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This essay will introduce entrepreneurship and innovation from the theoretical perspective and give the critical analysis, and explain a specific case study from the aspect of business innovation. Moreover, the relationship between entrepreneurship and business innovation will be discussed and interpreted in this paper. This essay will contain three significant sections of entrepreneurship and business innovation, case study and conclusion.
Firstly, the section of entrepreneurship and innovation will introduce and interpret the definition and discussion of entrepreneurship and innovation. The interrelationship between entrepreneurship and innovation will be discussed. Secondly, the section of case study will specify the application of innovation through the case study of Toyota. Finally, the conclusion will be given in the final part.
Entrepreneurship and Innovation
In terms of Shane and Venkataraman (2000) and Hitt et al. (2001), since there is no consistent definition of entrepreneurship and the relevant concepts, researchers cannot create a conceptual framework from the theoretical perspective. Furthermore, most researchers incline to focus on the practice of the entrepreneurship field. However, like Brazeal and Herbert (1999), integrating entrepreneurship with innovation and creativity and understanding the innovation under the circumstance of the entrepreneurship field could be considered as the focuses of future research. The following will not just introduce entrepreneurship and innovation, but also try to interpret the interrelationship between entrepreneurship and innovation.
Entrepreneurship is considered as a venture creation process of creating and simulating something which contributes to create wealth for society and share value (Drucker 1985; Kao 1995). This venture creation process needs entrepreneur to emphasize on value creation, recognize and pursuit opportunity, promote innovation and creativity, and allocate resources (Wickham 2004). Entrepreneurs should play an important role in opportunity recognition, innovation development and limited resources allocation. Furthermore, opportunity recognition is described as a significant process accompanying innovation and creativity. However, the previous perspective belongs to the view of entrepreneurship as a process originating from Shane and Venkataraman (2000). There are several viewpoints which observe and interpret entrepreneurship. Within the field of anthropology, opportunity recognition and risk-taking are viewed as the two marked characteristics of entrepreneur (Barth, 1969). This risk to a great extent may needs entrepreneurs to seriously challenge the common social moral and value, even entrepreneurs' ethics and moral. In other words, entrepreneurs' activities and practicing not only affect the development of the specific firm or company, but also influence society norms and community values. For example, along with the radical development of globalization and outsourcing, multinational corporates in developed countries integrated and transformed the production from homeland to developing countries with lower production cost. Nike and child labor in Pakistan has been considered as the remarked case, which manager of Nike or local contractors in developing countries seriously violate local country's law and challenge society norms and moral (Boggan 2001).
As the previous mentioned, innovation is considered as one of the most important pillars of entrepreneurship. Innovation contains remarked improved products and service, creative and effective organizational structure, managerial practice and operational process (Trewin 2004). Drucker (1985) defined innovation as a process that converts new concepts into value and wealth contributing to customers, firms and society. Moreover, Zairi (1999) and McGrath and Bruce (1998) clearly argued that innovation was a process participated by new ideas and knowledge. Furthermore, the understanding and implementation of new technologies, managerial practicing, procedure and others can be integrated to promote innovation from the perspective of enterprise. The purposes of employing innovation not only concern on shape and maintain the competitive advantages beyond competitors, but also produce and offer better products and service for their customers though the understanding of market and customers' needs.
The understanding and interpretation of the relationship between entrepreneurship and innovation is considered as the significant emphasis of this section. Innovation is regarded as the key characteristic of an entrepreneurial orientation (Lumpkin and Dess 2001). Drucker (1985) suggested that innovation is the principle practice of entrepreneurship, which is viewed as the key dimension of entrepreneurship. The implementation of entrepreneurship may lead to the renewal of products and service, even the development and penetration of new and existing market through innovation. Furthermore, Morris (1998) argued that three key dimensions of entrepreneurial attitudes and behaviors are composed of innovation, risk-taking and proactiveness. This viewpoint suggests that innovation is considered as the solution of problems on products, service and market.
