ELEC1

ENTREPRENEURIAL LEADERSHIP IN
ORGANIZATION

MODULE 1
Foundations of Entrepreneurial Leadership

BACHELOR OF SCIENCE IN ENTREPRENEURSHIP

PREPARED BY:

LENIE LUMBRES DE JUAN, CFRA, CLPM, MBA

FACULTY
TANAUAN CITY COLLEGE
MODULE 1 | Foundations of Entrepreneurial Leadership

TABLE OF CONTENT

SECTION 1: THE CONCEPT OF ENTREPRNEURSHIP

• Entrepreneurship is a way of life and being an entrepreneur means different things to other people. There is an
agreement that we are talking about a kind of behavior and mind-set that includes initiative taking, the organizing
and reorganizing of social and economic mechanisms to bundle resources in innovative ways and the acceptance
of risks, uncertainty and/or potential failure (Shapero, 1975). It is important to note that successful entrepreneurs
are often touted as exceptional individuals; a rare breed who seem to have been born with unique hereditary traits.
But the entrepreneurial mindset is most often acquired implicitly without conscious effort or awareness, which
may explain why it often appears to be a dispositional trait, even though it is not. An entrepreneurial mindset can
be developed and enhanced through entrepreneurial experiences. And to cultivate the entrepreneurial mindset,
we must create entrepreneurial learning experiences within our classrooms, organizations, and communities.

• Entrepreneurs help bolster economic development and their enterprise becomes the backbone of the economy
because they create jobs and invent products or services that can make the world a better place. Being a successful
entrepreneur requires outside-the-box thinking and larger-than-life ideas. Anyone can come up with a new idea,
but building a successful business around it is an entrepreneurial challenge. The entrepreneurial mindset is unique
in that one must be creative, communicative, and highly motivated to succeed, yet open to risk and failure. It is
not a big idea alone that paves the path to ultimate entrepreneurial journey to success; oftentimes, the success or
failure of a business comes down to the characteristics of the entrepreneur themselves. It takes a unique aggregate
of characteristics to meld one big idea into a fully functional thriving business.

• Entrepreneurship can be defined as the capacity and willingness to develop, organize and manage a business
venture along with any of its risks to make a profit. The most obvious example of entrepreneurship is the start of
new businesses.

• An entrepreneur is an individual who takes initiative to bundle resources in innovative ways and is willing to bear
the risk and/or uncertainty to act. Being an entrepreneur today:
➢ Involves the creation process.
➢ Requires devotion of time and effort.
➢ involves rewards of being an entrepreneur. Requires assumption of necessary risks.

• An entrepreneur’s actions are the behavior in response to a judgmental decision under uncertainty about a possible
opportunity for profit while entrepreneurial mind-set involves the ability to rapidly sense, act, and mobilize even
under uncertain conditions.

Entrepreneur – is a word borrowed from the French word “entreprendre”, “ one who undertakes” – that is, a
“manager”.
- Was shaped probably from celui qui entreprend, which is loosely translated as “those who get things
done”.

Types of Entrepreneurs and their Challenges

1. INNOVATORS
➢ are the types of entrepreneurs who come up with completely new ideas and turn them into viable
businesses. Innovative entrepreneurs also find new ways to market their products by choosing
PRODUCT DIFFERENTATION that makes their company stand out from the crowd.

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2. HUSTLERS
➢ often start small and think about effort– as opposed to raising capital to grow their businesses; focus
on starting small with the goal of becoming bigger in the future. They are motivated by their dreams
and will work extremely hard to achieve them. They tend to be very focused and will get rid of all
forms of distractions, favoring risks over short-term comfort.

3. IMITATORS
➢ are the types of entrepreneurs who copy certain business ideas and improve upon them. They are
always looking for ways to make a particular product better so as to gain an upper hand in the market.
They are partly innovators and partly hustlers who don ‘t stick to the terms set by other people and
have a lot of self-confidence.

4. RESEARCHER ENTREPRENEURS
➢ usually believe in starting a business that has high chances of succeeding because they have put in
detailed work to understand all aspects. They take a lot of time to launch products to make decisions
because they need the foundation of deep understanding; rely much more on data and facts than
instincts and intuition.

5. BUYER ENTREPRENEURS
➢ will identify a business and assess its viability, proceed to acquire it and find the most suitable person
to run and grow it. One thing that defines buyers is their wealth. They have the money and specialize
in buying promising businesses

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SECTION 2: Definition and Importance of Entrepreneurial Leadership

What Is Entrepreneurial Leadership?

➢ harness the power of relationships and put people first, and that enables them to take on and solve daunting
challenges.
➢ is a mindset that focuses organizations on turning problems into opportunities that create economic and social
value
➢ is a leadership style that merges the innovative, risk-taking mindset of an entrepreneur with the strategic and
organizational skills of a traditional leader.
➢ It focuses on identifying opportunities, driving innovation, and fostering an environment of growth and
adaptability.

Entrepreneurial leaders
➢ are not just risk managers; they are ambidextrous and are experts at navigating uncertainty
➢ they have a positive outlook about the future, as they are always trying to improve things

Babson Professor Nan Langowitz says an openness to learning is one of the key qualities of entrepreneurial
leadership. Like entrepreneurs, entrepreneurial leaders are made, not born. It’s a muscle that can be developed
with time and practice.

Why Is Entrepreneurial Leadership Important?

Entrepreneurial leaders:
• Drive innovation and creativity.
• Adapt quickly to changing environments.
• Build sustainable and scalable business models.
• Inspire teams to achieve common goals.

What Makes a Good Entrepreneurial Leader?

There are several critical qualities of entrepreneurial leadership:
• Entrepreneurial leaders want to solve problems collaboratively.
• Entrepreneurial leaders value action and are outcomes oriented.
• Entrepreneurial leaders believe that things can be better, and that they can make a meaningful impact.

Core Principles of Entrepreneurial Leadership

1. Vision and Strategic Thinking

Entrepreneurial leaders create a clear vision and align their team’s efforts to achieve it.
2. Innovation and Risk-Taking
They embrace change and are willing to take calculated risks to seize opportunities.
3. Empowerment and Collaboration
These leaders trust and empower their teams, fostering a culture of collaboration and mutual
respect.
4. Focus on Value Creation
It emphasizes creating value for stakeholders, including customers, employees, and investors

How To Develop Entrepreneurial Leadership Skills

1. Cultivate a Growth Mindset: Embrace challenges as opportunities for growth.
2. Enhance Emotional Intelligence: Develop self-awareness, empathy, and interpersonal skills.
3. Learn from Failure: View setbacks as learning experiences and stepping stones to success.
4. Stay Informed: Keep up with industry trends and emerging technologies.
5. Foster a Strong Network: Build relationships with mentors, peers, and industry experts.

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Examples of Entrepreneurial Leadership in Action

Elon Musk
Elon Musk embodies entrepreneurial leadership through his ventures like Tesla, SpaceX, and Neuralink. His
visionary approach and ability to take bold risks have transformed multiple industries.
Fred Swaniker
Fred Swaniker, the founder of African Leadership Academy and African Leader University, exemplifies
entrepreneurial leadership by nurturing young leaders across Africa. His initiatives focus on empowering the
next generation to drive change and innovation across the continent.
Sara Blakely
The founder of Spanx, Sara Blakely, turned a simple idea into a global brand. Her resilience, customer-
focused innovation, and ability to adapt to market demands showcase her leadership principles.
Oprah Winfrey
Oprah Winfrey’s journey from a talk show host to a media mogul demonstrates innovative leadership. Her
ventures emphasize innovation, empowerment, and creating meaningful value for her audience.

Benefits of Entrepreneurial Leadership

1. Encourages Innovation: Entrepreneurial leaders inspire teams to think creatively and develop
groundbreaking solutions.
2. Improves Team Morale: By empowering employees, these leaders foster a sense of ownership and
motivation.
3. Enhances Organizational Resilience: Businesses led by entrepreneurial leaders are better equipped to
navigate uncertainties.
4. Drives Sustainable Growth: It ensures long-term success by focusing on value creation and adaptability.

Challenges of Entrepreneurial Leadership

1. Risk of Burnout: Constantly pursuing innovation and growth can lead to exhaustion.
2. Balancing Vision with Practicality: Entrepreneurial leaders may struggle to ground ambitious ideas in
reality.
3. Managing Diverse Teams: Leading teams with varying skills and perspectives requires emotional
intelligence and strong communication.

SOURCE:
What Is Entrepreneurial Leadership? John Crawford, October 27, 2023
[Link]

What Is Entrepreneurial Leadership? Definition, Principles, and Benefits

[Link]

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SECTION 3: Differences Between Traditional and Entrepreneurial Leadership

Entrepreneurial leadership and traditional leadership are two distinct styles of leadership that differ in several
key aspects. Understanding these differences is crucial for aspiring leaders, as it can impact their approach to decision-
making, risk-taking, and overall organizational success.

Traditional Leadership Entrepreneurial Leadership

Vision and typically focus on maintaining stability and have a strong vision and purpose for their
Purpose achieving incremental growth organization. They are often driven by a
within established structures and markets. desire to innovate, disrupt existing
markets, and create something new
Focus emphasizes maintaining stability, efficiency, prioritizes growth, innovation, and
and control within the organization. It exploration of new opportunities.
focuses on optimizing existing processes and Entrepreneurial leaders are more inclined
ensuring consistent performance. to take risks and embrace change.
Risk Tolerance typically have a lower tolerance for risk, understand that risk is an inherent part of
preferring to avoid uncertainty and potential innovation. They are willing to take
failure. They focus on minimizing risks to calculated risks and view failures as
ensure steady progress. learning opportunities.
Decision-Making involves a more hierarchical decision- more decentralized, promoting input and
Style making process, with decisions being made collaboration across all levels of the
by those at the top of the organizational organization. This inclusive strategy
structure. nurtures a culture of innovation and a sense
of ownership.
Innovation and prioritize maintaining the status quo and actively seek out disruptive innovations
Change incremental improvements to existing and transformative changes. They are more
processes. focused on long-term vision and the
potential for significant impact.
Team Dynamics may rely more on hierarchical structures and foster a culture of empowerment and
and a top-down approach to decision-making, encourage their team members to take
Empowerment which can limit employee autonomy and ownership and responsibility for their
creativity. work. They value individual initiative and
encourage risk-taking and learning from
failures.
Approach to might rely on established protocols and past are more likely to experiment with new
Challenges experiences to address challenges. approaches, leveraging creativity and
adaptability to overcome obstacles.
Resource have more established processes and skilled at resource allocation, often making
Allocation structures for resource allocation, which can the most of limited resources to drive
be slower to adapt to new opportunities or growth and achieve their vision. They are
challenges. comfortable with ambiguity and can adapt
quickly to changing circumstances.
Customer Focus prioritize customer satisfaction, but their place a strong emphasis on understanding
focus may be more on maintaining existing and meeting the needs of their customers.
customer relationships rather than pursuing They are often customer-centric, seeking
new opportunities. out feedback and insights to inform their
decision-making and product/service
development.

