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Organizational Behavior

19.6 Optimal Support for Entrepreneurship

Organizational Behavior19.6 Optimal Support for Entrepreneurship
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Table of contents
  1. Preface
  2. 1 Management and Organizational Behavior
    1. Introduction
    2. 1.1 The Nature of Work
    3. 1.2 The Changing Workplace
    4. 1.3 The Nature of Management
    5. 1.4 A Model of Organizational Behavior and Management
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Critical Thinking Case
  3. 2 Individual and Cultural Differences
    1. Introduction
    2. 2.1 Individual and Cultural Factors in Employee Performance
    3. 2.2 Employee Abilities and Skills
    4. 2.3 Personality: An Introduction
    5. 2.4 Personality and Work Behavior
    6. 2.5 Personality and Organization: A Basic Conflict?
    7. 2.6 Personal Values and Ethics
    8. 2.7 Cultural Differences
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  4. 3 Perception and Job Attitudes
    1. Introduction
    2. 3.1 The Perceptual Process
    3. 3.2 Barriers to Accurate Social Perception
    4. 3.3 Attributions: Interpreting the Causes of Behavior
    5. 3.4 Attitudes and Behavior
    6. 3.5 Work-Related Attitudes
    7. Key Terms
    8. Summary of Learning Outcomes
    9. Chapter Review Questions
    10. Management Skills Application Exercises
    11. Managerial Decision Exercises
    12. Critical Thinking Case
  5. 4 Learning and Reinforcement
    1. Introduction
    2. 4.1 Basic Models of Learning
    3. 4.2 Reinforcement and Behavioral Change
    4. 4.3 Behavior Modification in Organizations
    5. 4.4 Behavioral Self-Management
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Management Skills Application Exercises
    10. Managerial Decision Exercises
    11. Critical Thinking Case
  6. 5 Diversity in Organizations
    1. Introduction
    2. 5.1 An Introduction to Workplace Diversity
    3. 5.2 Diversity and the Workforce
    4. 5.3 Diversity and Its Impact on Companies
    5. 5.4 Challenges of Diversity
    6. 5.5 Key Diversity Theories
    7. 5.6 Benefits and Challenges of Workplace Diversity
    8. 5.7 Recommendations for Managing Diversity
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  7. 6 Perception and Managerial Decision Making
    1. Introduction
    2. 6.1 Overview of Managerial Decision-Making
    3. 6.2 How the Brain Processes Information to Make Decisions: Reflective and Reactive Systems
    4. 6.3 Programmed and Nonprogrammed Decisions
    5. 6.4 Barriers to Effective Decision-Making
    6. 6.5 Improving the Quality of Decision-Making
    7. 6.6 Group Decision-Making
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  8. 7 Work Motivation for Performance
    1. Introduction
    2. 7.1 Motivation: Direction and Intensity
    3. 7.2 Content Theories of Motivation
    4. 7.3 Process Theories of Motivation
    5. 7.4 Recent Research on Motivation Theories
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Management Skills Application Exercises
    10. Managerial Decision Exercises
    11. Critical Thinking Case
  9. 8 Performance Appraisal and Rewards
    1. Introduction
    2. 8.1 Performance Appraisal Systems
    3. 8.2 Techniques of Performance Appraisal
    4. 8.3 Feedback
    5. 8.4 Reward Systems in Organizations
    6. 8.5 Individual and Group Incentive Plans
    7. Key Terms
    8. Summary of Learning Outcomes
    9. Chapter Review Questions
    10. Management Skills Application Exercises
    11. Managerial Decision Exercises
    12. Critical Thinking Case
  10. 9 Group and Intergroup Relations
    1. Introduction
    2. 9.1 Work Groups: Basic Considerations
    3. 9.2 Work Group Structure
    4. 9.3 Managing Effective Work Groups
    5. 9.4 Intergroup Behavior and Performance
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Management Skills Application Exercises
    10. Managerial Decision Exercises
    11. Critical Thinking Case
  11. 10 Understanding and Managing Work Teams
    1. Introduction
    2. 10.1 Teamwork in the Workplace
    3. 10.2 Team Development Over Time
    4. 10.3 Things to Consider When Managing Teams
    5. 10.4 Opportunities and Challenges to Team Building
    6. 10.5 Team Diversity
