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The traditional implications associated with business included prominent indications towards the lineage based ownership of the business. This resulted in the segregated accumulation of market share for certain organizations owned by colossal players in the domain of business. The major exchanges in the economy, as well as the distribution of resources, are also influenced by the conventional structures of business organizations.
However, the proliferation of technology and the increasing inclination of individuals to leverage the risks of a business for obtaining profits have resulted in the prominence of entrepreneurship activities. The definitions of an entrepreneur on the basis of several theories proposed in the context of required characteristics in an entrepreneur and the different underlying apprehensions faced by an individual while engaging in entrepreneurship. Furthermore, the compulsory requirements for estimating business plans and models as well as the perceived outcomes, risk management, acquisition of resources and the causal agents for an entrepreneurial mindset in an individual.
The association of entrepreneurship with social objectives has led to the origin of social entrepreneurship. Social entrepreneurship is hailed as a formidable contributor to the sustainability of an enterprise in a particular social and environmental construct thereby ensuring feasible returns in the investment of entrepreneurs with limited complexities (Barrington & Ireland, 2007). The following report highlights the notable theories pertaining to entrepreneurship and development of small firms with an illustration of concepts which could validate the considerably higher rates of failure in SME’s in the UK.
The cognizable illustration of literature associated with entrepreneurship and business management in small firms could facilitate a comprehensive impression of the essential requirements in order to align personal entrepreneurship goals with social goals and therefore obtain a promising competitive advantage over peers in the sector of business (Carson et al., 1995). Review of literature in accordance with examples serves as a critical inclusion in the report presented below since a practical apprehension of the causes for the failure of SMEs becomes flexible. Other profound highlights of the report refer to the role of small firms in an economy as well as the factors responsible for the failure of small business despite support facilities in the UK.
The consideration of distinct paradigms for determining the option of entrepreneurship provides a reliable insight into the perceived outcomes and the relevant factors which inhibit the progress of SMEs in the UK. As per Churchill & Lewis, primarily, entrepreneurship has been related to the social apprehension of success and failure (Churchill & Lewis, 1983). Constructs of different societies have indicated distinct precedents for success and failure and the consequences also vary in the different contexts. The apprehension of failure as a terminal outcome in certain cultures as well as the subjective illustrations of failure and success has led to different ambiguities related to the explanation of success for an entrepreneur.
Therefore the failure equation serves as a prolific resource for identification of the significance of entrepreneurship. According to Carter & Jones-Evans, the failure equation comprises of four essential elements which reflect the actual definition of success in small business development activities (Carter & Jones-Evans, 2000). The initial perception of entrepreneurs in the context of their startups is related to the survival as well as closing with no debts. Furthermore, entrepreneurs prefer to close with profits or provide an Initial Public Offering and going public.
The success of a small entrepreneurial establishment is derived from the accomplishment of above-mentioned objectives. Among these objectives, the feasibility of closing with profits and introducing an IPO is minimal. In such cases, the definition of failure cannot be attributed to financial failure since the closing of start-ups without any debts or with profits could be influenced by various other factors. Carson said that the closing of a company can be based on the other factors such as the decision of the owners to move out of the business or accepting job offers. Therefore, it would be inappropriate to determine to close of start-ups as resultants or indicators of financial failure (Carson, 1991).
The ambiguity between success and failure is compounded with the preferences of the majority of entrepreneurs for establishing a new venture in the case of failure of their existing startup establishment. Hence it can be aptly perceived that success and failure are dependent on the perception of surrounding environment and the expectation of involved people. The origins of failure and failed individuals did not happen until the late eighteenth century after which failure was termed as a social construct and acted as a stigma.
The establishment of a small business startup in the UK or any jurisdiction is associated with promising levels of returns on investments as well as other financial benefits. However, the association of financial returns with success has been a long debated topic in the context of entrepreneurship and business management literature. One of the most common misconceptions associated with entrepreneurial success is that entrepreneurs earn more than the average employed person. As per Chaston & Mangles, facts represent that the earnings of common self-employed individuals and employed individuals are approximately the same. Furthermore, the skewed distribution of earnings facilitates profits to superstar entrepreneurs while others stay below the average mark (Chaston & Mangles, 2002).