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Entrepreneurial leadership and traditional leadership are two distinct styles of leadership that have different
approaches and outcomes. While both play an important role in organizations, understanding the differences between
these two styles can help individuals better determine which approach is best suited for their specific needs and goals.

In this answer, we will explore the differences between entrepreneurial leadership and traditional leadership in detail.

Traditional Leadership Entrepreneurial Leadership

Definition and Purpose centered around maintaining characterized by individuals who
stability, implementing established have a vision and are willing to take
procedures, and managing day-to- risks to create a new venture or
day operations within an bring about significant changes
organization. within an existing organization. The
focus of entrepreneurial leadership
is on innovation, creativity, and
opportunity identification.
Risk-Taking tend to prioritize stability and prefer known for their willingness to take
to minimize risks and maintain the risks and embrace change. They
status quo. thrive in uncertain environments
and are comfortable making bold
decisions that may involve
substantial risks.
decision-Making approach typically adopt a more methodical often use a more intuitive and agile
and deliberate decision-making approach to decision-making. They
process, often relying on data and rely on their experience, gut
analysis to inform their choices. instincts, and quick thinking to
make decisions in rapidly changing
situations.
Creativity and Innovation may prioritize efficiency and highly creative and innovative.
adherence to established processes, They seek out new opportunities,
which can limit creativity and challenge conventional thinking,
innovation. and encourage their teams to think
outside the box.
Team Dynamics and Empowerment may rely more on hierarchical foster a culture of empowerment
structures and a top-down approach and encourage their team members
to decision-making, which can limit to take ownership and responsibility
employee autonomy and creativity. for their work. They value
individual initiative and encourage
risk-taking and learning from
failures.
Resource Allocation may have more established skilled at resource allocation, often
processes and structures for making the most of limited
resource allocation, which can be resources to drive growth and
slower to adapt to new opportunities achieve their vision. They are
or challenges. comfortable with ambiguity and can
adapt quickly to changing
circumstances.
Customer Focus prioritize customer satisfaction, but place a strong emphasis on
their focus may be more on understanding and meeting the
maintaining existing customer needs of their customers. They are
relationships rather than pursuing often customer-centric, seeking out
new opportunities. feedback and insights to inform

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their decision-making and

product/service development.

In summary, entrepreneurial leadership is a

forward-thinking, innovative approach that
emphasizes vision, risk-taking, and
adaptability. It contrasts with traditional
leadership by focusing on growth, innovation,
and empowering teams to take ownership of
their projects.

By adopting the qualities and skills of

entrepreneurial leadership, organizations are
better equipped to navigate the complexities
of today’s business environment and achieve
lasting success.

SOURCE/S:
How Does Entrepreneurial Leadership Differ From Traditional Leadership
[Link]

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Section 4 : Leadership vs. Management

Why would somebody want to be a manager and not a

leader?

Everyone is different—and leadership positions aren’t for

everyone. There is a lot of value in focusing on being a
manager first. Managers provide stability and guidance, and
they may not be interested in creating the big picture vision.
Even more so than leaders, managers are selfless in the way
they put the team first. First-time managers often remark
about how much more work it is to manage. That’s because,
instead of just focusing on putting their head down and getting good work done, managers are constantly thinking
about how to best guide and mentor their team members.
If you just became a manager, it can be helpful to focus on providing the best experience for your team first and then
developing your leadership skills later. After all, just because you’re focused on developing your management
style now doesn’t mean you can’t dedicate yourself to building leadership qualities later.

Management vs Leadership: Key Differences Explained

A few years ago, leaders, entrepreneurs, and innovators were the driving forces behind creating companies, while
managers were brought in to handle daily operations. Today, however, our educational system primarily emphasizes
business management. There is also a growing perception that management and leadership are synonymous, which is
far from the truth. Leadership promotes creativity and innovation, whereas management prioritizes efficiency and
seamless operations. This leadership vs management article will explore the distinct differences between leader and
manager.

What Is Leadership?

Leadership is the creation of positive, non-incremental change through meticulous planning, vision, and strategy.
Workforce empowerment and adaptive decision-making also add up to the crucial attributes of leadership. Most often,
people relate leadership with one’s position in an organization. But leadership has nothing to do with titles,
management, or one’s personal agendas. It’s also not restricted to personality traits such as better vision or charismatic
personality.

It is more like a process of social influence, which maximizes

the efforts of others toward the achievement of a common
goal. It stems from social influence and requires human
resources to achieve the intended outcomes. A leader is
someone who always takes the initiative and invests a great
effort to accomplish the company’s vision. That is the only
reason why people around them start following them.

What Is Management?

Management is all about performing pre-planned tasks on a

regular basis with the help of subordinates. A manager is
completely responsible for carrying out the four important functions of management: planning, organizing, leading,
and controlling. Managers can only become leaders if they adequately carry out leadership responsibilities, including
communication of good and bad, providing inspiration and guidance, and encouraging employees to rise to a higher
level of productivity.

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But, unfortunately, not all managers can achieve that. Managerial responsibilities are often outlined in a job
description, with subordinates following because of the professional title or classification. A manager's primary focus
is on meeting organizational goals; they often do not take much else into consideration. With the title comes the
authority and the privilege to promote, hire, or reward employees based on their performance and behavior.

Differences Between Leadership and Management

The role of management is to control a group or group of individuals in order to achieve a specified objective.
Leadership is the ability of an individual to influence, motivate, and enable others to contribute to the organization's
success.

Leadership drives
creativity and
cultivates fresh ideas,
while management
focuses on optimizing
processes and
maximizing
productivity.

Leaders inspire and

energize their teams,
encouraging growth
and vision. In contrast,
managers emphasize
structure,
coordination, and
operational harmony.

Management is
responsible for
controlling an
organization, a group,
or a set of entities to
achieve a particular
objective. Managing is
about making sure the
day-to-day operations
are being performed as
expected. A leader
communicates in order
to set direction, inspire,
and motivate their
team.

Leadership requires a vision to guide change. Whereas managers focus on achieving organizational goals through
process implementation, such as budgeting, organizational structure, and staffing, leaders are more concerned with
thinking ahead and seizing opportunities.

It is possible to be a manager and a leader at the same time. But keep in mind that just because someone is a great
leader doesn't mean they'll be a great manager or the other way around.

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Factors distinguish between leadership vs management:

FACTORS LEADERSHIP (leaders) MANAGEMENT (Managers)
Differences in Vision Leaders are considered visionaries. Managers set out to achieve
They set the pathways to excel in organizational goals by
organizational growth. They always implementing processes such as
examine where their organization budgeting, organizational
stands, where they want to go, and structuring, and staffing. Managers'
how they can reach there by vision is bound to the
involving the team. implementation strategies,
planning, and organizing tasks to
reach the objectives set out by
leaders. However, both of these
roles are equally important in the
context of business environments
and necessitate associative efforts.
Organizing vs Aligning Leaders are more concerned with Managers achieve their goals by
how to align and influence people using coordinated activities and
than how to assign work to them. tactical processes. They break down
They achieve this by assisting long-time goals into tiny segments
individuals in envisioning their and organize available resources to
function in a wider context and the reach the desired outcome.
possibility for future growth that
their efforts may give.
Differences in Queries A leader asks what and why, Managers are not required to assess
whereas a manager focuses on the and analyze failures. Their job
questions of how and when. To do description emphasizes asking How
justice to their duties as a leader, and When, which assists them in
one might question and challenge ensuring that plans are carried out
the authority to reverse decisions correctly. They prefer to accept the
that may not be in the better status quo and make no attempt to
interests of the team. If a firm has a change it.
stumbling block, a leader will be the
one to step up and ask, What did we
learn from this? and Why has this
happened?
Position vs. Quality term leader has a more ambiguous A manager is a role that frequently
definition. refers to a specific job within an
organization's structure
Leadership emerges as a result of
your actions. You are a leader if you manager is a job title that comes
act in a way that inspires others to with a fixed set of responsibilities.
do their best. It makes no difference
what your title or position is

What Are the Similarities Between Leadership and Management?

1. Comparable
2. Both require establishing objectives, coming up with strategies to get there, and tracking the development
3. Both demand collaboration with others, effective communication, decision-making, problem-solving,
strategic thinking, and accountability in order to succeed.

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4. Responsible for gathering data, weighing options, and making decisions that will benefit their team or
company.
5. Accept accountability for their deeds and be open and honest about them.

What Do Leaders Do? What Do Managers Do?