    7. 10.6 Multicultural Teams
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  12. 11 Communication
    1. Introduction
    2. 11.1 The Process of Managerial Communication
    3. 11.2 Types of Communications in Organizations
    4. 11.3 Factors Affecting Communications and the Roles of Managers
    5. 11.4 Managerial Communication and Corporate Reputation
    6. 11.5 The Major Channels of Management Communication Are Talking, Listening, Reading, and Writing
    7. Key Terms
    8. Summary of Learning Outcomes
    9. Chapter Review Questions
    10. Management Skills Application Exercises
    11. Managerial Decision Exercises
    12. Critical Thinking Case
  13. 12 Leadership
    1. Introduction
    2. 12.1 The Nature of Leadership
    3. 12.2 The Leadership Process
    4. 12.3 Leader Emergence
    5. 12.4 The Trait Approach to Leadership
    6. 12.5 Behavioral Approaches to Leadership
    7. 12.6 Situational (Contingency) Approaches to Leadership
    8. 12.7 Substitutes for and Neutralizers of Leadership
    9. 12.8 Transformational, Visionary, and Charismatic Leadership
    10. 12.9 Leadership Needs in the 21st Century
    11. Key Terms
    12. Summary of Learning Outcomes
    13. Chapter Review Questions
    14. Management Skills Application Exercises
    15. Managerial Decision Exercises
    16. Critical Thinking Case
  14. 13 Organizational Power and Politics
    1. Introduction
    2. 13.1 Power in Interpersonal Relations
    3. 13.2 Uses of Power
    4. 13.3 Political Behavior in Organizations
    5. 13.4 Limiting the Influence of Political Behavior
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Management Skills Application Exercises
    10. Managerial Decision Exercises
    11. Critical Thinking Case
  15. 14 Conflict and Negotiations
    1. Introduction
    2. 14.1 Conflict in Organizations: Basic Considerations
    3. 14.2 Causes of Conflict in Organizations
    4. 14.3 Resolving Conflict in Organizations
    5. 14.4 Negotiation Behavior
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Management Skills Application Exercises
    10. Managerial Decision Exercises
    11. Critical Thinking Case
  16. 15 External and Internal Organizational Environments and Corporate Culture
    1. Introduction
    2. 15.1 The Organization's External Environment
    3. 15.2 External Environments and Industries
    4. 15.3 Organizational Designs and Structures
    5. 15.4 The Internal Organization and External Environments
    6. 15.5 Corporate Cultures
    7. 15.6 Organizing for Change in the 21st Century
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  17. 16 Organizational Structure and Change
    1. Introduction
    2. 16.1 Organizational Structures and Design
    3. 16.2 Organizational Change
    4. 16.3 Managing Change
    5. Key Terms
    6. Summary of Learning Outcomes
    7. Chapter Review Questions
    8. Management Skills Application Exercises
    9. Managerial Decision Exercises
    10. Critical Thinking Case
  18. 17 Human Resource Management
    1. Introduction
    2. 17.1 An Introduction to Human Resource Management
    3. 17.2 Human Resource Management and Compliance
    4. 17.3 Performance Management
    5. 17.4 Influencing Employee Performance and Motivation
    6. 17.5 Building an Organization for the Future
    7. 17.6 Talent Development and Succession Planning
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  19. 18 Stress and Well Being
    1. Introduction
    2. 18.1 Problems of Work Adjustment
    3. 18.2 Organizational Influences on Stress
    4. 18.3 Buffering Effects of Work related Stress
    5. 18.4 Coping with Work related Stress
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Management Skills Application Exercises
    10. Critical Thinking Case
  20. 19 Entrepreneurship
    1. Introduction
    2. 19.1 Overview of Entrepreneurship
    3. 19.2 Characteristics of Successful Entrepreneurs
    4. 19.3 Business Model Canvas
    5. 19.4 New Venture Financing
    6. 19.5 Design Thinking
    7. 19.6 Optimal Support for Entrepreneurship
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  21. A | Scientific Method in Organizational Research
  22. B | Scoring Keys for Self-Assessment Exercises
  23. References
  24. Index
  1. How can government support entrepreneurship?

