Dynamic Economy Roots In Innovating Entrepreneurship Commerce Essay

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Hisrich et al (2010) define an entrepreneur as "An individual who takes initiative to bundle resources in innovative ways and is willing to bear the risk and/or uncertainty to act".

Drucker (2007) defines innovation as "...the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth".

McAdam et al (2004) in discussing the objects to integrating innovation within small to medium enterprises, raise the point that "Globalisation, economic changes, decreasing product lifecycle, increased technological capabilities, changing consumer needs and increased competition add to this challenge".

Drucker (2007) points out that "Today's business especially the large ones, simply will not survive in this period of rapid change and innovation unless they acquire entrepreneurial competence".

Drucker (2007) suggests "The enterprise that does not innovate inevitably ages and declines." Steele and Murray (2004) support Drucker's claim and add "to remain ahead it is important to speculate on the future rather that sit tight and consolidate". Pinchot and Pellman (1999) further Drucker's suggestion and declare that "...innovation is the primary source of lasting competitive advantage in the twenty-first century". Pinchot and Pellman (1999) point towards the fact that innovation is at the heart of the organisation and without innovation the firm would cease to exist. Bridge et al (2003) maintain that "Innovation is the successful development of competitive advantage and as such, can be said to be the key to corporate entrepreneurship".

Ahlstrom (2010) gives the example of Microsoft. Microsoft is a prime example of a company that is constantly innovating, each time they produce a new operating system for computers they add additional features to packages such as Microsoft Word. These features are added before consumers realise that they have a need for them, therefore reinventing their products and outperforming their competitors. Audretsch (2004) declares that successfully changing a country's economic performance is derived from how well innovation is exploited.

Hisrich et al (2010) state that "Innovation is the key to the economic development of any company, region of a country, or country itself". Flinter, as cited in Cooney and Hill (2002) suggests that "...Ireland has moved from a culture that viewed entrepreneurs with scepticism to recognising their contribution to the country's economic growth". The Department of Enterprise, Trade and Employment (2008) proclaim that "Entrepreneurial behaviour and innovation are inextricably linked, and Ireland is one of the most entrepreneurial countries in the world". The Global Entrepreneurship Monitor (2009) report on global entrepreneurship shows that Ireland is has elevated amounts of innovative "early-stage entrepreneurial activity". A recent report into research and development within Ireland shows that;

Between 2004 and 2006 over 47.2% of firms were engaged in innovation activities, with 56.7% of industrial firms and 41.3% of service industry firms being active in innovation of some kind. In monetary terms product innovation activities contributed an estimated €33.5bn to company turnover in Ireland (12.6% of the total turnover of businesses), much of which was underpinned by research and other knowledge investments.

(Forfás, 2009)

These figures suggest that innovation contributed to Irelands unprecedented growth over the past decade where Gross Domestic Product "growth averaged 6% in 1995-2007" (Trading Economics, 2010).

Drucker (2007) states that "...a change in market or industry structure is also a major opportunity for innovation." Nagji and Wordham (2009) point out that "The current recession coincides with fundamental changes in the business landscape". Goffin & Perkin (2010) state that ".....a recession is exactly the time to invest in innovation, as it will lead to the greatest competitive advantage". Zhao (2005) suggests that "......in the current turbulent economic environment, developing organisational capacity to acquire, create, accumulate, and exploit knowledge should be an essential strategy in gaining a competitive advantage through innovation." Intel is an example of an organisation that in the current climate are innovating. Despite reducing its workforce by 5000 Intel will spend Seven billion dollars over the next two years to construct new plants that will produce computing technological advancements for the future (Nagji and Wordham, 2009). According to the IDA (2010) "Intel describes its philosophy as "innovate or die". Drucker (2007) states that "For the existing business to be capable of innovation, it has to create a structure that allows people to be entrepreneurial". It is obvious then from the above examples that both Microsoft and Intel promote a culture of innovation within their organisations. Hisrich et al (2010) state that businesses must "...encourage and support new ideas instead of disconcerting them...". Hisrich et al (2010) also suggest that firms who have encouraged an entrepreneurial structure within their firms "lead rather than follow competitors". For innovation then to succeed within an organisation there must be a culture within the firm to promote and nurture innovate ideas. Porter, as cited in Bridge et al (2003) points out "that continuous innovation is essential for organisational survival in competitive markets but, in view of the barriers, achieving it requires hard work, appropriate attitudes and proper structures". The company 3M is notorious in the field of innovation. Bridge et al (2003) advise us that at the end of the 1980's 3M created an additional 60,000 products and in 1988 approximately one third of sales occurred from products nurtured in the preceding five years. According to Arndt (2006) Larry Wendling, (vice-president of 3M's corporate research) 3M's innovate success comes down to "...a seven-point list. You might call it "The Seven Habits of Highly Innovative Corporations". Within the article Wendling suggests that the seven habits are: "1.From the chief executive on down, the company must be committed to innovation. 2. The corporate culture must be actively maintained. 3. Innovation is impossible without a broad base of technology. 4. Talk, talk, talk.

