Entrepreneurship and Innovation in Organisations Essay

Entrepreneurship and Innovation in Organisations - Essay ExampleExplanations of corporate growth and development, and of the organizations world power to maximise profitability over time open increasingly relied on the entrepreneurial function (Greiner, 1972). Simply defined, an entrepreneur is someone who organizes and assumes the risk of a air in return for the profits. Entrepreneurial success depends on the ability to think strategically, have a dupe strategic vision, and achieve quick results. The meaning of entrepreneurship is bound up with the concept of uncertainty. Entrepreneurs create value by acting in the context of uncertainty. As Knight (1921) puts it, the entrepreneur is the organizer of uncertainties, which means he possesses the ability to creatively reorganize the relationships between factors of production and market opportunities in ways that create value which other than would not have been generated.The ability to organize wealth-generating relationships betw een factors of production presupposes that a market opportunity exists for the entrepreneur to capture. This gives rise to the concept of the entrepreneur as being noticer of opportunity (Kirzner, 1973). Entrepreneurial behaviour is, thus, described as action taken on noticed opportunities. Markets be almost always in disequilibrium and based on price disparity and information asymmetry, there always exists opportunity for arbitrage. This opportunity, however, only generates value for the noticing entrepreneur. It can be deduced that value is generated not only by an entrepreneur who is organizer of uncertainties, but also by the entrepreneur who is noticer of opportunities (Jones & Butler, 1992). In entrepreneurship, once an opportunity has been acted upon, a series of internal forces begin to interfere in the entrepreneurial process. A distinction arises between entrepreneurship and management in the firm, leading to agency chores. The agency problem occurs when it is strong fo r one party to evaluate the performance of the other due to uncertainty in environmental, organizational, or initiate conditions. Moreover, the motives of the parties to an exchange may be assorted giving rise to opportunism and, in turn, agency problem (Jones & Butler, 1992). In the entrepreneurial context, risk preferences cause an agency problem because the principal and agent have different risk preferences. Agency theory elaborates on the different risk preferences by discussing risk aversion of agents stating that the agents are only rewarded normal salary even though they have to bear the uncertainty of entrepreneurial activities. On the other hand, the principal is the residual claimant of all net revenues of the activities. The reward to the principal is the entrepreneurial profit for undertaking uncertainty whereas the reward to the agent is normal salary for risk taking. This disparity in reward organise gives rise to agency problem where agents have no fillip to beh ave entrepreneurial (Jones & Butler, 1992).Agents face an additional problem if they have injected any capital in the organization. This is because if the organization engages in a risky move and faces bankruptcy, the agents lose their capital and have difficulty in securing equivalent alternative employment. Therefore, there is no incentive for agents to invest in the organization. This causes a misalignment of interests of principals or entrepreneurs and agents or managers and results in a loss in a firms