms, I believe there is lot of to be done in future.

As a result, when talking about economic development and growth of Georgian economy, I think that the idea of Growing Pains discussed by Flamholtz, E. G. (1990) can be also applied to the governmental activities. When an economy grows on a rapid rate it should have an infrastructure that will take up that growth. If a government anticipates rapid growth, then required infrastructure must be built before it is actually necessary. I think Georgia is experiencing Growing Pains if you consider the case of tourists who are interested in Georgia and want to explore it but they face difficulties due to the lack of infrastructure and communication problems still existing in the country. After all, my advice for the Georgian government would be to build requisite infrastructure before they promote or achieve goals leading to economic growth of the country.

Reference:

Flamholtz, E. G. (1990). Growing Pains: How to make transitions from an entrepreneurship to a professionally managed firm (pp. 53-72). San Francisco: Jossey-Bass Inc.

How does Entrepreneurship lead to economic development?

We all know and it is obvious that entrepreneurship is everywhere. Until now, we saw that entrepreneurship is not all about creating new companies; rather it can also be exercised in existing organizations. For this reason along with my personal interests, I became concerned with the relationship between entrepreneurship and a government. Besides, I am interested how entrepreneurial activities lead to economic development of a country.

After exploring several books, I think that entrepreneurship is directly linked to economic development of a country. To simply illustrate this, first lets look at the definition of economic development: “the institutional changes made to promote economic betterment. It is the social organizational changes made to promote growth in an economy.” (http://oregonstate.edu/instruct/anth370/gloss.html) Furthermore, economic development is “typically measured in terms of jobs and income, but it also includes improvements in human development, education, health…” (http://government.cce.cornell.edu/doc/html/MethodologyGuide_TermsUsed.htm) So, I want to emphasize on the measurement of the economic development in terms of jobs. If we look at the outcomes of entrepreneurial activities we see that as new companies are established or new products and services are offered in the market, which is the result of company expansion, more jobs are created in an economy. If it is so, job creation leads to economic development, all other things being equal. This was the simple illustration of the very deep and tough matter of discussion in the literature on entrepreneurship for the last several years.

According to Shane (2005), entrepreneurship is often perceived by policy makers as a key instrument for boosting economic development. ‘To policy makers, entrepreneurship is a good solution because it provides a relatively non-controversial way to increase the proverbial pie, creating jobs and enhancing per capita income growth. Therefore government officials frequently search for mechanisms to enhance entrepreneurial activity in their regions, whether those mechanisms are tax policies, financing subsidies or other tools.’ (Shane, 2005, p.1)

Source: Global Entrepreneurship Monitor, 2003 and International Monetary Fund

Accordingly, from this figure we see that there is a positive relationship between entrepreneurship and economic growth at the national level, which means that as entrepreneurial activities grow in a country, average GDP growth raises in that country. Besides, the most important is that the figure below shows that the benefits of entrepreneurship grow over time:

Source:http://www.kc.frb.org/regionalaffairs/speeches/2006Henderson_IowaBankers.pdf

And the last figure shows the significance of entrepreneurial developments not only for home countries but for the neighboring countries as well.

Source: http://www.kc.frb.org/regionalaffairs/speeches/2006Henderson_IowaBankers.pdf

To summarize, my strong opinion about the topic is that entrepreneurship constitutes largely to the economic development of countries applying it. Furthermore, it has positive effects also on the neighboring countries. It is evident that there is a positive relationship between entrepreneurial activities and GDP growth, which in long run leads to overall economic well-being of a country. These all, emphasizes and reflects the huge impact of entrepreneurship on the economic development of a country or a region.

References:
Shane, S. (2005). Economic Development through Entrepreneurship. Great Britain: MPG Books Ltd, Bodmin, Cornwall

Henderson J. (2006, September 19). Building Regional Economies through Entrepreneurship. Retrieved 2008-09-26 from http://www.kc.frb.org/regionalaffairs/speeches/2006Henderson_IowaBankers.pdf

Oregon State University (2008, April 24). Definitions of Anthropological Terms. Retrieved
2008-09-26 from http://oregonstate.edu/instruct/anth370/gloss.html

Cornell University (2006). Terms Used. Retrieved 2008-09-26 from
http://government.cce.cornell.edu/doc/html/MethodologyGuide_TermsUsed.htm

Reflection on Module Literature...