Governments generally want to support entrepreneurship because successful businesses create value among the population. This value permits companies to provide jobs, pay corporate taxes, and enable workers to pay taxes. Governments also get political credit for policies that increase commerce, wealth creation, and job creation. In general, government sets and changes the institutional conditions that encourage or discourage entrepreneurs from either innovating or seeking profit by other means. Government can support entrepreneurship by reducing negative incentives or by increasing positive ones. In particular, government can:

  • Reduce barriers to entrepreneurship erected by previous governments or in society.
  • Protect intellectual property and capital through the patent system and the rule of law.
  • Provide businesses with technology ready for commercialization.
  • Increase incentives for entrepreneurship, which comes at a cost to other priorities.
  • Provide special benefits to favored industries, businesses, or regions, although such cronyism can come at a political and economic cost by distorting markets and playing favorites.

Less Discouragement: Reducing Barriers

Regulations, like laws, set rules that help entrepreneurs predict what will happen if they take certain risks. For this reason, regulations should be clear and should not change quickly or merely when a new political majority takes power. In general, a regulation is a restriction, and any restriction tends to reduce innovation by limiting options. For this reason, reducing regulations tends to unleash innovation. This is not always the case. For example, zoning restrictions might push similar businesses to be near one another, leading to increased cross-fertilization of ideas. Also, when government enforces property rights including intellectual property, preventing others from using that property, entrepreneurs feel more secure in employing their capital. Similarly, entrepreneurs feel more secure when their government refrains from appropriating property via eminent domain or socialist takeovers.

Laws and regulations often reflect the values of a particular political and economic moment, and they become outdated because of the speed of innovation. Technology changes faster than bureaucrats can keep up. For example, two different companies had similar revolutionary technology: Skype and Free World Dialup (FWD). Both were able to provide free “telephone calls” over the Internet worldwide. In the United States, FWD had to wait 18 months for regulators to determine that FWD was exempt from traditional U.S. telecommunication regulations. Meanwhile, abroad, free from this process, Skype had years to develop its user base. FWD could not compete and went out of business, leaving Skype the undisputed champion.10

Regulations also tend to favor larger, established businesses that innovate less, and they tend to disfavor smaller, entrepreneurial ventures. International trade barriers such as tariffs often protect a country’s existing businesses and make it relatively difficult for new businesses from other countries to compete. Bureaucracy also can make it difficult, costly, and time consuming to start a business. In countries with high levels of corruption, proprietors may have to pay extra fees to bureaucrats to get their paperwork to the top of the pile.

Taxation also reduces the profit from an enterprise, so taxation reduces the likelihood that entrepreneurs will risk their capital. Progressive taxation, unlike a flat tax, penalizes businesses at higher rates for making more money, which also can discourage entrepreneurship. Reducing taxes and regulation can encourage entrepreneurship, although these changes also can increase the competitiveness of established businesses, which entrepreneurs will take into account. Also, providing tax exemption for nonprofit enterprises and social entrepreneurship encourages a wide variety of value-creating services in civil society.

In addition to government barriers to entrepreneurship, there often are cultural barriers. For example, in some countries, discrimination on the basis of sex, race, or religion prevents many would-be entrepreneurs from getting equal access to the resources they would need to thrive. Government can step in to outlaw such discrimination and protect equal rights. Government also can address culturally discriminatory attitudes that are not illegal by means of education campaigns. Government also can subsidize external constraints on growing a business, such as by subsidizing childcare so that entrepreneurs can spend more time on their work at lower cost.

More Discouragement: Increasing Positive Incentives

Government can reduce the cost of technological innovation by simply giving government-produced technology to the private sector so that the technology can be commercialized. Government also can change the rules of financing to reduce the transaction cost or the actual cost of acquiring funds. For instance, government can make it easier or less costly for businesses to receive government loans, can subsidize lending, or can subsidize borrowing. All of these efforts come at a cost either directly, at the cost of the subsidy, or indirectly, by providing cheaper funds to riskier ventures than the private loan market would otherwise provide.

Government also can provide venture capital to attract new ventures, especially in areas where the private sector cannot afford to take expensive risks or has little experience with this kind of funding. This capital, however, can prop up lower-quality businesses that ultimately will not succeed. The private sector, risking its own capital instead of taxpayers’ money, generally may not have supported such less-investible businesses. Furthermore, by focusing on potential high-growth firms, government can shortchange other kinds of firms. Finally, research suggests that high-quality projects are what attract dollars, rather than extra dollars attracting investible projects.11

Government also can subsidize other elements of innovation and building businesses, such as direct subsidies for research and technology development or for building facilities. This kind of support easily slides into cronyism where, for a variety of reasons, particular industries or regions receive special treatment even when they are not the best-positioned options from an economic perspective. For example, government might limit its business contracts to only certain kinds of small businesses, even though a larger business might provide better service per dollar.

Government also can put resources into training programs, which can include formal entrepreneurship and business courses at institutions of higher education, “incubators” that provide business advice, or informal networking events in local communities.

Longer-term projects, closer to the beginning of the entrepreneur pipeline, include public financing of education in financial literacy, comfort with risk taking, historical exemplars of entrepreneurship, and leadership to develop a culture of entrepreneurial thinking that can start as early as elementary school.