The self-employed individuals who earn below average face almost one-third reduction in their earnings as compared to an employed person. Therefore the motive of entrepreneurs becomes unclear with the opportunities of the generation of profits in public equity markets. Entrepreneurs invest in higher risk ventures for varying purposes which include the pursuit of passion, decision making, and controlling abilities as well as solving issues which are highly detrimental. Therefore the association of entrepreneurship with the vision of sustainability and higher revenue should be replaced with that of a vision for continuous productivity and innovation in creation. The vision of embarking on a journey of creation induces competencies in a startup which are crucial contributors in the later stages of an entrepreneurial establishment.
According to Deakins & Freel, the knack for creating new products in entrepreneurs prompts them to assume critical risks as well as accountability for their creations (Deakins & Freel, 2009). Even after a consecutive series of failures in production, the process of learning becomes strengthened due to the failures were seen in the domain of business. These excerpts from the learning process are known for preparing an individual to cope with complexities in the future business environment. The third element in the failure equation is responsible for clarification of the definition of failure in the context of venture failure. Often it is perceived that the failure of a particular venture results in the failure of the individual or simply indicates it. The failure equation negates the apprehension of the failure of a venture as the failure of the individual.
The prime reasons for the above-mentioned statements indicate that SMEs tend to wear out in the long run and thus a failure is a common event in the context of entrepreneurship. As per Audretsch & Keilbach, another reason to be considered in the failure of ventures could be identified in the maturity of a market as compared to the infancy when certain startups are established (Audretsch & Keilbach, 2007). Since the market maturity is beyond the scope of the ventures, the scope for entrepreneurial success is limited. Different types of research activities have suggested the relation between age of an enterprise and their survival rates while minimal emphasis has been laid on the success rates of entrepreneurs.
The lack of opportunities to collect and evaluate the opinions of failed entrepreneurs leads to discrepancies in the relating failure of ventures with the failure of individual entrepreneurs. The example of Milton Hershey depicts that closing of an enterprise does not necessarily mean individual failure since his first attempt at establishing a candy manufacturing business in Philadelphia turned into a failure. According to Hughes & Storey, it was his idea to design a formula for milk chocolate with the reputation of the product as a Swiss luxury item. It is interesting to observe that Milton Hershey failed in almost six businesses prior to the establishment of a globally renowned brand of milk chocolates (Hughes & Storey, 1994). The final element associated with the failure equation directs towards the influence of failures on learning of entrepreneurs. This element emphasizes on the positive prospects which could be obtained from failure in entrepreneurial establishments and thus presents a viable impression of the meaning of failure in a startup business. The case of Apple product launches suggests how the company evolved its products according to failures in the previous product launches.
As per Johnson & Scholes, the failure in specific product launches could have spelled misfortune for innovation in products at Apple (Johnson & Scholes, 1993). However, the enterprise apprehended its flaws in product design and thus was able to create products complemented with the reduction of flaws observed in earlier product designs. Therefore, the foremost concern in the establishment of an entrepreneurial startup is observed in the perception of failure as a positive entity rather than a source of social stigma. Comprehension of the failure equation enables entrepreneurs to understand the contextual definition of success and failure and thereby prepare contingency measures for dealing with failure rather than treating it as a terminal outcome. Furthermore, an individual could be able to recognize the appropriate point for stopping the business and deciding for a new establishment or any other activity.
Realization of entrepreneurial opportunity cannot be considered as a potential contributor to the establishment of a startup as perceived in theoretical illustrations. The most profoundly observed apprehension in individuals preferring entrepreneurial activities is the fear of failure. Since it has been already noticed that failure and success in entrepreneurship are merely social constructs are subject to the individual perception of observers. As per Casson & Godley, the corridor principle depicts a clear explanation of the founding stage of a startup and the hesitation of founders to engage in high-risk ventures (Casson & Godley 2007).
The theory of corridor principle indicates that the domain of entrepreneurship serves as a corridor of unexplored, unintended and novel opportunities which can be capitalized on by entrepreneurs during the launch of their new ventures. The principle further explains the hesitation of entrepreneurs in view of the unexplored nature of opportunities accessible in the corridor. As per Shane & Venkataraman, the corridor principle also highlights the provision of opportunities to multi-venture entrepreneurs for fabricating distinct corridors of opportunity and thus access novel prospects (Shane & Venkataraman, 2000).