I would like to say that the piece that stuck me the most is the six thinking hats technique. It captured my interest at the lecture and made me go through the book of Edward De Bono (1999), Six Thinking Hats. I found it very interesting how parallel thinking of the Six Hats method works. I strongly agree that it is very simple concept which allows a thinker to do one thing at a time. Thus, it allows the brain to maximize its sensitivity in different directions at different times. Based on my experience, I agree with the author that it is not possible to have that maximum sensitization in different directions all at the same time. For that reason, Six Hats method provides convenience, which is the main value of the concept. Author mainly introduces the concept as an alternative to the argument system and puts emphasis on “what can be” rather than “what is”. If I relate author’s words with my personal experience, I have always seen if two people disagree, there is an argument in which each tries to prove the other party wrong. But as for the parallel thinking, which struck me the most, both views are put down in parallel. And then, in case of essentiality to choose between the contradictory positions, an attempt to choose is made at that point. Most importantly, if a choice cannot be made, then the design has to reflect both possibilities. Furthermore, I want to emphasize on the effectiveness of Six Hat technique in dealing with the “showing off” issue, which is some people enjoy argument because they can show off how clever they are, but remember, in a nonconstructive manner. While using the Six Hats method, thinker shows off by performing well as a thinker and significantly, this type of showing off is constructive. The another reason this creativity technique struck me the most is that it gets people to “play the game”, which is a very powerful form of changing behavior and more effective and quick than methods that set out to change personalities. Even though I agree with the author on the effectiveness and significance of the method, I think that it consumes some time before team members learn “the rules of the game”. Consequently, it made me think about it would be useful if author gave instructions how to “play the game”. At last, Six Hats technique made me think about my competence and possibilities in fostering creativity at my future work place with the help of the technique.

The next topic I want to discuss is The Weird Rules of Creativity by Robert I. Sutton. This article made a big influence on my understanding of creativity. I totally agree with him when telling that ideas for managing creativity and innovation are nearly all 180 degrees different from standard management practice. That’s why, what he discovered and shares with us seems weird to most of the readers. Despite this, I agree with him that in order to employ creativity, we should take our past successes and forget them, we should ignore people who have solved the exact problem we face, and we should think of some impractical things to do and plan to do them. Based on my personal experience, I found his “rules” useful. When I recall the hiring process at my previous work, I understand now I could use job interviews to get new ideas not only to screen candidates. At the same time, it would have been more efficient and effective to hire someone who made me uncomfortable according to the author. I agree on that since we would “fight” for ideas and have a better result than with someone who would obey me and support my ideas. Another important issue I agree with the article is to reward success and failure, but punish inaction. We all are human-beings and make mistakes. If we punish mistakes then people do not get motivated to try things that was not tried by some one else before and thus, eliminates creativity. But, important is we should learn on our mistakes and not make same mistake in future. Even though I agree on the most of the weird rules presented by the author, I doubt it costs a lot and many companies can not afford it. Those rules are well-shaped for large organizations and do not fit small organizations if we look at its possible costs. As we know, creativity is an activity with high variance. So, disagreement comes here when deciding how big a company should be to afford creativity. To sum up, this article made me think about weird ideas that work. Before reading this article, I would not listen to the person talking about impractical things he/she plans to do and simply, would disregard them. But now, the article made me think of some of such things myself.

Finally, I want to summarize the case study What a Star - What a Jerk. This case study gave me great insight how to deal with an employee who is nasty, hard-hearted and at the same time, top performer. The most amazing is the fact that I found advices given by four commentators to be different from each other. Consequently, this made me think about how various and diverse can be our answer to one and the same problem identified. Afterwards, this enforces the suggestions of finding different alternatives, considering many ideas and approaches before we come to the conclusion, which may affect strongly on the creativity and efficiency of an organization.


References:
Edward De Bono (1999). Six Thinking Hats. Unites States of America: Little, Brown and
Company.
Sutton. R. I. (2001). The Weird Rules of Creativity. Harvard Business Review, 94-103.
Cliffe S. (2001). What a Star-What a Jerk. HRB Case Study, 37-48.
Gustavsson V. (2008). Lecture September 8th: Organizational Creativity. Retrieved 2008-
09-08, from Jonkoping International Business School´s website :
http://jibsnet.hj.se/documents/index.asp?SID=11&GID=kurs_JIBD28&PID=3768451492693623091&Pagenr=2

Promoting Creativity at my start-up

“A product is creative when it is (a) novel and
(b) appropriate. A novel product is original not
predictable. The bigger the concept, and the
more the product stimulates further work and
ideas, the more the product is creative.”
— Sternberg & Lubart, Defying the Crowd

Nowadays, the importance of creativity has increased dramatically. The focus on customer service, competition, flatter organizational structures are among several organizational changes and developments that make creativity a valuable necessity. Company life-cycles are getting very short and one reason for that may be inability of many companies to exercise creativity and innovation, respectively. Creativity can be defined as an ´´ability to produce work which is both novel and appropriate´´. Being appropriate for the idea is very important, since if new idea is not connected to current idea and knowledge, it may be unimplementable. Understanding the creativity itself, I want to turn to boosting creativity at my start-up. First of all, I will try to hire people who have high self-efficacy, tend to be independent and self-discipline and also have willingness to overcome obstacles. Moreover, I will try to employ people with diverse expertise as it is highly conducive to creativity in an organization. I will not go with just supportive environment, but I will ´´find some happy people and get them fight´´(Sutton, 2001) because certain degree of adversity is necessary. According to A. Styhre & M.Sundgren (2005), ´´many creative ideas are born into hostile environment or at least an environment where different ideas are competing for scarce resources´´.