The local government can market the value of social entrepreneurship and small businesses for the community, providing moral support for volunteerism, low-profit and nonprofit service ventures, and structures such as a local chamber of commerce. In thriving economies where many people have leisure to pursue low-profit and nonprofit ventures, there is room for more social entrepreneurship. Therefore, to maximize social entrepreneurship, pro-growth policies that support entrepreneurship in general may be the best policies in the long run.

Finally, the government can also support entrepreneurship by making technology developed in federal labs available for commercialization, as illustrated by The Right Stuff case.

A photo shows the screenshot of a social media page, promoting “The Right Stuff” electrolyte.
Exhibit 19.6 The Right Stuff Rather than use traditional advertising methods like magazine, newspaper, and television advertising, many entrepreneurs use social media to connect to existing and future customers. Posting information about products and services is the obvious use. Twitter also gives entrepreneurs a two-way channel for listening to and finding out more about their customers—what they like or dislike about their products and services, how they feel about the brand, and what suggestions they have for improvement. (Credit: David Belaga/ Attribution 2.0 Generic (CC BY 2.0))

Managing Change

Technology and Innovation: The Right Stuff

David Belaga enjoyed a successful corporate career of over 25 years at Pepsi, Wyeth, Hallmark, and other leading companies, and was keen to start his own technology-based venture. Although Belaga possessed an undergraduate degree in psychology, he sought to take advantage of technology from federal labs across the United States. While searching the National Aeronautics and Space Administration (NASA) database of available patents to license, Belaga discovered NASA scientist Dr. John Greenleaf’s patent to rehydrate astronauts who suffer from severe dehydration when reentering Earth’s atmosphere. Greenleaf et al.’s research suggested that the formula would also be ideal for athletes facing dehydration due to exertion, sun exposure, or altitude, which could then result in headaches, muscle cramps, dizziness or light-headedness, and other side effects. Key ingredients are: filtered water, sodium citrate (to protect against gastrointestinal upset), sea salt or sodium chloride (key components of sweat), all-natural flavors, citric acid (to cut saltiness), high-intensity sweetener, natural flavors, and preservatives. The liquid concentrate ensures quick absorption by the body, and the formula does not contain any World Anti-Doping Agency (WADA)-listed banned substances, heavy metals, or other adulterants.

NASA’s Technology Partnership Division has the mission of developing partnerships between NASA enterprises and nonaerospace U.S. industrial firms to commercialize innovative technologies. NASA’s Technology Partnership Division offers space, licensing, software, and other small business agreements, and NASA benefits from division license agreements that help fund vital research and development for future products. NASA prioritizes “small business” partnerships, classified by the U.S. Small Business Administration as “. . . firms that are independently owned and operated, organized for profit, and not dominant in the field.” Belaga liked that the formula was used by astronauts, and thought to himself, “The reality is that in less time than it takes to read this paragraph, Coke (Powerade) and Pepsi (Gatorade) could do a work-around formula, but it wouldn’t be the one supported by all the science.” Belaga named the formula “The Right Stuff,” reflecting the book and movie linked to the NASA program and due to the formula’s superior efficacy. Following the submission of a 150-page business plan for The Right Stuff’s commercialization and a 60-day public comment period on the Federal Register, Belaga negotiated final approval and exclusive rights to the technology with a share of royalties for NASA and a guarantee of production in the U.S.

Belaga started his venture with $300,000 in personal funds and $325,000 in “friends and family” investment, and developed a network of contracts with suppliers for supply chain management, manufacturing, and marketing activities. Prior to the launch, Belaga empaneled a set of endurance athletes to create the preferred flavor profiles. He later learned that power athletes (e.g., football, baseball, hockey, and basketball) prefer a sweeter and fruitier taste than do endurance athletes.

Although initial consumer market research suggested the possibility for use by individual endurance athletes (e.g., runners) and first responders (e.g., military, fire, and police), Belaga focused on the institutional market of professional athletic teams, universities, sports clubs, and high schools. Today The Right Stuff is used by most professional North American sports teams (MLB, NBA, NFL, NHL, MLS, etc.) and hundreds of universities across the U.S.

Discussion Questions
  1. What benefits do David Belaga and The Right Stuff accrue from the affiliation with NASA technology?
  2. What are the societal benefits of the government making technology available for commercialization licensing?

Sources: Siri Terjesen. 2015. The Right Stuff. Entrepreneurship Theory & Practice.

Concept Check

  1. How can governments reduce barriers to entrepreneurship?
  2. How can governments increase positive incentives for entrepreneurship?
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