The primary difference between management and A manager is a member of an organization with the
leadership is that leaders don’t necessarily hold or responsibility of carrying out the four important
occupy a management position. Simply put, a leader functions of management: planning, organizing,
doesn’t have to be an authority figure in the leading, and controlling.
organization; a leader can be anyone.
The primary difference between management and Most managers also tend to be leaders, but only IF they
leadership is that leaders don’t necessarily hold or also adequately carry out the leadership responsibilities
occupy a management position. Simply put, a leader of management, which include communication,
doesn’t have to be an authority figure in the motivation, providing inspiration and guidance, and
organization; a leader can be anyone. encouraging employees to rise to a higher level of
productivity.
There isn’t always tangible or formal power that a not all managers are leaders. Some managers have poor
leader possesses over his followers. Temporary power leadership qualities, and employees follow orders from
is awarded to a leader and can be conditional based on their managers because they are obligated to do so—not
the ability of the leader to continually inspire and necessarily because they are influenced or inspired by
motivate their followers. the leader.
Subordinates of a manager are required to obey orders Managerial duties are usually a formal part of a job
while following is optional when it comes to leadership. description; subordinates follow as a result of the
Leadership works on inspiration and trust among professional title or designation. A manager’s chief
employees; those who do wish to follow their leader focus is to meet organizational goals and objectives;
may stop at any time. Generally, leaders are people who they typically do not take much else into consideration.
challenge the status quo. Leadership is change-savvy, Managers are held responsible for their actions, as well
visionary, agile, creative, and adaptive. as for the actions of their subordinates. With the title
comes the authority and the privilege to promote, hire,
fire, discipline, or reward employees based on their
performance and behavior.

How to Measure Effective Leadership?

A number of variables, such as employee satisfaction, productivity, efficiency, and financial performance, can be
used to gauge efficient management. High-performing teams should be easy to create and manage, effective
delegation of tasks, clear goals and expectations, and the adoption of efficient procedures are all skills that successful
managers should possess. A manager's efficacy can be evaluated using key performance indicators (KPIs) like sales
figures, customer satisfaction ratings, and production rates. Additionally helpful sources of information about a
manager's success include employee feedback, 360-degree evaluations, and routine performance reviews. In the end,
a manager should be able to drive outcomes while fostering a good workplace culture and supporting employee
growth.

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How to Develop Leadership and Management Skills?

1. To look for formal education and training programs, such as management development programs or business
courses.
2. To participate in volunteer work, internships, or projects as a leader to gain real-world experience. It can also
be helpful to find areas for improvement by asking for feedback from mentors, peers, and colleagues.

What Are the Traits a Manager Possesses?

1. The Ability to Execute a Vision

Managers build a strategic vision and
break it down into a roadmap for their team
to follow.

2. The Ability to Direct

Managers are responsible for day-to-day
efforts while reviewing necessary
resources, and anticipating the need to make
changes along the way.

3. Process Management
Managers have the authority to establish work rules, processes, standards, and operating procedures.

4. People Focused
Managers are known to look after and cater to the needs of the people they are responsible for: listening to them,
involving them in certain key decisions, and accommodating reasonable requests for change to contribute to increased
productivity.

What Are the Traits a Leader Possesses?

1. Vision
A leader knows where they stand, where
they want to go and tend to involve the team
in charting a future path and direction.

2. Honesty and Integrity

Leaders have people who believe them
and walk by their side down the path the
leader sets.

3. Inspiration
Leaders are usually inspirational—and help their team understand their own roles in a bigger context.

4. Communication Skills
Leaders always keep their team informed about what’s happening, both present and the future—along with any
obstacles that stand in their way.

5. Ability to Challenge
Leaders are those that challenge the status quo. They have their style of doing things and problem-solving and are
usually the ones who think outside the box.

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Differences Between Leader and Manager

Leader Manager
Invents or Innovates Organizes The leader of the team comes up with new ideas and
kickstarts the organization’s shift or transition to a forward-
thinking phase. A leader always has his or her eyes set on the
horizon, developing new techniques and strategies for the
organization. A leader has immense knowledge of all the
current trends, advancements, and skillsets—and has a clarity
of purpose and vision. By contrast, a manager is someone
who generally only maintains what is already established. A
manager needs to watch the bottom line while controlling
employees and workflow in the organization and preventing
any chaos.

In his book, The Wall Street Journal Essential Guide to

Management: Lasting Lessons from the Best Leadership
Minds of Our Time, Alan Murray cites that a manager is
someone who “establishes appropriate targets and yardsticks,
and analyzes, appraises and interprets performance.”
Managers understand the people they work with and know
which person is the best fit for a specific task.
Inspires Trust Relies on Control A leader is a person who pushes employees to do their best
and knows how to set an appropriate pace and tempo for the
rest of the group. Managers, on the other hand, are required
by their job description to establish control over employees,
which, in turn, helps them develop their assets to bring out
their best. Thus, managers have to understand their
subordinates well to do their job effectively.
Asks the Questions Leans More Toward the To be able to do justice to their role as a leader, some may
“What” and “Why” Questions “How” and question and challenge authority to modify or even reverse
“When” decisions that may not have the team’s best interests in mind.
Good leadership requires a great deal of good judgment,
especially when it comes to the ability to stand up to senior
management over a point of concern or if there is an aspect
in need of improvement. If a company goes through a rough
patch, a leader will be the one who will stand up and ask the
question: “What did we learn from this?” Managers,
however, are not required to assess and analyze failures.
Their job description emphasizes asking the questions “how”
and “when,” which usually helps them make sure that plans
are properly executed. They tend to accept the status quo
exactly the way it is and do not attempt a change.

What are the two key differences between leadership and management?
1. Leadership creates values, management counts those values.
2. Leadership leads people, management manages the work people do.

The Three Tests : Three Differences Between Managers and Leaders

1. Counting Value Versus Creating Value

2. Circles of Influence Versus Circles of Power

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3. Leading People vs. Managing People

Counting Value Versus Creating Value

Managers are the only ones who count

value, he says. There are some who cut
down on the value by disabling or
otherwise countering ideas and people
who add value.
Leaders, however, focus instead on
working to generate a certain value that is
over and above that which the team creates, and is as much a creator of value as their followers. Nayar goes on to say,
“Leading by example and leading by enabling people are the hallmarks of action-based leadership.”

Circles of Influence Versus Circles of Power

As mentioned previously, managers have subordinates and leaders gain followers, which implies that managers
create a circle of power while leaders create a circle of influence. Nayar offers advice on how to identify which circle
you have around you. He says, “The quickest way to figure out which of the two you’re doing is to count the number
of people outside your reporting hierarchy who come to you for advice. The more that do, the more likely it is that
you are perceived to be a leader.”

Leading People vs. Managing People

One responsibility of a manager is controlling a group to accomplish a specific goal. Leadership, on the other hand,
is the ability of an individual to motivate, influence, and enable other employees to contribute to the success of an
organization. Inspiration and influence separate leaders from managers, not control and power.

By Nikita Duggal
[Link]

Leadership vs. management: Are they different?

[Link]

Three Differences Between Managers and Leaders by Vineet Nayar

[Link]

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Section 5: Historical Evolution of Entrepreneurial Thought

Schumpeter (1942)
➢ defined innovation as "creative destruction"
INNOVATION
➢ the deliberate abandonment of the old methods and replacing them with newly improved methods increasing
productivity.

Stone Age

HOMO HABILIS
➢ the ancestor of Homo sapiens used hunting and gathering tools.
➢ This primeval ability to fashion stone tools marked the earliest innovation that differentiates Homo sapiens
from the primates.
➢ Toolmaking and the exchange of tools and other goods also marked entrepreneurial achievement during the
Stone Age era.
Agricultural Revolution (10,000 B.C.-5,000 B.C.)
➢ second wave of innovation
➢ People planted crops and domesticated wild animals that expanded the trading of more goods and services,
further speedin up innovation.
Industrial Revolution (1750 A.D.-1830 A.D.)
➢ third wave of innovation
➢ came during the People introduced machines to farms and factories, marking the manufacturing era during
the industrial revolution
Information Revolution (1960-present)
➢ Fourth wave-when people developed computers and gradually changed entrepreneurship into the world of
digitalization.

THE EARLIEST MEN WERE TRADERS AND MERCHANTS

Stone Age ( 5 million – 10,000 B.C.)

➢ Also known as the Palaeolithic age

➢ came with the appearance of Homo Habilis, the precursor to modern man in Africa approximately 5
million years ago.
➢ Early humans lived in the woodlands and used crude tools to survive by scavenging from carcases of
creatures wiped out by predators or died of natural causes (Attenborough and Collins, 1990).
➢ The carlies stage of entrepreneurship began when early humans developed hunting tools (Binford, 1986).
➢ They also exchanged tools and other goods; thus, the earliest men were traders and merchants, as
evident by trading in New Guinea around 17,000 BCE.
➢ They moved to sparsely wooded areas; however, they lived in small groups to survive with the minor
physical and intellectual capital to increase productivity (Gavashelishvili and Tarkhnishvili, 2016).
➢ Since the food available in the foraging area determines the population, life expectancy was short
by only around twenty years. More than half of the children born did not endure long enough to
start a family, although some elders might live long into their forties (North, 1981; Livi-Bacci,
1992).
➢ The exchange of goods between groups was rare as no organized trading system existed. Historians
found it challenging to pinpoint precisely when the barter trade started but believed it started way
back in 6000 BC (Doughty, 2018), as evident from the barter trade by the Phoenicians in Mesopotamia
tribes.
➢ Tribes would barter goods for food, animal skins, weapons, and spices they wanted in return.

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➢ This era marked the earliest form of entrepreneurship responsible for the exchange.
➢ Early during the Stone Age, the population growth rate was almost nil, around .0007%, doubling in about
100,000 years (Getzen, 1997).
➢ As tribes became more prominent in the local area, some families separated and occupied new lands.
Better tools for food exploitation and the ability to track and barter efficiency increased but not
productivity.
➢ They have depleted large tracts of land, tree-dwelling animals, and water mammals for food and
clothing. Hunting and gathering for food brought out less than what could have supported an increase in
the population using the same measure of resources. By the close of the Stone Age, population reached
their limits in some fully populated areas. This situation stimulated domestication of wild animals
and plant cultivation to feed the excess population starting the development of Agricultural Age

START OF SPECIALIZATION

Agricultural Revolution (10,000 B.C. – 5,000 B.C.)