After I have a team of people, I will share organizational goals with them and make sure everyone is good with it. Then, as one and the most important factor in creativity, I will support group work, also encourage and value their individual contribution. It is also important for me to challenge them with the work assigned, challenge them with their ideas or their goals, and at the same time give them reasonable deadlines. Since I understand how criticism of new ideas damage creativity, I will develop an environment where new ideas do not get criticized, instead rewarded. In turn, this does not mean failures will be punished. Instead, failures will be also rewarded and that´s inaction which will be punished at my start-up. I agree with the idea that it is impossible to generate a few good ideas without also generating a lot of bad ideas. Therefore, creativity results from action. ´´Creativity is a function of the quantity of work produced´´(Sutton, 2001). My start-up will be the place where ideas are generated constantly and where the best ideas win.

Furthermore, Instead of weekly ´´report-ive´´ meetings, I will hold meeting with my people to exercise creativity techniques or idea generation techniques in order to promote the environment which in turn promotes creativity in an organization. I will unquestionably encourage divergent thinking called as ´´Thinking Outside the Box´´ at my start-up, since it allows thinkers think without boundaries and leads to creative problem solving. As for how I am going to stimulate divergent thinking, I will use impossibilities and role switching as suggested by Thompson (2003). Even though Brainstorming is criticized for its weaknesses leading to social loafing and so on, I strongly believe that brainstorming can be used as encouraging creative thinking and I will employ it in discussing certain cases. Another technique I would promote at my start-up is analogical reasoning. I mentioned above that I will strive to have people with diverse expertise, so they can freely and efficiently use practice of analogical reasoning. Analogical reasoning technique will lead to creativity, if people apply a concept or idea from their previous experience to the current company operations. Nevertheless, I expect my company to grow at a high rate and I will need more people, so ´´newcomer´´ will have great influence on the company team in that it motivates ´´old-timers´´ according to Thompson (2003). In addition, it does not matter how small my company building is at the beginning, It will have a place where employees can gather and share their ideas, thoughts and opinions. The most important above all is, I will coach my employees to make them use the techniques properly and in an efficient manner. So, free flow of communication and ideas will be placed at the top of the companies priorities.

Finally, I want to summarize with the model for management practice, leadership and creativity introduced by A. Styhre & M.Sundgren (2005) in their book Managing Creativity in Organizations. The model presents dynamics involved in managing organizational creativity. Authors emphasize the influence of leadership and management on creativity in organizations. However, the model offers new thinking in management practice to support creativity. I found it useful and I will take account the model implications, which suggest to use the concept of stabilizers and de-stabilizers. According to model, stabilizers are fixed repertoires of behavior programmes over time, while destabilizers are dynamic and unpredictable behaviors. Examples for destabilizers are informal networks, information sharing, thinking out of the box and intrinsic motivation, whereas examples for stabilizers can be management control, planning and extrinsic motivation. I want to point out that organizations have many stabilizers but more often lack proper destabilizers. So, I will apply this model to my start-up by recognizing, supporting and handling destabilizers and stabilizers in order to promote organizational creativity at my company.

References:
Styhre A., & Sundgren M. (2005). Managing Creativity in Organizations. Great Britain:
Antony Rowe Ltd, Chippenham and Eastbourne
Thompson L. (2003). Improving the creativity of organizational work groups. Academy of
Management Executive, Vol 17 No. 1
Sutton. R. I. (2001). The Weird Rules of Creativity. Harvard Business Review, 94-103.
Naiman L. (2006-07). What is Creativity? Retrieved September 15, 2008, from
http://www.creativityatwork.com/articlesContent/whatis.htm
Gustavsson V. (2008). Lecture September 8th: Organizational Creativity. Retrieved 2008-
09-08, from Jonkoping International Business School´s website :
http://jibsnet.hj.se/documents/index.asp?SID=11&GID=kurs_JIBD28&PID=3768451492693623091&Pagenr=2

Issue that struck me the most…

To further elaborate more on one of my posts called as ``What is the probability that a ´´young student´´ can become an entrepreneur?´´ , I want to talk a little bit about personality characteristics, which are more likely considered to be the part of an answer to the discussion topic.

Before coming to JIBS, attending lectures and reading recommended books, I strongly believed that by observing personality characteristics of a person would be one of the determinant whether a person will be an entrepreneur or not? I was sure about strength and implication personality characteristics had in answering to my question. But, now it appears that that´s not the whole story.