5. Set individual expectations and reward employees for outstanding work. 6. Quantify efforts. 7. Research must be tied to the customer" (Arndt, 2006). Within the same article the author describes the company's current innovative product which at that stage was a post it note, printer on glossy paper that can be stuck on a fridge, called "post-it Picture Paper" (3M, 2010). This goes in line with what Drucker (2007) describes as "all effective innovations are breathtakingly simple. Indeed, the greatest praise an innovation can receive is for people to say :'This is obvious. Why didn't i think if it?". 3M's addition to its product family is an adoption of a current product. Technological advancements now allow us to develop our own photos in the comfort of our own home; 3M have exploited this and adapted their products to changing market conditions.

Goffin and Perkins (2010) state that the current financial crisis has put companies in a position that they haven't experienced before. They further this by saying that "tried and tested management approaches are no longer appropriate and managers need to develop a plan to boost creativity and innovation". Di Mini et al (2010) illustrate the importance of leadership in innovation in a global downturn by displaying the example of Fiat. During the economic down turn in the 1990's the car industry experienced severe turmoil (Di Mini et al, 2010). According to Di Mini et al (2010) "...Sales plummeted by 20-30% between 1992 and 1993". Car makers in Europe were hit hard by the recession, especially Fiat who had a 12% stake of the European market. The response of the CEO was to reduce its workforce and company's spending on research and development. Gian Carlo Michellone disagreed with the CEO and provided management with a plan to open its research centre to external parties to contribute to innovation. The result now, years later is that Fiat has turned it reputation throughout the world around and has formed a partnership with Chrysler in the America which could potentially save Thirty thousand jobs. Thus showing how reinventing the company when market conditions changed potentially saved the organisation (Di Minin, 2010). Drucker (2007) advises us that "a change in industry structure offers exceptional opportunities..." this was certainly the case for Fiat and also AXA Ireland. Goffin and Perkins (2010) demonstrate the example of AXA Ireland. In 2000 AXA Ireland Insurance experienced a potential crisis with huge competition, disintegrating profit margins and little consumer focus. When John O'Neil, the new Chief Executive Officer took over, the workforce expected a serious of cost cutting measures to restore the company to its former hay day.

O'Neill did the opposite and instead communicated with staff on the significance of innovation in "developing new insurance products and in implementing customer-focused processes" (Goffin and Perkins, 2010). He encouraged innovation, "Through initiatives such as the 'Madhouse' (ideas generation) and 'Taskmasters' (process innovation" (Goffin and Perkins, 2010). The results can be seen today as "AXA Ireland has not only become extremely profitable but also created a culture of innovation that is the envy of their competitors" (Goffin and Perkins, 2010). It is clear from this example that O'Neill changed the culture within the company to an innovative one, thus reinventing the company as market conditions changed.

Drucker (2007) also informs us that "To allow it to innovate, a business has to be able to free its best performers for the challenges of innovation". In the case of AXA Ireland, by creating in house initiatives the company have done just as Drucker suggests and in doing so reinvented their business.