➢Millennia after millennia, humans have become extremely adept at hunting, leading to the extinction of big
animals.
➢In most locations, food became so scarce and compelled humans to make a choice: either to continue moving
out for food or to stay permanently in a place by feeding on plants.
➢During many years of adaptation to climate, they have noticed that some plants reproduce naturally by their
seeds and others by their roots, stems, and leaves. Eventually, they learned to raise plants by sticking to the
natural process with some improved tools and wild animals domestication. This situation ushered in the
second wave of entrepreneurial innovation - agriculture. Discovering agriculture was groundbreaking. People
realized the natural power of the land to support many families that later became cities.
➢During agriculture, humans also allowed early men to do many tasks such as pastoral farming, crop
cultivation, forestry, mining, logging, and fishing, speeding up the pace of innovation. Some individuals in a
community specialized in one activity or another; Life became much better since they could exchange various
goods and services and increased the benefits of all. Even today, a large part of the world's population still
has the effects of the agricultural revolution.
➢During the agricultural era, population growth has increased at 0.0465%, doubling every 1,500 years
(Getzen, 1997). The demographic transition caused tremendous growth in population. This period is the
historical trend of high birth and death rates to low birth and death rates as tribes economically develop
(MyrskylŠ, Mikko, et al., 2009). But the most significant social and economic improvement was the increase
in productivity (incremental innovation in farming, i.e., farm improvements, the building of irrigation canals,
the invention of farm implements, and the selection of better seeds). Since intensive land cultivation
(plowing, sowing, harrowing, harvesting, irrigation, or drainage) required a permanent abode for farmers, there
must have been some form of usage and property rights (ZŸckert 2003). Significant productivity increases
resulted in a surplus of harvest needing storage systems for times of scarcity or trading them for tools and other
necessary things.
➢An early form of money allowed people to exchange goods and services through delayed payments and
save the surplus for larger purchases in the future (Liuliang Yu and Hong Yu, 2004).
➢The development of property rights and barter trade, and money as a medium of exchange stimulated the growth
of early entrepreneurs who started the earliest form of trade and investment: As people become more
efficient, they experience a surplus of food and need protection against looters. Organizing an army is
necessary to protect farmers against the appropriation of productive lands through conquest and slavery.
Those who successfully gathered troops in battle gained power. Through a hierarchy of rules and
commands, they controlled most of society's wealth. However, governance by the military was necessary for
protection and food security against stronger bands of tribes. Collective actions allowed farm innovation
such as road building, irrigation systems, and storage facilities. This situation caused a set of regulations
that govern collaborative farm practices that everyone must agree to cooperate with or go back to the old
ways of hunting and gathering. People must have realized that governance does more good than harm.

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Eventually, the feudal system became an accepted institution. Population growth requires more significant
returns on investment and requires more cooperation among people, emphasizing the division of labor. The
new form of social organization sustained the rapid growth of the population by creating the cultural,
political, and economic civilization.
➢As society became more advanced, the quest for more territories expanded and caused widespread conflict
and war during ancient times. For instance, Ancient Greece developed between 500 B.C.-146 B.C. (de Blois
and van der Spek, 1997), and the ancient Roman Empire ruled for 500 years between 140 B.C.-360 A.D
(Kaplan and Jouni Halki, 2002). Although productivity increased tremendously during the Agricultural Era,
it was accompanied by a wide disparity in wealth distribution. The population split into two classes of
people: peasants who worked the land and stayed at the subsistence level, while rulers controlled all the
wealth. According to anthropologists, wealth disparity began when land became more valuable and capital
substituted for human labor. This wealth disparity caused labor to reduce its value (Cowie and Bowles,
2019). One such substitute was the ox-drawn plows (an early form of capital), a labor-saving technology
that ushered early forms of separation of wealth from labor. This separation caused economic disparity and
is still prevalent today. During that time, a family who wanted their house moved to another place by
legal eviction or seeking greener pasture would require many oxen equivalent to the number of days, weeks,
or even months of free labor. So the family had to remove or leave behind some part of the house to make
the transfer possible. David Ricardo (1817) articulated the conflict between labor and landowner. He
theorized that the market value of labor determines the value of commodities. As the population increases,
labor supply exceeds demand, pulling wages lower toward subsistence level. When the harvest is scarce,
prices of goods rise; landowners gain as they continue to receive land rent while farmers get less amount of
goods since subsistence wages (amount of labor spent) fall below prices.
➢Conversely, when the harvest is abundant, prices go down, and landowners get less than. expected since
the value of rents falls below prices while farmers benefit as subsistence wage falls above prices. Fertile
lands naturally produce more food than land of poorer quality. As a result, it commands a higher rent while
worsening the condition of farmers since prices are higher. Improvement in the utilization of the poorest
land for agriculture increases rent, all of its earnings must go to landowners. As the population increases,
holding land fixed, rents increase, and the real value of wages falls, economic progress slows down. Though
economic life during the agricultural stage was technologically more efficient, uneven distribution of wealth
arose when capital had a higher value than labor - an early form of capitalism characterized by the conflict
between landowners and peasants

MANUFACTURING ERA

INDUSTRIAL REVOLUTION (1800-1950 AD)

➢first appeared in England at the start of the nineteenth century. In 1733, John Kay invented the "ßying
shuttle," a new mechanized method of weaving cloth (Hills, 1998). That invention created the third wave of
innovations applied in the textile industry. The foremost weaving inventor was Richard Arkwright 1770
➢ An English inventor and leading entrepreneur who invented Cotton Jenny (Fitton, 1989). His machines were
faster in yarn spinning and rapidly more efficient and centralized machines in the English textile industry.
Technological advancement towards mechanization also arose in other industries such as steam power,
iron making, and the invention of machine tools. Today, people live in a technologically and industrially
advanced 21" century.
➢These advancements would have been impossible if not for the industrial revolution, which happened from
the 18th to 19th centuries.-Productivity increased tremendously, which caused the average standard of living
to increase. Population growth rose to .43 percent and surged to 1.8 percent in 1950 (Getzen, 1997). The
world population quadrupled from 750 to 2.5 billion, and life expectancy rose from 20 to 35 years
(Getzen, 1997). The social hierarchies during the Agricultural Era broke up by a tremendous increase in
social mobility due to improved wages. As a result, middle-class group of people emerged and actively
participated in a monetary economy. This shift in social and economic structure was the driving force of
the market-driven growth of the industrial revolution. However, many people remain poor even today, and

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rural struggle to support the growing population is prevalent along with the rapidly growing economy.
This situation is not because of the lack of technology but the lack of equitable property rights, social order,
and administrative organization, allowing technology to be productively applied (Olson, 1996). The
increasing wealth disparity remains a threat to the people's health not of the shortage of knowledge,
technology, or money but the defect in economic organization.-The most direct impact of technological
progress on the daily life of most people is unemployment and rising inequality. There were already fears
of unemployment in the early stage of the Industrial Revolution. The common fear was that introduction
of labor-saving mechanization in the cloth industry would replace labor causing massive unemployment
and worsening income inequality. While this could be true initially in some sectors but not in other
sectors, the trend continues today (Olson, 1996). For instance, at the start of the 20 th century, manufacturing
plants and agriculture jobs were disappearing. However, millions of new jobs eventually have been created
in new industries.
➢ Nonetheless, technology is a real threat, particularly to people whose labor skills have become obsolete due to
labor-saving technologies. One historical study presents a different way of looking at the problem. Thomas
Picketty (2014) indicated that the rate of return of capital has recently been greater than income from wages.
He noted that the build-up of wealth by the wealthiest percentiles had grown aster than income likely to
stay in the 21th century. He theorized that increasing the return of capital without far more progressive tax rates
would undermine democracy and political instability. He claimed that wealth becomes increasingly
concentrated in the hands of a small elite whose marginal propensity to consume (MPC) increases as a
class compared with the MPC of poor classes. Since economic growth depends on savings, there is a
greater tendency for the income of the richest to be saved, and these funds are reinvested into the Financial
system. However, at full employment, an attempt to save more will reduce consumption levels and offer less
incentive for firms to increase output capacity. As the economy tends to run at full employment, over-
saving' will reduce economic growth and increase unemployment.
➢ Another trade-off of technological progress is the application of technology in the production of weapons of
mass destruction (WMD). For instance, a study of 170 countries over 45 years showed that increased
military spending led to slower economic growth; over 20 years, a 1% increase in military spending
decreased a country's growth by 9%. Military spending was especially detrimental to the economic growth
of wealthier countries (d'Agostino and Dunne et al., 2017). There are, however, arguments in favor of the
development of nuclear technology. One may argue that the production of WMD creates jobs and, at the
same time, preserves peace by preventing foreign attacks.
➢ On the other hand, smart bombs and cruise missiles have accurate targets for the enemy, reducing the danger
of war and lessening the unintended damage to the civilian population.
➢ These suggest that the production of WMD has trade-offs between the risks of war and the production of
consumer goods, health care, and other more urgent needs. Certainly, other alternatives to preserve global peace
and economic prosperity are more important than weapons of mass destruction.

ENTREPRENEURSHIP IN THE ERA OF DIGITALIZATION

INFORMATION AGE (1950-to the Future)

➢ The very recent historic leap of entrepreneurship came with the rapid shift from the Industrial Revolution to
information technology in the 20th century (Zimmerman, 2017; Manuel, 1996). This era characterizes
information as a commodity and readily available with computer technology. The labor spent on ICT is much
lower than on labor intensive farming and manufacturing. Such an information-driven economy is prevalent
in countries with a significant human capital investment in Information and Communication Technology
(ICT) such as computerized machinery (Robotics), fiber optics, communication satellites, Internet, and
other ICT tools that have changed the operations of business and industries. In addition, ICT-based economic
systems are prevalent in countries with higher life expectancy, lower dependency ratio, and lower
population growth rates. On the other hand, the effect of ICT on economic growth is attributable to the
huge reduction of production costs. The production of goods was through bits or bytes that are easy to
produce and readily accessible through the computer across the country and globally.