An alternative view indicates that entrepreneurship can be regarded as an element of innovation (Hurley and Hult 1988). From this perspective, the spectrum of innovation can be broader than entrepreneurship. Managerial innovation, such as Total Quality Management, Business Process Reengineering and Redesign, Cross-culture Management is considered as one dimension of innovation, which broadens the spectrum of innovation. However, entrepreneurship can promote managerial innovation.
This paper cannot specify the further philosophy of the previous two views on the understanding of the relationship between entrepreneurship and innovation. However, there is no doubt that the closer relationship between entrepreneurship and innovation can correctly promote and stimulate the development of entrepreneurship and innovation. Specifically, entrepreneurship can further support and promote the development of innovation; innovation can strongly support managerial innovation and entrepreneurship.
In conclusion, this section introduced and explained entrepreneurship, innovation and the interrelationship between entrepreneurship and innovation from the theoretical perspective. Entrepreneurship is considered as a value venture process. Furthermore, innovation is integrated in this process. The relationship between entrepreneurship and innovation is mutual.
This section will take Toyota as an example to specify the application and implementation of innovation in practice. There are three innovation aspects of Toyota including production system, supply chain and managerial innovation.
Toyota Motor Corporation, established in 1937 in Japan, is described as the worldwide leading motor vehicle manufacturing corporate. Furthermore, Toyota becomes the world's largest motor vehicle manufacturing company in the past 70 years. In 1957, Toyota employed the globalization strategy to expand the scope of vehicle, and integrated Toyota's Production System to exert a positive influence. Toyota significantly contributes to the design and production of motor vehicle and the value creation for its customers (Toyota 2010). Toyota integrated and developed the powerful and effective distribution, developer, channel and learning network with its partners all over the world to be dedicated to the last-long partnership with customers and their success. Furthermore, superior customer service of Toyota is regarded as one of the most important competitive advantages beyond its competitors.
The effective and powerful production system will be considered as the most significant competitive advantage pursued by most firms. Toyota has this unique and effective product system-Toyota's Production System. The philosophy of Toyota's Production System is to be dedicated to create and offer superior value for customers through a process of eliminate waste as much as possible and shorten leading time (Womack et al. 1990). Innovation as a process is employed and applied to production system and supply chain. For instance, the introduction and implementation of Total Quality Management can further improve the quality of products and service and the efficiency of production system. Total Quality Management concentrates that quality can be produced yet tested.
Supply chain in Toyota makes Toyota's Production System integrate and allocate resources. Furthermore, Toyota has a significant ability to work collaboratively with suppliers to establish the remarked supply chain and network. Toyota and its partners concentrate on the sharing of proximity, organizational alignment and cultural similarities. This supply chain make Toyota employ domestic production whose parts account for 70% of the materials and components from local partners. For example, when Toyota entered European market, Toyota employed several activities to penetrate into European market. Referring to innovation, the inter-organizational network of Toyota is considered as one of the most important innovation in the European market. The important aspect of this network is to allocate and integrate limited resources controlled by other companies (Chetty and Holm, 2000).
Moreover, managerial innovation is regarded as one of the most important innovation aspects in Toyota Company. In terms of Liker (2004), he critically proposed The 14 Management Principles transformed from Toyota Production System to. The 14 Management Principles can be divided into four broad categories including philosophy, process, people and partners and problem solving. The following figure will be represented in the pyramid diagram. Firstly, the principle of philosophy-long term thinking will be considered as the foundation of production and organizational structure. Secondly, the principle of process-eliminate waste will result in continuous improvement. Thirdly, the principle of people and partners-respect, challenge and grow them will make Toyota integrate the powerful supply chain and shape their own competitive advantages. Fourthly, the principle of problem solving aims to encourage its employees and partners to seek the solution of production and management problems.
In conclusion, entrepreneurship and innovation were considered as the two important aspects of starting. However, there are two viewpoints considering the relationship between entrepreneurship and innovation. The first view suggested that innovation is regarded as one dimension of entrepreneurship. Nevertheless, the second view argued that the spectrum of innovation is larger than entrepreneurship. In this paper, the mutual interrelationship between entrepreneurship and innovation will further promote and simulate each other. The case study of Toyota will explain the three applications of innovation including production system, supply chain and managerial innovation.