There is an interesting discussion made by Dollinger (1999) on this matter, stating that already for a long period of time, entrepreneurial research has recognized a number of personality characteristics that distinguish entrepreneurs from others. But still, even the most frequently discussed ones came out to be not a distinguishing characteristics of entrepreneurs. Finally, Dollinger (1999) says that `´ what distinguishes entrepreneurs from nonentrepreneurs is that entrepreneurs start new businesses and others do not´´. Moreover, I can say that Dollinger (1999) gives valid argument on this subject.

Dollinger, M. J. (1999) Entrepreneurship: Strategies and Resources (2ed., pp.25-40) . Upper Saddle River, NJ: Prentice Hall.

radical changes in my views on entrepreneurhip...

In my first post I have talked about if it´s easy to exercise entrepreneurship in my country Georgia and I strictly said that it is not! I also emphasized on gaining financial resources needed for entrepreneurship. But now, I have way different opinion regarding importance of financial resources for entrepreneurs to be successful in today´s hypercompetitive and uncertain markets. So, what did I learn and what do I think about this topic now?

I think that financial resources are valuable for creating businesses or initiating a new venture but they are not the most important factor constituting to future success of entrepreneurs. I learned that financial resources are not really nonsubstitutable. And this makes my argument more pervasive. Example for that maybe practice of bootstrapping. Few but still , through bootstrapping entrepreneurs succeed. They start very small and integrate their hard work and efforts with little capital. From my point of view, it´s synthesis of various traits of an entrepreneur, environmental conditions, available resources and so on, constitute to making entrepreneurs successful. By this post, I wanted to stress on shifts in my views on entrepreneurship and how is it affected as I read more articles or chapters of several books.

What is the probability that a ´´young student´´ can become an entrepreneur?

What is the probability that a ´´young student´´ can become an entrepreneur?

When everyone is speaking about entrepreneurship and roles of entrepreneur, one question came to my mind: is it possible to anticipate if a ´´young student´´ can become an entrepreneur and state what´s the probability that it will happen so?

I think it is very tough issue and does not have definite answer. Some people are discussing whether MBA students possess entrepreneurial skills and are motivated to take high risks in future. Others, talk about major characteristics of entrepreneurs as key issue in entrepreneurship. Nevertheless, no one stressed on if it’s likely to foresee a person´s entrepreneurial abilities and chances. As for me, it might be possible when it comes to persons who already have managerial position and sufficient observation can be made on his/her work history and personal traits. But when it come to ´´young student´´, with little work experience and educational history, we may not be able to anticipate his/her future entrepreneurial chances and affirm the probability, respectively.

Due to the high importance of this issue, I would like comments and further discussions.

WHAT'S ENTREPRENEURSHIP????

In my previous post, I considered entrepreneurship as creating business or initiationg a venture. But after I read some articles on entrepreneurship, I realized that etrepreneurship does have various definitions and is not solely about creating new business. Therefore, according to the lectures delivered by Jonas Dahlqvist, if you add innovation to business creation becomes entrepreneurship. So, entrepreneurship is wide and comprised of various roles of entrepreneur. According to Schumpeter, the entrepreneur is an economic agent that introduces new combinations into the economy. Which in turn is called as creative distruction and thus, it leads to economic development. At the other hand, Kizner says that entrepreneur can be a copycat or an innovator nd the important characteristic is that they “drive the market process”. So, here we see different views on the same concept called entrepreneurship.

As for me, I like when I read different views of opinion-leaders and think more broadly. I totally agree with Stevenson and Gumpert (1985) while saying that “the question for the would-be entrepreneur is: How can I make innovation, flexibility and creativity operational?” (p. 86) And then, he suggests to look at entrepreneural behaviour or process since it’s where we can find answer to that question. From my point of view, entrepreneurship is a process and every entrepreneur goes through this process by asking herself/hisself: where is the opportunity? How do I capitalize on it? What resources do I need? How do I gain control over them? What structure is best?

Finally, I am interested to search more on entrepreneurial process as involving two overlapping parts: one is discovery process and another exploitation process. Since discovery process entails initial conception and further refinement of business idea over time and exploitaion process involve the acquisition and coordination of the resources that are needed to realize the idea, as well as the identification and persuasion of would-be buyers, these two overlap at some point.

Stevenson, H.H., & Gumpert, D. E (1985). The heart of entrepreneurship. Harward Business Review.

Dahlqvist, J. (2008). Lecture August 27^th: What is entrepreneurship? Retrieved 2008-08-27, from Jonkoping International Business School’s Website: http://jibsnet.hj.se/documents/files/download/810527740/5017879242693138447/Microsoft%20PowerPoint%20-%20Opportunity.pdf