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➢ Through ICT, product design and subsequent manufacturing processes can be effectively and efficiently
made compared to the labor-based and expensive traditional product design and processing. Almost all firms
today have computers and internet connections, providing consumers with more diversified and customized
products, improving product quality, and selling goods and services. Technology brings together the tools that
ease the manufacturing and distribution of goods, uses and exchange of information, makes tasks easier to
execute, and solving many of humankind's problems. But for whom are these high tech products and
services?
➢ Research on the effect of information technology on economic growth provides mixed results. Many studies
conducted in European Countries, Canada, and the United States confirmed the positive effect of ICT on
economic growth (Schreyer, 2000). Another study conducted in 159 diverse countries showed a positive
relationship between the growth rate of real GDP per capita in terms of the number of internet users,
fixed broadband internet subscribers, and the number of mobile subscriptions per 100 inhabitants (Farhadi,
Ismail, et al., 2012). However, the effect of ICT use on economic growth is higher in the high-income
groups rather than in lower income groups. This implies that if these countries seek to enhance their
economic growth, they need to implement specific policies that facilitate ICT use. However, the argument
that ICT is a driving engine of economic growth today across countries is disputable, as there are shreds of
evidence that showed the negative effect of ICT on economic growth. For example, introducing a new
investment good like computers can impose large change costs on the economy and decrease economic
growth (Kiley, 1999).
➢ Another study reveals no significant relationship between ICT investment and economic growth for the sample
of 43 countries over the period of 1985-1999 (Pohjola, 2002). In another study, no significant positive
effects of computer penetration on the economic growth of 84 countries during 1990-1999, although
confirms the positive link between the use of mobile phones and economic growth (Jacobsen, 2003). Apparently,
the effect of ICT on economic growth requires further studies that would account for other predictors such
as unemployment, income distribution, peace, and security.

ECONOMIC THEORIES OF ENTREPRENEURSHIP

1. Classical theories
2. Neoclassical theories
3. Austrian theories

CLASSICAL THEORIES OF ENTREPRENUERSHIP (17th–19th Century)

Richard Cantillon (1725):

➢ Was the first to present a theory of the entrepreneur.
➢ Originally, the term “ entrepreneur: is a French word that means “ ability to take charge.”
ability to take charge
o They are the responsible for activating and stimulating all economic activity whereby the economic
success depends.
Cantillon’s theory
➢ Suggest that without entrepreneurs taking and overcoming the risks of business ventures, economic progress
would have slowly stopped a long time ago.

Cantillon’s distinguished three functions of entrepreneurs in his essay:

1. Buying and selling products from the villagers to the cities
2. Buying and selling products from the city to the villagers
3. Producing goods and services sold in the villages or cities.

Five pre-classical economic theories assume the central position in Cantillon’s essay:
1. The role of entrepreneurs and economic geography, entrepreneurs and labor market

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➢ Refers to the importance of the taking charge role of entrepreneurs, coordinating

the product market and resource market which in turn determine the size, location
and proximity of markets.
➢ Cantillon viewed the entrepreneur as central to economic coordination.
➢ Entrepreneurs connect supply and demand by buying inputs at certain prices and
selling outputs at uncertain prices.
➢ They operate with imperfect information, especially about future demand.
➢ Economic geography plays a role: location affects production decisions, market
access, and labor availability.
➢ Entrepreneurs influence and respond to labor market conditions—determining
how labor is allocated and compensated across regions and sectors.
2. Critical role of entrepreneurs in labor value determination
➢ This value differs from the classical theory of wages. The classical value of labor
relies chiefly on the interplay of demand and supply of labor, fluctuating above
or below the “subsistence of wage”.
➢ Cantillon suggested that labor has no intrinsic value unless applied to productive
use as determined by entrepreneurs.
➢ Entrepreneurs set wages indirectly by estimating future demand and adjusting
their resource allocation.
➢ Labor’s value is thus derived from how entrepreneurs employ it, not from
inherent characteristics.
3. Entrepreneurs and theory of value
➢ Intrinsic value of goods which is a corollary of the second theory considered
antagonistic to modern economist.
➢ There were doubts about whether it represents labor value, land value, both labor
and land value, or whether it was like Adam Smith’s distinction between market
price and natural price.
➢ Moves toward a subjective theory of value—value is not fixed but depends on
what consumers are willing to pay.
➢ Entrepreneurs play a key role in interpreting consumer preferences and
determining how much value a good or service can command in the market.
➢ Early shift away from cost-based or labor-based value theories.
Cantillon Effects
➢ Structural changes wherein the domestic prices increase (localized inflation),
entrepreneurs would change their production structure to address then
changing pattern of demand
➢ Causes of changes in the money supply and causing changes in relative prices
of goods.
4. Circular flow model
➢ Cantillon outlined an early version of the circular flow of income, highlighting the
interdependence of economic agents:
➢ Landowners, entrepreneurs, and laborers.
➢ Entrepreneurs coordinate the flow by:
1. Buying inputs (land, labor)
2. Producing goods
3. Selling outputs
4. Redistributing income across the system.
➢ This laid the groundwork for later macro-level models of income circulation.
5. Price – specie flow mechanism
➢ One of Cantillon’s most profound insights, later adopted and expanded by David
Hume.
➢ Money supply changes (e.g., through gold inflows) affect prices:

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Increased money → higher demand → rising prices (inflation)

Entrepreneurs respond by adjusting production and trade patterns.

➢ This theory explained:

o Relative price changes
o International trade adjustments
o Inflationary pressure and purchasing power changes due to monetary
expansion.

Jean-Baptiste Say (1803):

➢ Described the entrepreneur as someone who coordinated and organizes production and creates value by
shifting resources to more productive uses.
➢ Emphasized innovation and the use of resources.

Adam Smith (1776):

➢ Focused on the invisible hand and productivity but didn’t highlight entrepreneurship directly.
➢ Division of labor and the role of the entrepreneur in economic efficiency
➢ Entrepreneurship tied to wealth creation

David Ricardo & John Stuart Mill:

➢ Emphasized capital allocation and economic utility, hinting at entrepreneurship in resource deployment.

Neo-Classical and Austrian Views (19th–20th Century)

❖ focus on supply and demand, equilibrium, and rational decision-making
❖ entrepreneurship viewed as resource allocation
❖ less emphasis on the individual entrepreneur’s innovation or risk.

Alfred Marshall (1949)

➢ Principles of Economics
➢ Entrepreneur as an Organizer, Marshall emphasized the entrepreneur’s role in organizing the other factors
of production such as land labor, and capital to produce good and services efficiently.
➢ Entrepreneurial function
The entrepreneur is responsible for:
❖ Coordinating production
❖ Making decisions
❖ Managing business risks
❖ Innovating and improving processes
➢ According to Marshall, profits are the reward for good judgment, coordination and risk-taking.
➢ He believed entrepreneurs adapt to market changes through supply and demand, influencing pricing and
production decisions.

Frank Knight (1921):

➢ Distinguished between risk and uncertainty, saw entrepreneurs as those who take on uncertainty in return for
profit.

➢ The distinction between risk and uncertainty is:

RISK UNCERTAINTY

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Quantifiable and insurable (e.g. fire, theft) Unpredictable and not measurable (e.g., consumer
preferences, innovation success)

➢ Entrepreneurs are willing to make decisions without knowing the outcomes and bear the uncertainty of future
events.
➢ True entrepreneurial profit arises from dealing with uncertainty, not only the risk.
➢ Knightian uncertainty is a concept influenced later thinkers and policy on entrepreneurship, emphasizing
that entrepreneurial decision-making goes beyond calculation as it requires judgement.

Israel Kirzner (1973):

➢ Introduced the idea of entrepreneurial alertness recognizing unnoticed opportunities in the market.

AUSTRIAN MARKET PROCESS THEORY OF ENTREPRENEURSHIP (AMP)

➢ Austrian school taken as a whole uses verbal logic of a prior thinking in contrast to classical and neoclassical
school which make use data and mathematical models to objectively prove their point.
➢ Austrian school rejects the universal application of any economic theory. Prices are subjective as an
individual’s preference to buy or not to buy a particular good is subjective. While the classical school of
economics holds that objective costs of production determine prices while the neoclassical school holds that
demand and supply equilibrium determine prices, the Austrian school put emphasis on subjective factors
that also determine the costs of production according to the value of alternative uses of scarce resources.
➢ Entrepreneurs play a pivotal role in the Austrian view of economy. The entrepreneur is the active agent in
the economy who uses the information available from prices and interest rates exercises judgement of
expected future prices and interest rates exercises judgement of expected future prices and conditions, make
alternative economic plans, and bears the risk of an uncertain future by taking ultimate responsibility for the
success or failure of the chosen plan.
➢ Austrian economics argued that entrepreneurs have the ability to seek and communicate knowledge
throughout a market system via price information and are responsible for innovation to take place, satisfying
market needs, and changing the systemwide structure to happen.
➢ Entrepreneurs know how to create new goods or services because they are better informed and reap profits
through it. Entrepreneurs make use of knowledge because it will provide some individually defined
consumer benefits.
➢ According to the AMP, entrepreneurs find it profitable to use knowledge to generate new economic value
consistent with the three main conceptualization of Kirzner.
FIRST : is an arbitraging market in which opportunities emerge for a given market that other
markets may overlook certain opportunities.
SECOND : alertness to profit-making opportunities, in which entrepreneurs discover an
entrepreneurial advantage.
THIRD : conceptualization followed Say’s (1803) and Schumpeter (1934) proposition tha
ownership is distinct from entrepreneurship.
FOURTH : doe not required ownership of resources but an idea that adds value to uncertainty and
risk (Knight,121).
These conceptualizations show that every opportunity is unique and therefore, previous activity is
unusable to predict outcomes reliably.
The AMP model is not without criticism.
1st : market systems are not purely competitive but can involve antagonistic cooperation.
2nd : resource monopolies can hinder competition and entrepreneurship.
3rd : fraud, deception, and tax controls also contribute to market system activity.
4th : private and state firms are different but both can be entrepreneurial
5th : entrepreneurship can occur in non-market social situations without competition

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Empirical studie by Acs and Audretsch (1988) rejected the Schumpeterian argument that innovation
requires economies of scale. The criticisms of the AMP have given impetus to recent explanations from
psychology, sociology, and business management.

