The essence of innovative entrepreneurship - Innovative entrepreneurship

The essence of innovative entrepreneurship

Entrepreneurship can be defined as creative activity aimed at finding new areas of capital investment, creating new and improving existing products, industries, developing their own advantages, and effectively using various opportunities for profit. At the same time, entrepreneurship is characterized by the mandatory involvement of an innovative moment - be it the production of a new product for the market, a change in the profile of activity or the establishment of a new enterprise or industry.

Of particular importance for understanding the essence of entrepreneurship is the point of view of US economists KR McConnell and SL Bru, who identified four interrelated functions of the entrepreneur:

• the entrepreneur takes the initiative to combine resources - land, capital and labor - into a single process of production of goods and services;

• the entrepreneur takes upon himself the development and adoption of basic decisions in the process of doing business, i.e. those operations that determine the course of the enterprise, the direction of business development:

• An entrepreneur is an innovator, a person seeking to produce new products (services), developing new production technologies or introducing new forms of business organization and development:

• an entrepreneur takes on the risk arising in the course of doing business, as gaining profit for the entrepreneur is not guaranteed, reward for time, effort and ability can be both profit and loss. At the same time, an entrepreneur risks not only his time, work and business reputation, but also invested money.

Thus, innovation is one of the functions of an entrepreneur, and accordingly, it must be present in business activities always.

According to J. Schumpeter, "... the task of entrepreneurs is to reform and revolutionize the way of production through the implementation of inventions, and more generally through the use of new technologies for the production of new goods or former goods, but a new method thanks to the discovery of a new source raw materials or a new market for finished products - right up to the reorganization of the former and the creation of a new industry ... " Thus, I. Schumpeter believes that innovation and novelty are an integral feature of entrepreneurship.

Indeed, the search for new ideas and their implementation is one of the most important, but also complex tasks of the entrepreneur, because in this case, the entrepreneur is required not only to be creative and to find new solutions, but also to think in advance, anticipating future needs that are formed in society. Consequently, the task of the innovator entrepreneur is to reform the way of production through the implementation of inventions, and more generally through the use of new technological opportunities for the production of fundamentally new products or the production of old goods by new methods, by opening a new source of raw materials or a new market for finished products, a new branch of the economy.

It should be noted that any innovation activity is entrepreneurial, as it is based on the search for new ideas (from a new product to a new structure) and their evaluation; searching for the necessary resources; creation and management of the enterprise; receipt of money income and personal satisfaction with the result achieved. However, not all entrepreneurship is recognized as innovative, but only one that allows you to extract entrepreneurial income as a result of the creation, use or diffusion of an innovative product. Entities of innovative entrepreneurship include enterprises and organizations that carry out innovative activities.

In accordance with this, two models of entrepreneurship are distinguished. The first model is classical entrepreneurship (traditional, reproductive, routine), aimed at organizing activities with the expectation of maximizing the resources available to the entrepreneurial organization. It is within the framework of the classical business model that the concept of production growth management is formed, the implementation of which requires time for carrying out a number of activities at the expense of external factors for the entrepreneurial firm - subsidization, state support. In addition, the internal reserves of the firm are put in motion to increase the efficiency of its operations.

The second model is innovative enterprise, assuming a search for new ways of enterprise development, which allows to speak about the concept of growth management, or innovations. Innovative entrepreneurship is based entirely on innovation, therefore the result of such activity is either a new product or a product with fundamentally new characteristics or properties, or new technologies.

As a rule, the practice of carrying out entrepreneurial activity in any of its forms includes an innovative moment, for example, using a new organization of production management, product quality or introducing new methods of organizing production or new technologies. The production or supply to the market of traditional goods can also be carried out using some new elements or techniques associated with the organization of production itself, the technical elements of production or changes in the quality characteristics of the goods produced. In this case, traditional goods are produced by using a partial innovation.

The development of innovative entrepreneurship depends on consumers' demand for innovation, the availability of a developed scientific and technical potential of the national economy, the functioning of venture firms and investors financing risky innovation activities. In Table. 1.1 shows the factors that influence the development of innovative entrepreneurship.

Table 1.1

Factors contributing to the development of innovative entrepreneurship

Factor group


Economic, technological

Presence of a reserve of financial, material and technical means, progressive technologies, necessary economic and scientific and technical infrastructure, state programs for financing innovative activities; material incentive for innovative activities

Political, legal

Legislative measures to encourage innovation, state support for innovation

Organizational management

Flexibility of organizational structures, democratic management style, predominance of horizontal information flows; self-planning, the admission of adjustments; decentralization, autonomy, formation of target, problem groups, reengineering

Socio-psychological and cultural

Moral encouragement, public recognition; providing opportunities for self-realization, liberation of creative work. Normal psychological climate in the work collective

As a rule, the basis of entrepreneurial activity is innovation in the field of products or services, which allows to create a new market, meet new needs. Innovation is a specific tool of entrepreneurship, not innovation in itself, but a directed organized search for innovations, a constant focus on them entrepreneurial structures. As noted by PF Drucker, "... entrepreneurs are distinguished by an innovative type of thinking, and innovation is a special tool of entrepreneurship".