The opportunities available to entrepreneurs can be broadly observed in the provision of resources as well as estimation of objectives. The approach of entrepreneurs varies in the context of the opportunities utilized by them. According to Smallbone, Leigh & North, the individuals working with effective utilization of resources are characteristically associated with effectual approach while those entrepreneurs who associate their operations with specific goals are known for the casual approach. The means or resources available to an individual for the promotion of entrepreneurship include knowledge, identity, and relations (Smallbone, Leigh & North, 1995).
Knowledge of an individual comprises of proficiency, education, and experience in the field. The relation aspect of an individual refers to the individual’s social networks. The identity of an entrepreneur can be determined from the distinct entities such as abilities, inherent traits, and behavioral attributes. As per Storey, the effectual entrepreneur is associated with the formulation of distinct strategies or course of action in order to create a specific desired effect (Storey, 1994). The decisions of an entrepreneur on the preferred course of action are subject to the stakeholders’ perspective since they are responsible for the contribution of resources as well as generating expressive agendas alongside associated goals of the new enterprise.
Therefore, the effectual approach has been closely associated with entrepreneurship since the casual approach indicates accomplishment of predefined objectives with the use of provided means while the former reflects the use of available means for reaching diverse ends required for the sustainability of the novel enterprise. The use of unwanted resources for accomplishing entrepreneurial objectives is also considered as a prolific aspect of effectual entrepreneurs which enables them to obtain a competitive advantage over the other competitors.
The means referred to in the effectual approach of entrepreneurship have to be realized distinctly in order to realize potential returns on entrepreneurial investment by an individual. The first aspect refers to the identity of the individual comprising of behavioral traits and description of attitudes as facilitated in the literature (Stacey, 1990). The application of identity traits in entrepreneurial activities is the most undermined aspect of entrepreneurship.
The reason for utilizing identity traits in the proliferation of entrepreneurial activities could be validated since entrepreneurs are characterized by their unique approach towards business and the consistent scouting of opportunities in order to exploit and make a vital revenue statement for themselves and stakeholders.
As per Stacey, some of the distinct approaches based on the effectual variety of entrepreneurs could be further defined by the economic approach as well as from the perspective of the development of small businesses. The economic approach of defining entrepreneurs could be perceived in the requirement of entrepreneurs as a formidable agent of economic change in a particular business context (Stacey, 1996). The activities of entrepreneurs are considered as crucial entities for moderating the factors of production.
Furthermore, theories have also explained that the economic approach can be validated in the context of entrepreneurs due to their abilities for identifying the products and services which could facilitate reasonable economic value rather than banal goods. Modern entrepreneurship has also been associated with promising outcomes such as the creation of opportunities as well as a limitation on the expansion of passive economic markets. The introduction of novel technological entities has also been credited as a foremost influence on entrepreneurship activities as identified in the literature.
The example of the spontaneous increase in popularity of the internet and subsequent ventures of enterprises on the online platform suggests the creative destruction of a passive market. Creative destruction refers to the revolutionizing of conventional technology and is also associated with the perceived outcome in the form of ease of trading (Bridge, O’Neill & Martin, 2009). Entrepreneurial activities are considered to be effective in realizing economic efficiency through underlying objectives such as increased savings, reduction of waste and a comprehensive perception of the interplay between risk, opportunity, and rewards.
The involvement of enterprise, capital and the individual entrepreneur in the attributed abilities of an enterprise create opportunities for executing the integrated action and thus cope flexibly with the emerging market trends. Small business development is also another profound approach noted in entrepreneurs since it is associated with advantages such as proximity to consumers, flexible provision of employment, prospects for innovation and creation of new product, niche market providers, substrates for creating new industries, establishment of social fabric in the local community as well as capability to support large companies in the form of subcontractors or suppliers (Stacey, 1996).
Characteristic features in the development of small businesses refer to the higher levels of strategic responsiveness as well as considerable flexibility in decision-making procedures. The small business development could be complemented with the support of planning models, marketing tools including marketing planning models and marketing information systems, people management models such as models for motivation and leadership. However, small business development is also related to potential constraints which include a marginal labor market, obstacles in obtaining market information, supplier power and constraints of abilities and resources.