Joseph Alois Schumpeter (1934)

➢ Described entrepreneurs as innovators and change agents who engage in "creative destruction" to drive
economic progress.
➢ From his theory of economic development, he described the development as a historical process of structural
changes, largely driven by innovation.

Classification of historical process of change according to Schumpeter:

1. Introducing a new product or a new kind of an existing product.
2. Application of new methods of production or sales of a product (unknown in the industry)
3. Opening of a new branch of industry
4. Acquiring new sources of supply of raw materials or semi-finished goods
5. Nedw industry structure such as the creation or destruction of a monopoly position.

➢ He described innovation in his book CAPITALISM, SOCIALISM AND DEMOCRACY (Schumpeter,

1942) as a “process of industrial mutation, constantly revolutionizes the economic structure from within,
incessantly destroying the old one, incessantly creating a new one “, largely driven by innovation.
➢ In terms of how and when innovation has real economic effects, he divided the innovation process into four
phases:
1. Invention
2. Innovation
3. Diffusion
4. Imitation
➢ According to Schumpeter, the invention phase or the basic innovation has less of an impact, while the
diffusion and imitation process have a much greater influence on the state of an economy.
➢ According to him, innovations are responsible for economic growth, and the entrepreneur played a central
role as an innovator.
➢ He described in his theory if Economic Development” the entrepreneur’s main function to allocate existing
resources to “new uses and new combinations”. One of his most enduring contributions was his idea that
entrepreneurship is a unique factor of production and the rare social input that makes economic history
evolve. In other words, innovation is the prime mover of the development of the economy and behind this is
the entrepreneur who performs the function as a catalyst of change.
➢ According to Schumpeter, the typical characteristics of entrepreneurs are intelligence, alertness, energy, and
determination. Entrepreneurship is essentially the actualization of innovation, however, excludes the four
complementary functions of innovation : (1) invention, (2) Risk-taking, (3) Error-correction and (4)
administration which in Schumpeter’s economics of innovation are separate, distinctive, and non-
entrepreneurial in nature.
➢ There are several limitations of Schumpeter's theory of innovation :
1. Overemphasis on Innovation as the Sole Driver
2. Neglect of Incremental or Imitative Entrepreneurship
3. Ignores the Role of Teamwork and Collaboration
4. Inapplicability to All Industries and Contexts
5. Underestimates Risk, Uncertainty, and Failure
6. Limited Consideration of Social and Environmental Impact
7. Assumption of Constant Disequilibrium

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Limitation Description
Overemphasis on Innovation as the Sole Driver Ignores other drivers like demand, policy, and
replication
Neglect of Incremental or Imitative Entrepreneurship Overlooks the value of small improvements and
imitation
Individual-focused Minimizes the role of teams and ecosystems
Context-bound Not fully applicable to all industries or economies
Downplays risk and failure Doesn't fully consider high failure rates and challenges
Lacks social/environmental perspective Focuses only on economic gains
Assumes constant disequilibrium Ignores benefits and realities of stable markets

SOURCE:

MODULE 2: ENTREPRENEURIAL DEVELOPMENT

MODULE 3: ECONOMIC THEORIES OF ENTREPRENEURSHIP
ENTREPRENEURIAL MIND BY FREDINAND C. PAUROM, FREDERICK U. YBANEZ
MINDSHAPERS CO., INC.
COPYRIGHT 2021

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SECTION 6 : Traits of Successful Entrepreneurial Leaders

Objectives:
1. Know and understand models if personality traits that influence successful entrepreneurial actions;
2. Develop hypothesis

Personality Traits

• Research in the mid-20th century tried to integrate research frameworks for entrepreneurial studies in the areas of
economics , psychology, and business management. The aims include defining an entrepreneur, their motivations,
and personality traits.
• Subsequently work, however, encountered conceptual difficulties and inappropriate measuring tools. The empirical
findings varied leading some researchers to conclude that there was no correlation between personality and
entrepreneurship.
• At the beginning of the 21st century the literature showed a generally accepted theoretical framework on
entrepreneurial personality. The framework aims to answer whether certain personality traits predict an
individual’s likelihood of becoming a successful entrepreneur.
• Researchers investigated the prevalence of personality characteristics of entrepreneurs set against other population
groups. They also analyzed the correlation of these characteristics with entrepreneurial performance factors such
as business survival and growth.

The BIG FIVE Personality Traits

➢ Five Factors Model (FFM)

➢ Have their early beginning from the Hippocratic temperament such as sanguine, phlegmatic, choleric, and
melancholic.

Sanguine type
➢ Closely relates to emotional stability and extraversion
Phlegmatic type
➢ Is stable but introverted
Choleric type
➢ Is unstable and extraverted
Melancholic type
➢ Is unstable and introverted

• Later, Gordon Allport in 1936 hypothesized that personality traits were observable and relatively permanent
traits.
• Subsequently, systematic research of the Big Five conducted from the 1940s ended temporarily in the 1960s
to 1970s.
• The Big Five regained acceptance in early 1980s upon the works of Lewis Goldberg, Naomi Takemoto-
Chock, Andrew Confrey, and John Digma and by personality researchers in the 1980s.
• In the 1980s, researchers used the Big 5 to compare the traits of entrepreneurs to either employed workers
or the general population and identify the traits that define entrepreneurship as a group.
• Researchers measured openness, consciousness, agreeableness, extraversion and neuroticism.
✓ Openness to experience describes the breadth, depth, originality and complexity of an individual’s
mental and experimental life.

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✓ Consciousness describes
socially prescribed impulse
control that facilitates task and
goal oriented behavior.
✓ Extraversion defines an
energetic approach toward the
social and material world and
includes traits such as
sociability, activity,
assertiveness and positive
emotionality.
✓ Agreeableness contrasts a pro-
social and communal orientation toward others with antagonism and includes traits such as altruism,
tendermindedness, trust and modesty.
✓ Neuroticism contrasts emotional stability and even temperedness with negative emotionality’s, such
as feeling anxious, nervous, sad, and tense.

Key Traits of Entrepreneurial Leadership

• Visionary thinking
• Resilience and adaptability
• Strong decision-making capabilities
• Emotional intelligence and empathy
• Ability to inspire and empower teams

Differences between Entrepreneurs and Managers

Aspect Entrepreneur Manager

Primary Focus Innovation, opportunity-seeking, and value Efficiency, control, and organizational
creation goals
Goal Orientation Creates new ventures; focuses on growth and Oversees operations; ensures stability and
profitability performance
Risk Appetite High risk-taker; embraces uncertainty and Risk-averse; aims to minimize and manage
ambiguity risks
Decision-Making Quick, intuitive, often under uncertainty Analytical, structured, based on data and
processes
Role Founder, initiator, visionary Executor, planner, coordinator
Resource Use Acquires and allocates resources for Utilizes and optimizes existing resources
opportunity
Innovation Drives innovation and change Maintains processes and ensures
consistency
Independence Highly independent; often starts from scratch Works within a defined structure or
organization
Motivation Passion for solving problems and creating Motivated by achieving organizational
impact goals
Reward Seeks profit, autonomy, personal fulfillment Seeks job security, recognition, promotion
Orientation

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Summary of Differences between Entrepreneurs and Managers according to Big Five

Entrepreneur Manager
1 Openness to experience > Openness to experience
2 Conscientiousness V Conscientiousness
3 Extraversion V Extraversion
4 Agreeableness < Agreeableness
5 Neuroticism < Neuroticism
6 Dependability = Dependability
7 Achievement Motivation > Achievement Motivation

Relationship between Big 5 and Self -Efficacy

Big Five Trait Impact on Self-Efficacy

Openness Enhances learning confidence and adaptability
Conscientiousness Increases goal achievement and task confidence
Extraversion Boosts social confidence and assertiveness
Agreeableness Mildly supportive in team-based tasks
Neuroticism (High) Reduces belief in personal ability and increases self-doubt

Agreeableness
➢ Is the trait of being cooperative , considerate, tender, trusting, accommodating, and empathetic
Disagreeable
➢ Is uncooperative, suspicious, egocentric, self-centered, skeptical towards others’ intentions, and
manipulative.
Conscientiousness
➢ Is a multidimensional personality traits that integrates achievement orientation, dependability, and
orderliness.
Extraverted
➢ Are enthusiastic, cheerful, assertive, energetic, sociable and seek opportunities for enthusiasm
Introverted
➢ Prefer to be unaccompanied, are discreet, smooth, and characterized by partners of the enterprise.
Neuroticism
➢ Depicts people who suffer from anxiety, depression, impulsiveness, hostility, vulnerability, and
self-consciousness.
➢Entrepreneurs face situations that generate stress, such as the employment environment, workload, work-family
conflict and financial hazard of setting out and operating a fresh business venture, physical and psychological
strain.

