Name: Shady Adel Saleh
The entrepreneurial mindset in SME
sector:
Introduction:
Entrepreneurship is considered one of the key elements of economic development, Interest in
entrepreneurship is very high especially in developed countries as it is one of the most
important pillars of stimulating the economy and fighting unemployment.
Kuratko (2009) defines entrepreneurship as an integrated concept that permeates an
individual‟s business in an innovative manner. It is a dynamic process of creating incremental
wealth by individuals who assume major risks in terms of equity, time, and/or career
commitment of providing value for a product or service which may or may not be new or unique
but the
entrepreneur must somehow infuse value by securing and allocating the necessary skills and
resources.
What is an SME?:
As we mentioned earlier SME’s ( Small & Medium Enterprises) are the main engine that drives
economic growth through creating employment opportunities, increases production, encourages
innovation, and introduce new technologies.
SME’s are a small independent (non-subsidiary) firms that employees a small number of people
and that number varies from one region to another as in Europe it is around 200 employee but
for the united states it is around 500 employee however, the most common number around is
250 employee.
Impact of entrepreneurial mindset on SME survival:
The entrepreneurial mindset is defined by Dhliwayo and Vuuren (2007) as a way of thinking
about business and its opportunities in a way that captures uncertainty. It is also an important
success factor for SMEs without which a business will fail.
Entrepreneurs are believed to have either a fixed mindset or a growth mindset, where the
Entrepreneurs with a fixed mindset believe that talent, intelligence, and abilities are
unchangeable and they believe that talent is more important than learning and developing new
skills.
Entrepreneurs with a growth mindset believe that they should try new approaches and always
keep learning either by studying or by asking others for help, and they believe that success is a
result of learning and overcoming challenges.
McGrath and MacMillan (2000) identified the typical entrepreneurial mindset to possess the
following characteristics: passionately seeking new opportunities; pursuing opportunities with
enormous discipline; pursuing only the very best opportunities; focusing on execution; and
engaging everyone‟s energy in their domain.
Entrepreneurial characteristics:
McGrath and MacMillan (2000) identify some characteristics of the entrepreneurial mindset to
include: passionately seeking new opportunities; pursuing opportunities with enormous
discipline; pursuing only the very best opportunities; focusing on execution, and engaging
everyone‟s energy in their domain. These mindset characteristics are imperative because:
1) SMEs/individuals that are passionately seeking new opportunities are alert and always look
for possibilities to make profits based on changes and disruptions in the way business is done.
2) Pursuing opportunities with enormous discipline. This means SMEs/individuals are not only
alert enough to spot opportunities, maintain some form of register or unexploited opportunities,
but also they act on the opportunities if they perceived them to be attractive and viable.
3) Pursuing only the very best opportunities implies that SMEs/individuals should avoid
exhausting themselves and their organization by not running after every option but remain
ruthlessly disciplined about limiting the number of projects they pursue.
4) Furthermore, focus on execution means that successful SMEs/individuals are able to change
directions in their process of exploring an opportunity.
5) Engaging energies of everyone in their domain means that SMEs/ individuals are able to
create and sustain networks of relationships both within and outside their businesses (Yaw,
2004).
Business practices:
Entrepreneurs are the decision-makers on SME’s, they have a high influence on the
organization strategy and performance, business strategy, and the roadmap for achieving the
company goals.
Business practices are the methods, techniques, and standards that are used by the company
to achieve and reach their goals.
One of the main issues that face SME’s especially in their early stages as they lack
documentation and clear processes, an extensive study by Neneh (2011) identified five
business practices (marketing practices; performance management practices; strategic planning
practices and teamwork) to be the necessary business practices required for the long-term
survival of SMEs. She further believes that businesses that have a mixed bag of these
practices, alongside a set of desired entrepreneurial characteristics will attain long term survival.
Marketing practices:
Marketing is the understanding of who your customers are and what you can improve to serve
them in a better way, in order to do this you need to understand the customer’s needs and listen
actively to them, also marketing is the main source of generating leads and one of the main
factors that affect the company performance.
Performance management:
Performance management is the process of communicating to your employees the company
strategic goals and how their work affect the company achievement and how they can reach the
desired performance, the cycle of performance management consists of the following:
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Planning and goal setting.
Management and employee involvement.
Monitoring and feedback.
Development and improvement.
Reward and compensation.
Strategic planning:
Strategic planning is the process of analyzing the business and setting the goals that need to be
achieved, which might affect the future of the business and its sustainability, also without
planning the company will never know where it is heading or what the future holds for the
company, steps for strategic planning:
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Have a clear vision and set your goals.
Gathering and analyzing information.
Formulate the strategy.
Implementation.
Evaluation and control.