Innovative entrepreneurship is a special innovative process of creating something new, an economic process based on a constant search for new opportunities, an orientation toward innovation. It is related to a willingness of an entrepreneur to assume all the risk of implementing a new project or improving an existing one, as well as financial, moral and social responsibility that arises at the same time. In general terms, innovative entrepreneurship can be defined as an economic process leading to the creation of the best goods (products, services) and technologies by means of practical use of innovations (innovations).

Based on the method of organization of the innovation process, three models of innovative entrepreneurship are singled out at the enterprise (Figure 1.1).

Innovative enterprise based on internal organization - innovation will be created and/or developed within the firm by its specialized units based on planning and monitoring their interaction on an innovative project.


Innovative entrepreneurship based on an external organization through contracts - an order to create and (or) master the innovation is placed between third-party organizations.

Models of innovative entrepreneurship

Fig. 1.1. Models of innovative entrepreneurship

Innovative enterprise on the basis of an external organization with the help of venture traders - the firm for the implementation of the innovation project establishes daughter venture firms that attract additional third-party funds.

The second model of innovative entrepreneurship is most often used - the enterprise places an order for the development of innovations, and masteres them on its own.

At the heart of all types of innovative entrepreneurship are the creation and development of new types of products (goods, services), the making, the creation of things, values, goods. The main determining part of such entrepreneurship is the creation and production of scientific and technical products, goods, works, information, intellectual values, which are subject to subsequent sale to customers and consumers. A typical scheme of innovative entrepreneurship is shown in Fig. 1.2.

Typical scheme of innovative entrepreneurship

Fig. 1.2. Typical scheme of innovative entrepreneurship

To develop and manufacture a new type of product (goods, services), an entrepreneur needs working capital in the form of materials used in the process of creating scientific and technical products, energy needed for processing materials, and other resources. In addition, there may be a need for components, semi-finished products, i.e. ready-made components that can be used in the manufacture of scientific and technical products. Necessary materials, raw materials and components (M), the enterprise purchases from the owners of working capital, paying for their cost (Dm), which depends on the amount of materials and their prices.

For the production of scientific and technical products (goods, services), the company also needs fixed assets (OS) in the form of structures, premises, special equipment, equipment, tools, etc. The enterprise can purchase or lease them for a while from the owners of fixed assets. For the basic assets necessary for innovation activity, it is necessary to pay to the owners a money amount (D0), the amount of which depends on the type and quantity of fixed assets and their cost required for the activity. When leasing fixed assets, the payment will depend on the period of their use.

In order to carry out innovation activities, the enterprise also needs to attract scientific and technical personnel, production personnel, ie, labor (PC), spending on it certain money resources (Dr).

If an enterprise does not have its own funds or it is not enough to carry out innovation activities, then they can be received by the enterprise in commercial banks, with subsequent repayment and repayments in the form of loan interest (DK).

In addition, the implementation of innovative entrepreneurship is impossible without the timely receipt of the necessary information that can be obtained on a fee basis (days).

Individual works and services necessary for the implementation of innovation activities, the enterprise can place on a paid basis (Du) from outside organizations.

Accordingly, the need for funds necessary for the implementation of innovative entrepreneurship is estimated by the formula

De = Am + Do + Ap + A + + A + A +.

The result of innovative entrepreneurship is the finished product (products, service) (T), which the enterprise sells to the consumer of innovative products at a price (Dt), including the costs of innovation and the profit of the enterprise.

So, innovative entrepreneurship is a special innovative process of management. It is based on a constant search for new opportunities, an orientation toward innovation, the ability to extract and use resources from a wide variety of sources to solve persistent tasks. This type of entrepreneurship is associated with the willingness of an entrepreneur to voluntarily assume all the risks associated with the implementation of a new project or the improvement of an existing one, assume financial, moral and social responsibility for the process that should bring monetary income and personal satisfaction to what has been achieved. Innovative entrepreneurship is the main base of all spheres of business activity.

In addition, innovative entrepreneurship is both an economic phenomenon and a process. As an economic phenomenon, entrepreneurship acts as a form of production relations with regard to the production and sale to consumers of specific goods (works, services) of the required quality and obtaining the planned result. As an economic phenomenon, it expresses the entire system of relations that arise in the entrepreneur in relations with consumers in the process of selling goods (works, services), with suppliers, other business entities, employees and, finally, with state and other government bodies.

Entrepreneurship as a process is a complex chain of actions - from the search for the (birth) of an entrepreneurial idea to its implementation into a concrete project of an enterprise that allows producing goods necessary for consumers. This process ends with a certain amount of profit. Accordingly, as part of entrepreneurship as a process, there are four most significant stages:

• Search for new ideas and their evaluation;

• drawing up a detailed business plan;

• Search for the necessary resources;

• Management of the created enterprise.

Since innovative entrepreneurship is recognized as a special type of entrepreneurial activity, for it, these stages should be broken down into smaller ones (Figure 1.3).

Not always listed stages are executed sequentially one after another, as shown in Fig. 1.3. Quite often, separate stages are carried out in parallel, and this only speeds up the process of innovation. As a rule, the idea is chosen and evaluated simultaneously with the development of the business plan, at the same time, state registration of the created innovation enterprise can be conducted and an application for a patent should be submitted. It is important for innovation entrepreneurship to acquire such stages as the search for a new idea and protection of the created intellectual product. Therefore, at these stages should be discussed in more detail.

Stages of innovative entrepreneurship

Fig. 1.3. Stages of innovative entrepreneurship

thematic pictures

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)