BIG FIVE Traits and Efficacy

BIG FIVE Self-Efficacy
1 Openness to experience + Self-Efficacy
2 Conscientiousness - Self-Efficacy
3 Extraversion + Self-Efficacy
4 Agreeableness V Self-Efficacy
5 Neuroticism - Self-Efficacy

13 Entrepreneurial Leadership Characteristics To Develop

1. Effective communication
Entrepreneurial leaders communicate effectively with other leaders and members of their team.
They use this skill to convey their own ideas as well as listen actively to the ideas of others. Entrepreneurial

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leaders also usually work to foster productive communication between other team members, departments
and organizations.
2. Confidence
Entrepreneurial leaders are confident in their ability to make good decisions and lead their
organization into productive, growth-oriented activities. They usually gain this confidence in leadership
experience that includes successes and failures that serve as learning opportunities. Often, leaders pair this
confidence with humility and self-awareness of their abilities, skills and limitations.
3. Self-efficacy
Besides confidence, entrepreneurial leaders also show self-efficacy or the belief that they have the
skills required to manage any situation when it arises. Entrepreneurial leaders also motivate and empower
members of their teams to cultivate self-efficacy as well. Self-efficacy can boost confidence, improve a
leader's ability to take initiative and lead to better workflows in an organization.
4. Collaboration
Good entrepreneurial leaders work together with others in leadership positions, as well as members
of their team and external stakeholders, to achieve their organizational goals. They share credit for successes
with those who contributed to them and nurture opportunities for growth and improvement.
Entrepreneurial leaders often take a visibly active role in their company's operations. For instance,
they might position their work area in a central location or even circulate among team members' offices
instead of working from their own office exclusively.
5. Growth mindset
A growth mindset is the belief that you can learn any skill with adequate focus, persistence and
effort. Entrepreneurial leaders often personify a growth mindset and encourage their team members to do so
as well. The growth mindset can help them achieve challenging organizational objectives, as they're
committed to continual personal growth and development.
6. Determination
Strong entrepreneurial leaders persevere when encountering challenges in their careers and their
organizations. They commit to achieving their objectives and foster a sense of dedication and perseverance
in their teams.
Determination helps leaders develop new plans, respond well to challenges and continue working
hard even if things don't progress as planned. This characteristic can contribute to a positive work
environment where others feel like they have room to make a mistake.
7. Optimism
Entrepreneurial leaders choose to believe with optimism that challenges are solvable. They leverage
this optimism into creative problem-solving, innovation and determination. When paired with a sense of
realism and the right tools and resources, this can help entrepreneurial leaders achieve their organizational
goals.
8. Curiosity
Effective entrepreneurial leaders often allow themselves to wonder about solutions and alternative
ways to achieve their goals. Curiosity establishes them as leaders who are comfortable with change and who
can leverage dynamic ideas into productive strategies. Curiosity can also help entrepreneurial leaders see
and take advantage of new opportunities and ideas.
9. Risk awareness
A primary characteristic of entrepreneurial leadership is the ability and willingness to evaluate and
leverage risk as an opportunity for growth. This means entrepreneurial leaders always assess risk and can
expect its implications. While they assess organizational risk, they also feel more comfortable taking risks
that may lead to greater success.
10. Comfort with ambiguity
Entrepreneurial leaders are comfortable with ambiguity and fluid circumstances. This means they
can navigate situations with multiple correct responses or perspectives with ease.
Entrepreneurial leaders also encourage their teams to develop a strong level of comfort with
uncertainty. Since entrepreneurial leaders may work in a start-up company or in a volatile industry, this
comfort equips them to thrive in any circumstance.

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11. Ownership
Effective entrepreneurial leaders instinctively claim ownership of their new ideas, projects and
products. They take initiative in visualizing a final product and guide the action required to achieve that
vision. These leaders frequently also take part in the steps they identify as necessary for achieving the goals
of their organization.
12. Initiative
Entrepreneurial leaders actively plan to manage and address challenges and new projects
independently and as members of their teams. They take action when encountering challenges and motivate
their employees to do the same. Taking initiative can mitigate risks, reduce challenges and lead to more
productive organizations.
13. Persuasiveness
Most effective entrepreneurial leaders are highly persuasive. This helps them motivate their team
and convinces other organizations to follow through with actions that support the organization's best
interests. Many strong entrepreneurial leaders use sales and management skills to support their leadership
operations.

SOURCE:
MODULE 4: ENTREPRENEURIAL PERSONALITY TRAITS
ENTREPRENEURIAL MIND BY FREDINAND C. PAUROM, FREDERICK U. YBANEZ
MINDSHAPERS CO., INC
COPYRIGHT 2021

13 Entrepreneurial Leadership Characteristics To Develop

Written by Indeed Editorial Team, Updated March 26, 2025
[Link]

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SECTION 7: Leadership Competencies in Startups

Leadership competencies are qualities effective leaders display that instill trust in team members and create a healthy
work environment, allowing for company growth.

What Are Leadership Competencies?

Leadership competencies are the interpersonal skills leaders need to succeed. Each industry and field will require its
own set of unique talents for those working at higher levels, but leadership competencies act as the universal core
requirements for ensuring the well-being of a team and developing others' strengths.

These competencies are the building blocks of effective leadership. Leadership competencies are different from
business acumen: While the latter refers to expertise in one's field, the former are people skills, or soft skills, that
prioritize emotional intelligence. Certain leadership competencies come more naturally to some leaders than others,
such as mentoring, problem-solving, or communication skills. These competencies are prized skills to hone, and many
leadership development programs, including conferences and webinars, help those in leadership positions fortify these
competencies.

7 Leadership Competencies

1. Decision-making
Leaders make decisions all the time, and how they lead decision-making can influence others'
opinions of them. Team members should feel included in the decision-making process, but leaders typically
have the final say at the end. Leaders should give each point of view weight and consideration, and junior
levels tend to need a clear sense of who they are reporting to, so they know how decisions are eventually
made within the hierarchy.

2. Communication skills
Communication spans many mediums, including email, phone, and in-person conversations. Team
members will look for leaders who listen to them, offer praise when the timing is right, and only email or
call during office hours. Communication skills help you set clear expectations when delegating tasks, so
your direct reports feel empowered and know exactly what is required of them.

3. Conflict management
Offices are dynamic places where differing personalities and opinions make for rich diversity.
Nonetheless, disagreements can sometimes arise, and leaders will do well to hear both sides before rushing
to resolve conflicts. The leader can get a professional opinion from human resources on how to proceed,
reinforcing their credibility in conflict management.

4. Emotional intelligence
Part of being a leader means being able to read emotional cues. If an employee recently suffered a
loss or is displaying emotions outside their norm, it is important to take note of these tonal shifts but not call
them out publicly. Instead, engage the person in a one-on-one meeting, ask how they are doing, and be
sympathetic to their needs. Letting workers know you care, and asking how you can help, earns your trust
and shows workers you are more than just concerned with their daily grind.

5. Proactivity
Often, leaders will handle big-picture thinking while the staff oversees execution and details.
Nonetheless, strong leaders can show initiative by going above and beyond to help their staff and be a team
player. Volunteer to fix little issues that arise or conduct the research before an original pitch.

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6. Adaptability
A sense of adaptability connotes self-awareness and the ability to change, making it among the
more important leadership skills. New employees will come in with their own ideas, providing you with the
opportunity to listen, change, and grow. This shows humility and can also build trust.

7. Integrity
Integrity is one of the most important leadership competencies. For business leaders, integrity
means upholding the values of an organization, owning up to mistakes instead of placing blame, and
prioritizing the well-being of each and every employee.

The 7 Core Leadership Skills for Startup Founder Success

1. The Courage of Leadership

2. Setting and Demanding High Standards
3. Delegation
4. Coaching and Developing Team Members
5. How to Deliver Difficult Conversations
6. Conflict Management
7. Delivering Effective Feedback

Why is courage the first thing you discuss with founders and leaders?

To be a founder and CEO of a startup takes a lot of courage. These are talented, intelligent people who could take
easier routes. They could work for someone else and not take on the risk and challenge of leadership. Their courage
is inspirational.

Why is decisiveness necessary to be a courageous leader?

The ability to decide, act, and move a team forward is critical to a startup’s success. The leader has to be able to
recognize errors, auto-correct, and move in different directions quickly. They must manage their calendars well. There
is no room for procrastination. And that takes decisiveness.

Why is grit necessary to be a courageous leader?

Sometimes, leaders have to roll up their sleeves. Sometimes, they have to work shoulder-to-shoulder with their
team. They have to know when to do the work and when they can accomplish more through delegation. And they
have to be willing to do both those things.

Why is integrity necessary to be a courageous leader?

With integrity, you either have it or you don’t. When you are in integrity with others, it generates the outcomes you
promised. When leaders fall out of integrity, they become unpredictable. A high-performing team needs to know and
be able to predict how their leader would behave, even if they aren’t there.

How does a leader know they have the appropriate decisiveness, grit, integrity, and compassion to be a
courageous leader?

As founders and CEOs create their business models, many of these qualities fall into play. A key ingredient to
figuring out this mix is the value proposition. When founders create their business model, the value proposition (or
value propositions) of their business come into focus. As that happens, it can bring the founder’s leadership style to
the forefront. They may see that they need to be a driver or a visionary, for example. Regardless, they need to be
intentional and courageous.

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Why is it important for the founder or leader to set the level of standards?

CEOs and founders need standards. If they don’t have them and expect them, they won’t get them. They have to be
pragmatic, but high standards win the day. This is a situation where leading by example is everything. When the
leader has the courage to operate with high standards, their team members see and understand the expectations. People
follow that.
Leaders get what they model.

What are some downstream effects if a startup has not set high enough standards?

They are likely to fail. The statistics show that 90% of startups fail in the first two years. Many times, founders are
great technicians. They start their own business and find they are a great company and CEO, but not always. The
classic example is the terrific mechanic who starts their own shop. They are under-capitalized, and the business doesn't
run well. They can’t weather the hiccups.

How big an issue is delegation for startups?

It's easy for founders and new CEOs to fall into doing everything. They know what needs to be done and how it
needs to be done. An acid test for a leader is if they are in the weeds and someone below their pay grade could do it,
they are being ineffective. They could be using their time better. I challenge my clients to set aside 15 minutes each
day to offload something that will be a force multiplier by freeing them up to higher-level tasks that only they can do.
It develops other skills and ideas, frees them up, saves time, and prevents burnout.
Delegation is a huge deal that is easily taken for granted. Too many leaders are perfectionists – they don’t want to fail
or to set anyone else up to fail. But over-protecting others is not practical for anyone.

Why do founders need to coach and develop other team members?

Coaching and developing are mission-critical. As leaders help others develop, they engage the most valuable
retention tool they have. This process is another force multiplier. If you have hired the right people, they will take
about an hour and turn it into 3x productivity. And then they will then coach and develop others. It works for
organizational savvy, soft skills, and technical skills.
It’s helpful to keep in mind that there are times when the founder, CEO, or other top leader(s) must do the coaching
and development and other times when they should hand off the process to someone else in the organization. As the
business scales, the founder may need to give the responsibility to others below them to be hands-on.
The leader has to be savvy about organizational structure. It needs the right number of people reporting in and the
right people to coach others. If you do this right, the organization will have levels of people who can step in as needed.

