What is Innovation and Entrepreneurship?

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By: Site Engineer, Staff

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Many people consider the high technology-based small firms when discussing entrepreneur concerned with innovation. Yet innovation can occur with low technology as well as high technology-based firms. It may simply involve “managing changes” the entrepreneur may find a new method of changing the process of production as well product.

The product here can equally mean services, innovation in services can occur through new variations in the service product. The diffusion stage requires the development of the technology so that it can be applied and adopted in different uses.

Innovations are all those activities that give rise to a new product or process of production.

These include:

  1. Basic research, which generates new knowledge without necessarily a specific use intended.
  2. The invention, which includes the application of knowledge to achieve a specific end such as the building of a prototype model.
  3. Wider take-up and absorption of technology into society.
  4. Development, which involves refinement of the prototype model into the final product or process.

Innovation may be categorized into product innovation and process innovation. Innovation can further be defined as the transformation of an idea into a new or improved product or operational process in industry or commerce.

Difference Between Entrepreneurship And Intrapreneurship

Intrapreneurship is the practice of innovating by developing new products processes or services while one is still part of an organization. Intrapreneurship, as we have seen also, involves innovating but creating a new organization carrying out the innovations. From this distinction, anybody who practices entrepreneurship inside the organization he works is an intrapreneur; but if he practices the same outside the organization probably on his own this time around he is an entrepreneur.

Identifying the Innovative Entrepreneur

For us to illustrate the nature of the concept of innovation and entrepreneurship consider a small craft manufacturer making earnings. Assuming he is skilled and finds that he is able to use a new material that has been developed elsewhere, for example, the aircraft industry by major manufacturers. He is taking technology that has been developed elsewhere and applying it to everyday use. The question is whether he is an innovative entrepreneur?

There is no Research and Development (R&D), but it can be merely an application or incremental change to existing technology. For the purpose of this article, he is an innovative entrepreneur has found a way of applying the technological change in a new way, perhaps from the commercialization of technology developed elsewhere.

Thus, the innovative entrepreneur is more than just a pure scientist. He has to have the additional skills and abilities to recognize the commercial application of technological advancement. To identify entrepreneurs who are concerned with innovation are, therefore, a problem that does not easily overcome for researchers. One way that has been adopted is to identify high technology small firms by industrial sector and hence assume that they will include the entrepreneur who is concerned with R&D. This approach assumes that the key entrepreneur can be identified.

What are the Issues in Innovation and Entrepreneurship

The act of entrepreneur sets the innovation process in motion. The reward is an extraordinary profit, but this is eroded by imitation. More competition increases the likelihood of imitation, and hence the reward for innovation is reduced. Therefore, that entrepreneur and small firms are at a disadvantage, compared to the larger firm, in the innovatory process.

The first issue in innovation and entrepreneurship is that entrepreneur and small firms are disadvantaged, compared to the larger firms, in the innovation process because large firms are seen to have distinct advantages in the innovation process.

The second emerging issue is that the innovative entrepreneur faces disadvantages in raising finance and obtaining other resources.

This is due to a number of factors, which include:

  • Entrepreneurs and small firms may not be able to protect their investment, through patents or other means. Hence this can increase the difficulties they face in obtaining funding.
  • Banks do not place any value on R&D in the balance sheet, because it is an intangible asset.
  • Banks face increased problems m risk assessment due to increased uncertainty associated with new or high technology.
  • Banks are primarily concerned with short-term finance. They will not be prepared to lend seed capital.

The third issue is that entrepreneurs face difficulties in protecting Intellectual Property Right (IPR). The IPR system worldwide can operate against the successful protection of the IPR by entrepreneurs and small businesses due to the time involved and the legal complexities of the system. Registration of IPR can be a complex and expensive process since the entrepreneur will often have to engage special legal experts.

Main methods of protection of IPR

Another issue is that entrepreneurs are not provided with special supports environments such as science parks and incubators, especially in developing countries where little or no attention is given to the entrepreneurship pursuits.

Performance of Innovative Entrepreneurs

It has not been cheering news for innovative entrepreneurs especially in developing countries where little attention is given to R&D in all fields. This has made innovative entrepreneurs face tremendous barriers to development.

If we consider that R&D periods are often long, resources are scarce, equity will be exhausted, and patents are expensive, then we can appreciate that the innovative entrepreneur faces special and acute barriers and problems. An entrepreneur may take ten years developing his product, and even after development, there are marketing and promotion problems after prototypes have been produced. Despite the occasional special assistance, these problems are often challenging.

Given the difficulties that have been outlined above that take the entrepreneur concerned with the innovation process, it is recommended that “innovative” support mechanisms be provided for the development of innovative entrepreneurs nationwide.

Support Should be Given to Innovative Entrepreneur by Government

Both high technology-based entrepreneurs and low technology-based entrepreneurs face the same problem of funding. Funding should take a holistic approach where R&D and other aspects should be taken into consideration. There are information and funding gaps with the innovatory entrepreneur. Networking between external support agencies and financial institutions has not been encouraging because the financial climates in developing countries do not favor or encourage the development of innovation within their small firms.

Conclusively, to make any significant impact, changes are required in all the institutions concerned with the support infrastructure. This infrastructure includes banks, chambers of commerce and local authorities. Even universities need to be more entrepreneurial in their outlook.

With the situation in developing countries now as compared to advanced countries like, U.S.A and Germany, we can see that a radical change in the infrastructure is required if developing countries will ever wake up and compete with these countries, this situation will only change if the government abandons its laissez-faire attitude to innovative entrepreneurship and small business enterprises.

 

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