Bridge et al (2003) suggest that "......organisational policies and procedures often discourage managers and others from taking risks". They further point out that "...failure is often seen as a barrier to career advancement". Hisrich et al (2010) advises us that a company wishing to establish an entrepreneurial culture must also be willing to create a setting that permits errors. They further their point by suggesting that without a setting that permits errors, hardly any generated ideas will be cultivated. At a recent entrepreneurial conference, out on your own, attended by the current author, Seán Gallagher (2010), "entrepreneur and founder of smart homes" (Sean Gallagher, 2009) spoke noticeably about entrepreneurial failure. He suggests that people should invest in themselves and not be afraid to take risks that one will learn from failure. This can be carried through to innovation within the firm also, both employees and organisations can learn from failure. Fear of failure is just one example of how innovation within an organisation is hindered. Pinchot and Pellman (1999) suggest that a "....big gap in the innovation process is the capacity of the system to implement ideas rapidly and cost effectively". Bridge et al (2003) point out that "If a new idea looks promising then adequate funds must be made available". Pinchot and Pellman (1999) "The key to cost-effectiveness is to accelerate the learning process by testing the critical assumptions as early as possible".

The European Round Table of Industrialists (1998) state that "Competitiveness is in turn linked to innovation, which allows us to keep pace with, or even take the lead in, advances in world markets".

The Department of Trade, Enterprise and Employment (2008) match the statement from the European Round Table and declare that "The pressure to be competitive drives innovation across the range of business practice; and, conversely, innovation is a key driver of competitive advantage".

The National Competitiveness Council (2009) state that "Ireland's competitiveness position has deteriorated in recent years". They suggest this is due to "Strong domestic growth in recent years led to significant increases in the costs of doing business in Ireland". The Department of Trade, Enterprise and Employment (2008) assert that "Enhancing competition within Ireland's domestic economy is critical to improving the cost competitiveness of internationally-trading Irish-based firms". The Irish Minister for Enterprise, Trade and Innovation, Batt O'Keeffe (2010) spoke at the aforementioned entrepreneur's conference and suggested that the cost of doing business in Ireland is now back to levels seen in 2001. He also hinted that he hoped to announce a further 20% reduction in the cost of doing business within the next few months.

Blau (2010) advises that "Policy makers in Brussels now agree that innovation is essential not only to promote economic growth but also to lead the region to a sustainable future."

The Irish Government, like their European counterparts recognise the important of innovation and entrepreneurship and in 2008 issued a blueprint for Ireland future "Building Ireland Smart Economy: A Framework for Sustainable Economic Renewal." (Ireland, Department of Taoiseach, 2008).

The objective of the plan is:

...to make Ireland the innovation and commercialisation capital of Europe - a country that combines the features of an attractive home for innovation multinationals while also being a highly-attractive incubation environment for the best entrepreneurs in Europe and beyond.

(Ireland, Department of Taoiseach, 2008)

In addition to the publication of the Smart Economy proposal

...the Taoiseach, Mr, Brian Cowen T. D. appointed the Innovation Taskforce to advise the Government on its strategy for positioning Ireland as an International Innovation Development Hub and to assist in making the Smart Economy a reality.

(Department of Taoiseach, 2010)

Minister O'Keeffe (2010), spoke at the previously mentioned entrepreneur's conference about how the Government were increasing funding for innovation, and that the announcement of the €500 million innovation fund would allow for innovation to become a commercial reality for some businesses.

According to the official publication on the innovation fund:

The €500 million Innovation Fund Ireland has been created to increase the availability of risk capital for early-stage and high-growth companies, and is central to the Irish Government's strategy to develop Ireland as a Global Innovation Hub.

(Ireland Department of the Taoiseach, 2010b)

The increased funding for innovation in the current climate suggests that the Irish Government wish to invest in the future of the Irish economy to outperform other countries when global recovery begins. According to the OECD, as cited in a recent Forfás (2010) publication: "Innovation is essential if countries and firms are to recover from the economic downturn and thrive in today's highly competitive and connected global economy".

Throughout the text the current author has illustrated the argument for the statement at the opening of the assignment. The argument has been shown through reviewing the literature, statistical information and using company situations.