What happens if the people you are delegating the coaching process to are incapable of doing it?

It's important for a founder to evaluate that ability in people as they move them up the org chart and into leadership
positions. As we coach and develop people, they learn from us. The savvy ones will get it. If you're a CEO, you need
to be able to assess the talent and capability of each contributor as a leader and coach.

Why must leaders develop the ability to hold difficult conversations?

70% of leadership is solving problems. We need to engage in difficult conversations. I have a step-by-step process
for helping leaders prepare to do this task, but they must also be courageous problem solvers. And they should expect
people to come to them with solutions.

The same question applies to conflict management. Why is it a necessary leadership skill?

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For the same reason. There are times when we want to challenge team members to self-solve. At other times, we
want to invite others in for a discussion. During those times, a founder or leader has to be able to co-address the
challenge and conflict.

Why is it the founder’s responsibility to be able to deliver feedback to team members?

Founders and CEOs who can deliver effective feedback can improve productivity by as much as 35%. On the flip
side, they can undermine productivity by delivering feedback that lacks clarity and consistency.
If you are a leader and you aren't sure if you’re delivering clear feedback, check your language. Clear language will
use connection words like “and” instead of "but” or “when” instead of “if.” And you’ll know if feedback is working
if it reinforces the right behaviors. If it doesn’t, tweak it to elevate the input and how you are delivering it.

SOURCE:
Leadership Competencies: 7 Essential Leadership Competencies, Written by Masterclass, Last updated: Jan
20, 2022
[Link]

The 7 Core Leadership Skills for Startup Founder Success, November 1, 2023, November 1, 2023
Rachelle Kuramoto
[Link]

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SECTION 8: Entrepreneurial Mindset Development

Fixed and Growth Mindset

Mindset
➢ A pattern of thinking or behavior of one or more individuals or groups of
individuals (Argyris, 2024)
Individual
➢ Acquire mindset through interaction with the social, economic, and cultural
environment.
Much of what we understand of personality comes form “mindset that propels or
prevents a person from fulfilling his potential (Dweck, 2005). As a learned behavior, it
exerts strong motivation or demotivation within an individual or group of individuals
to carry on or adopt new attitudes and behaviors.

Two kinds of people according to Dweck: Growth mentality versus fixed mentality

Fixed mindset
➢ Sees individuals’ abilities as innate traits and sees failure as a lack of basic skills
needed.
This is clearly not the case. No one at 50 would have the same IQ. As when they
were 10. If that is the case, something went wrong in his life. The fixed mentality
is also evident from the innate desire for instant gratification. Research has shown
that a person might undertake a business with a large percentage profit on a smaller
scale than would undertake a large-scale enterprise to earn a small profit per unit.
Yet, buyers might go to a store to save P10 for P100 purchase but might not go to
a store to save P100 for P1000 purchase.
Growth mindset
➢ Individuals see themselves capable of gaining any ability through hard work and
persistence.
➢ Dweck (2005) as quoted by Herbert (2007), said individuals with a fixed mindset
consider the primary objective in life the titles of their abilities and not true learning.
When they experience setbacks, they take those setbacks as reflections of their
innate capacity, becoming defensive and helpless. On the other hand, individuals
with a malleable mindset value learning and growth and react to adversity with
increased change efforts, strategies and resilience. A fixed mindset undermines a
person’s ability to cope with challenges or criticism such as loss of job, living up
with expectations, committing mistakes, and so on. People with fixed mindsets
consider challenges tedious and feel easily frustrated. Growth-conscious people see
challenges and a way to create opportunities. Growth mindset people lead to a less
stressful and successful life.

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Neuroscience Evidence of Growth

Mindset

Dr Carol Dweck is an American

Psychologist. She was on the faculty at
Columbia University, Harvard University,
and the University of Illinois before
joining Stanford University. In Mindset:
The New Psychology of Success, Dr
Dweck explains that everyone juggles
between two mindsets: a fixed mindset and
a growth mindset. On the one hand, the
fixed mindset sees intelligence and skills
are a fixed product that we are either born
or not born with. On the other hand, the
growth mindset is believes that people can
develop their abilities and talent.

We can approach our daily lives with a

fixed or growth mindset. Let’s see a few
key points of comparison. In a growth
mindset, you:
• embrace challenges, instead of
avoiding them
• persists in the face of difficulties,
instead of being defensive or
giving up
• see effort as the path to mastery,
instead of something that makes
you look weak
• learn from criticism, instead of
ignoring or denying it
• find lessons and inspiration in the success of others, instead of feeling threatened or jealous
As a result, we may reach ever-higher levels of achievement instead of living with unfulfilled
potential.
Adopting a growth mindset is therefore beneficial throughout our lives, as children, pupils, and
students, but also as leaders, parents, and coaches. The book compiles short stories and lessons
driven from scientific studies to empower its readership to adopt a growth mindset whenever
possible.

These three lessons appeared to be the most impactful in my reading of Mindset:

1. Value effort, not outcome

First, praising intelligence or talent makes people be fearful in the face of challenges. This
happens because praise often focuses on personality attributes, which are difficult to change.

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Instead, praising effort and hard work motivates the pursuit of further achievements without
creating unnecessary pressure.
The next time you wish to show support and encouragement to your family or colleagues, tell them
how proud you are of the hard work they put in. “It’s incredible how much you’ve learned!”
stimulates a growth mindset, whilst “You are so smart!” encourages a fixed mindset.

2. Focus on learning, not proving your intelligence

Second, it’s frightening to give in on the idea of being inferior, but the growth mindset
implies being a life-long learner at all levels. For this reason, we should seek situations where we
challenge rather than comfort ourselves. We must look for opportunities to make mistakes, learn
from others, and acknowledge our shortcomings.
“Why waste your time proving over and over how great you are, when you could be getting
better?” asks Dr Dweck in the book. Similarly, you may have heard that “if you are the smartest
person in the room, you are in the wrong room”. This is the takeaway from this lesson: the energy
you spend on showing off is energy that could have been spent on learning.

3. Surround yourself with people who disagree with you

By being surrounded by people who constantly praise us, we learn nothing. The growth
mindset implies a love of learning. Similarly, it implies seeking to be surrounded by people who
will disagree with you and challenge you. This is particularly relevant given the ways in which
social media and other digital spaces lead us to see and hear content that we already agree with.
It’s important to brake those “bubbles” or “echo-chambers” and seek to socialise with people who
think and behave differently from us.

Growth Mindset and Intuition

Intuition
➢ can be an important business tool.

Two modes of decision-making

1. perception
2. insight

Growth mindset is important in perception because acquiring scientific knowledge and

business information needs persistence and hard work. On contrary, intuition is feeling before
thinking, it is instantaneous, unconscious, automatic, and emotional. It is product of the
evolutionary history of decision-making which helps to create expectations, connect
inconsistencies and alert a person to potential problem. At any given time, active thoughts and
actions vary with active mode.
People use perception rarely as in many situations’ responses are automatic and intuitive.
Therefore, in many situations reasoning is post-hoc rationale where “intuition comes first and
strategic reasoning second in an attempt to avoid cognitive dissonance and feel in control of
the process that the rational mind comes up with reasons.

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Intuition
➢ also know as heuristic, allow people to make decisions in uncertain situations where
science and logic are meaningless

Intuition research has become increasingly popular over past two decades in management literature
and in the academic community in general. There are two reasons for this:
1. intuition is the least understood aspect of managerial cognition
2. without understanding intuition, it is impossible to develop any meaningful
conceptualization if cognition.

Growth Mindset, Risk taking, Creativity and Innovation

Researchers believe that successful entrepreneurs are innovators, profit-seekers and risk-takers. A
growth mindset is essential for the development of theses abilities while innate abilities or talents
are necessary but not sufficient cause for achievement.

One significant result of the growth mindset is the attitude toward risk. Risk in decision situation
occurs when a decision maker lacks information. Growth mindset individuals take doubts or
uncertainties as a challenge to work harder in gathering as much information as possible. With
more information obtained, the probability of reaching the right decision is higher.

Risk taking behavior is a factual probability, where business risks are estimable and reducible.
Risk management plan will help determine investment security through insurance or
diversification dependent on the amount and probability of occurrence. Taking risk is not just a
haphazard undertaking but also an opportunistic venture as in creative risk-taking.

Growth mindset is important in developing creativity since creative time to develop and creative
success is not so much innate ability or talent but in putting more effort and perseverance into the
limited talent a person has.

Innovation is another important ability as an outcome of a growth mindset. The innovation

introduces new ideas of doing things and does not happen quickly since a new business idea needs
time to grow and develop.

Schumpeter define innovation as a process of creative destruction-the process of developing and

introducing new ways of doing things and abandoned the old ones.

Entrepreneurial Mindset

The BIG FIVE personality traits or Five- Factor Model (FFM):

1. neuroticism
2. extraversion
3. openness to experience
4. agreeableness
5. conscientiousness

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people’s mindset
➢ defines how a person thinks, their state of mind or the lens through which they see the world,
and how this influences their propensity for entrepreneurial activities and outcomes.

The state of mind or lens is influences by multiple factors that include:

1. what people know or do not know (related to their knowledge)
2. what people have done or have not done – related to their experience
3. what people can do or believe they can do -related to their level of competency and self-
belief
4. who they are (related to their personality, values, attitudes, and beliefs.)

Eleven characteristics of an entrepreneurial mindset:

1. lifelong learning and openness to change

2. engagement in a complex and uncertain world
3. creative and innovative approaches to problem solving
4. belief and confidence in one’s own capacity and competency to be entrepreneurial
5. desire, motivation and intention to practice entrepreneurship and behave entrepreneurially
6. taking initiative and personal responsibility for actions
7. pursuit of goal-attainment through personal mastery and value-creation
8. recognizing opportunities
9. grit and perseverance in the face of challenges
10. taking risks that lead to learning, growth, and value
11. a belief in one’s ability to influence

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