Furthermore, the preference of small business owners to incorporate management frameworks and long-term processes, as well as relevant information related to management of large companies in their management, amounts to a formidable setback (Bridge, O’Neill & Martin, 2009). Hence small firms are dependent on the apprehension of technology, social and economic trends, the transition from production to service and the increasing requirement of subcontracting for growth.
Social entrepreneurship has also acquired ample popularity in recent times with the increasing preference of entrepreneurs to integrate social objectives with the activities for income generation. Small firms which aim to induce social change at the community level are liable to experience promising opportunities for sustainability. Small businesses engaged in business participation can be reviewed in the context of the support they receive for development. However, it is imperative for the organizations to understand the contribution of support to SMEs and capitalize on them for sustained operations.
The establishment of a social enterprise could be validated on the basis of certain specific precedents. First of all, the enterprise must engage primarily in social cause alongside executing commercial activities as a secondary purpose. The secondary purpose of economic activity serves the social cause. The features of social enterprise refer to the transparency of accountability which could be validated through the democratic inclusion of members for decision-making and governance of the enterprise. Social enterprises are included in the social economy class in the systems of the economy including private, profit-oriented economy system and the public services or government system of economy. The responsibilities of a social entrepreneur can be realized only in event of relating distinct entities such as entrepreneurial virtuousness, abilities for making decisions and identifying social opportunities as well as imperative features such as proactive nature, risk tolerance, and innovation.
According to Storey, the journey of a social entrepreneur through the distinct stages of business can be observed in three distinct stages which refer to the endowment, investment, and dividends of social capital. Alike every entrepreneurial activity, social enterprises are also vulnerable to certain threats and ambiguities (Storey, 1994). The foremost concern for social enterprises arises in the form of reliance on the endowment of social capital or aid which puts the sustainability of an enterprise under question. Ambiguities are related to the preferences for commercial or social dividends by the enterprise and determining a core mission from among the two values. The market model in the case of social enterprises is limited in the context of references to citizenship and democracy and the influence of market values on them.
However, the effectiveness of a social enterprise can be aptly realized from the unique perspectives which facilitated the growth of social enterprises. The consideration of distinct factors known as SCALERS is the abbreviation for staffing, communication, alliances, lobbying, earnings, replication and stimulating market forces (Witt, 2007). Staffing is concerned with hiring apt personnel with the relevant skills, experience, and knowledge for adapting to the organization mission and objectives. The concerns of staffing are not limited to the recruitment of permanent staff but also the needs of volunteers. Volunteers are required in event of intensive staffing needs in order to cater a higher volume of work. Therefore, volunteers are capable of providing comprehensive or one-time assistance in case of specific requirements and it has also been observed that social enterprises have to opt for favors in order to realize the initial stages of the company’s foundation.
Communication is perceived as the requirement of transparency in the interactions between the social enterprise and its immediate environment comprising of beneficiaries, customers, and stakeholders (Storey, 1994). Lobbying is related to the eliciting of support from government and concerned bodies of authority. Alliance formations are necessary for social enterprises in order to improvise the endowments as well as accomplish substantial dividends.
Earnings aspects of the SCALERS refer to the returns obtained by the social enterprise on its initial investments as well as the feasibility of developing beyond a startup business and sustaining the enterprise. Replication indicates the initiatives of the organization to promote the establishment of other replicas of the enterprise with the help of a model for growth (Stacey, 1996).The presence of stimulating market forces such as credit unions is also considered as prolific opportunities for social enterprises.
Therefore, social entrepreneurship serves as an outline for SMEs which fail to make a mark in the UK market and are faced with higher failure rates. The SMEs established as per the model of social entrepreneurship indicates promising contributions to the economy alongside utilizing the support facilities to curb failure rates.
The literature review illustrated distinct theoretical concepts and approaches pertaining to the role of small businesses in an economy. To conclude, this review delves into the wider implications of the domain of entrepreneurship such as effectual entrepreneurship, economic contributions of SMEs, small business development, and social entrepreneurship as a role model for sustainable SME development.
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