Teamwork:
Teamwork is the collaboration between company employees to achieve a certain goal, alot of
studies showed that companies that fosters the concept of teamwork have better performance
and productivity.
Individual benefit of Entrepreneurial mindset:
The impact of an Entrepreneurial mindset can be measured on the individual level in their scope
of work, as it changes the behavior and attitude of the individual in the professional work
environment as it encourages the innovation and capturing of the opportunities in the market.
Community benefit of entrepreneurial mindset:
(Charney and Libecap 2000; Athayde 2009; Duval-Couetil et al, 2012). Growing the population
of capable entrepreneurs has been shown to have positive impact on community economic
growth. Economist and researcher Enrico Moretti discovered a causal relationship in job
creation across a range of professions (Moretti, 2012). When comparing various industry
sectors, the technical innovation sector (engineers and scientists) lead to the highest job
multiplier studied. Within a metropolitan area, for every position in the technical sector, five
additional jobs are created. In comparison, the traditional manufacturing creates far fewer: 1.6
additional jobs. For example, while Apple employs 12,000 in Cupertino, Moretti would assert
that there are at least 60,000 related jobs. As Moretti states, “in Silicon Valley, high-tech jobs
are the cause of local prosperity, and the doctors, lawyers, roofers, and yoga teachers are the
effect.” Similarly, the authors of “Patenting Prosperity” (Rothwell, et al., 2016) write “Inventions,
embodied in patents, are a major driver of long-term regional economic performance, especially
if the patents are of higher quality. In recent decades, patenting is associated with higher
productivity growth, lower unemployment rates, and the creation of more publicly-traded
companies. The effect of patents on growth is roughly equal to that of having a highly-educated
workforce. A low-patenting metro area could gain $4,300 more per worker over a decade’s time,
if it became a high-patenting metro area.” Given the impact on communities, we would argue
that instill an entrepreneurial mindset in our students drives an economic engine for
communities that benefits many different groups.
Companies Benefit of Entrepreneurial mindset:
As noted by (Menzel et al, 2007) “the presence of entrepreneurial minded technologists [in
existing companies] is most relevant for technological innovation.” The rate of corporate
disruption and corporate overturns (i.e., changes in dominant companies) demand regular and
frequent innovation. Some companies, such as Apple, have recognized the need to retain
entrepreneurial thinking after success. Companies that cannot afford to stand still, because of
competition or obsolescence, need their own internal regenerating engine. These companies
need intrapreneurs, individuals who turn their entrepreneurial mindset toward internal
improvements of their companies, rather than striking out on their own. In 2015, the
intrapreneurial activity (i.e., via entrepreneurial employees) is 7% in the US (GEM, 2015). This is
the rate of involvement of employees in entrepreneurial activities, such as developing or
launching new goods or services, for setting up a new business unit, a new establishment or
Subsidiary. That suggests that 93% of the workforce is engaged in more maintenance activities.
Many companies recognize the need for intrapreneurs. For example, a survey of
Ohio companies demonstrated the corporate interest in employees with an entrepreneurial
mindset, etc. (Stuckey and Yoder, 2014).
Conclusion:
This study comes to the conclusion that the Entrepreneurial mindset can have a great effect on
major levels ( Economic, companies, social and personal ) and that it can help countries
especially emerging countries improve their economy and solve some major problems such as
unemployment.
Citations:
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Kuratko D (2009). Entrepreneurship, theory, process and practice. 8th
edition. USA: South-western Cengage Learning.
Dhliwayo S, Van Vuuren JJ (2007). The strategic entrepreneurial
thinking imperative. Acta Commercii, 7:123-134.
McGrath RG, MacMillan I (2000). The entrepreneurial mindset:
strategies for continuously creating opportunity in an age of
uncertainty. USA: Harvard Business School Press.
Neneh BN (2011). The Impact of Entrepreneurial characteristics and
Business practices on the Long-term survival of SMEs. Unpublished
Masters Dissertation, Department of Business management,
University of the Free State, South Africa. 2011
(Charney and Libecap 2000; Athayde 2009; Duval-Couetil et al, 2012)
References:
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Why EM? The Potential Benefits of Instilling
an Entrepreneurial Mindset
https://files.eric.ed.gov/fulltext/EJ1199596.pdf
Towards establishing long term surviving small andmedium enterprises (SMEs) in South
Africa: An entrepreneurial approach https://academicjournals.org/journal/AJBM/articlefull-text-pdf/286921518020
An exploratory study on entrepreneurial mindset in thesmall and medium enterprise
(SME) sector: A SouthAfrican perspective on fostering small and medium enterprise
(SME) success https://academicjournals.org/journal/AJBM/article-full-textpdf/34622BD31166