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Entrepreneurship in the Industry

  1. Industry & Technology Entrepreneurship, Technology & Industry
  2. Entrepreneurship A factor of production (alongside land, labor & capital). It is the process of setting up a business. Entrepreneurs typically create a business plan, hire labor, acquire resources and financing, and provide leadership and management for the business. Role of knowledge creation in opportunity identification by entrepreneurs Entrepreneurs are good at identifying/discovering opportunities. Opportunities are the result of purposeful investments into the creation of new knowledge and ideas through expenditures on R&D and augmentation to human capital.
  3. Why some individuals and firms are more likely to discover a given opportunity than others? • Willingness to incur risk. • Preference for autonomy and self-direction. • Access to scarce and expensive resources, such as financial capital, human capital, social capital, and experiential capital. Knowledge creation is an integral part of entrepreneurship. Organizations do not use all the knowledge created by their human capital to identify new opportunities. Some individuals see opportunities within such unused knowledge and use it to create new technologies and new firms.
  4. Knowledge Spillover The transmission of knowledge to uncover new opportunities that have not yet been seized by incumbent firms. Spinoff Companies They are the companies formed by taking advantage of an incumbent firm’s under-utilized (unused) knowledge. A spinoff is also defined as the branching off of a division from the parent company with the aim of specialization. Ex. Acer’s contract manufacturing division was spun off as Wistron. Ex Acer employees founded ASUS. Collectively knowledge spillover and spinoffs led to the establishment of an innovative industry ecosystem.
  5. According to the Marshall–Arrow–Romer(MAR) spillover theory, the closeness of enterprises belonging to a common industry has a significant impact on how well knowledge travels among them. The greater the MAR spillover, the closer the enterprises are to one another, and therefore more specialization. Ex. Science Parks enclosing a unique discipline has fostered the growth and development of innovative technologies. As several firms with similar degrees of specialization are located at close quarters, the amount of knowledge spillover is high. According to Michael Porter, when local economies are competitive, the innovations of local firms are rapidly adopted and improved by neighbouring firms. This in turn has led to the development of a series of technologically advanced companies, which collectively form an industry on par with global standards.
  6. Financing Start-ups/New projects Problems Associated Even in large firms, technology managers often report that they have more projects that they would like to undertake than funds to spend on them. Some of the reasons for this problem are as follows. • Low expected returns due to an inability to capture the profits from an invention • The uncertainty and risk associated with the project over-optimism on the part of managers • Any problems associated with financing investments in new technology will be most apparent for new entrants and startup firms. Thus, any country should possess a financial assistance ecosystem (capable of withstanding failures), for start-ups and new projects.
  7. Possible Sources of Finance • Government funding • Venture capital • Banks
  8. Contribution of Public Entities Public entities contribute to the supply of ideas through the funding of research and development activities and the performance of research Universities and government labs are important external partners that provide access to complementary knowledge that may extend both the exploratory capability as well as the capacity of the firm to exploit commercial opportunity Private R&D funding is typically oriented towards activities that will be rewarded by the market. In contrast, government funds basic research that asks fundamental questions, without direct concern about practical applications, and is more experimental and theoretical Establishment of political and economic stability
  9. Contribution of Government Creating funding sources Development of quality basic infrastructure Development of semi- and high-skilled labor Providing tax and other benefits for entrepreneurs Ultimate objective of a government should be to increase the ease of doing business
  10. Contribution of Universities Increasing the stock of knowledge Training skilled graduates Creating new instrumentation and methodologies Facilitating the formation of problem-solving networks Increasing the capacity for problem solving Creating new firms
  11. It is important to promote below 4 factors simultaneously, 1. Supporting technology transfer to the country through FDIs. 2. Start establishing a startup eco-system around the FDIs. 3. Aligning the overall education strategy to support the expansion of the industry. 4. Supporting existing research centers and establishing new ones. Sri Lankan government focus on 2,3 & 4. However, for them to be fruitful 1 should also happen. * To succeed as a nation, Sri Lanka should develop an ecosystem conducive for new knowledge creation and entrepreneurship.
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