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Typology of entrepreneurial activities

Prof Scott W. Kunkel from University of San Diego suggested a new approach to classification in the field of Entrepreneurship in 2001. Prior efforts have attempted to classify types of entrepreneurs or types of entrepreneurial ventures. His paper suggests that classifying types of entrepreneurial activities offers some significant advantages to the other two alternatives. This paper then presents a hierarchial Typology of Entrepreneurial Activities. It identifies several “classification factors” or attributes on which entrepreneurial activities can be classified into archetypes, and identifies ten classes of archetypical entrepreneurial activities. The typology can be found below in Table 1.

CORPORATE ENTREPRENEURIAL ACTIVITIES

type1# Enterprise-Level Entrepreneuring

Enterprise-level entrepreneuring is the total redefining of the purposes for which the organization exists, the raison d’etre for the existence of the organization. Enterprise-level entrepreneurial activity is called for when the purposes for which the organization exists become recognized as either being unattainable or obsolete.

type2# Corporate-Level Entrepreneuring

At the corporate level entrepreneurial activity can be defined as the radical restructuring of the portfolio of business units that make up the corporation, or the transformation of the organization through renewal of the key ideas on which it is built. This type of entrepreneurial activity can be called “Corporate Turnaround.”

Business-Level Entrepreneuring

At the business level, it is possible to further subdivide entrepreneurial activity based on whether the entrepreneurial activity takes place within an existing business-level unit or the entrepreneurial activity is designed to bring about the founding of a new business unit.

type3# New business unit (“Corporate Venturing”). Founding a new business unit, sometimes called “Corporate Venturing,” is the first form of business-level entrepreneurial activity. This is, perhaps, the most widely recognized form of corporate entrepreneuring. Even scholars who insist on “new venturing” as the only acceptable definition of entrepreneurship accept Corporate Venturing as a form of entrepreneurial activity.

type4# Existing business unit (“Business Turnaround”). Bringing about the strategic renewal of an existing business unit, sometimes called a “Business Turnaround,” is the second form of business level entrepreneurial activity. Transformation of a business unit through the process of Business Turnaround is a form of entrepreneurial activity whether the business unit is one of many in a corporation’s portfolio or is the only business unit within a single-business organization.

type5# Functional-Level Entrepreneuring

Development of new products, new processes, new technologies (either product technologies or process technologies), that result in a strategic renewal of a function or group within an organization, i.e. finding new ways for the unit to do business, are Functional-Level Entrepreneuring.

INDEPENDENT ENTREPRENEURIAL ACTIVITIES

Since independent entrepreneurship takes place outside the context of an existing organization, it is logical to assume that independent entrepreneurial activity is, by definition, aimed at forming a new organization – at new venture formation. The most significant characteristic for subdividing Independent Entrepreneurship is the growth potential of the new venture.

High Growth-Potential New Venturing

There are two types of high growth-potential new venture activities, and they can be differentiated by the conceptual driver that motivates the entrepreneurial activity, be it a market need or a new technology.

type6# Need-Driven New Venturing. The first type of high growth-potential new venturing is “Need-Driven New Venturing.” The Need-Driven New Venture finds its raison d’etre in the marketplace. An entrepreneur or entrepreneurial team notices an unfulfilled need in the marketplace and sets out to fill it. The entrepreneur may know little about the technology or the product, but he/she can see the need. This fixation on the need frequently leads practitioners of Need-Driven New Venturing to find new and unique ways of satisfying that need, breaking or rewriting the preestablished “rules of the game.”

type7# Technology-Driven New Venturing. The second type of high growth-potential entrepreneurial activity is “Technology-Driven New Venturing.” The Technology-Driven New Venture comes into being because of the entrepreneur’s desire to make the technology accessible. Many of the high-flyers in the leading-edge technologies are Technology-Driven New Ventures. Rather than seeing a need and looking for a way to fulfill that need, the founders of Technology-Driven New Ventures begin with the technology and then find a way to make the technology need-fulfilling in the marketplace.

Low Growth-Potential New Venturing

Low growth-potential new ventures are not as glamorous as high growth-potential new ventures, nor are they credited with the enormous impact on the growth of employment and the economy attributed to high growth-potential new ventures (Birch, 1987). Nonetheless, small businesses, the great majority of which are low growth-potential (“mom ‘n’ pop”) businesses, “employ 57% of the workforce, produce 45% of the Gross National Product, and create 67% of the new jobs” (Ibrahim & Goodwin, 1986, p. 41). These businesses form the backbone of the U.S. economy. In Low Growth-Potential New Venturing, the goal is income, not growth. Low growth-potential new venture activities can be classified based on the income potential of the venture into three types, Income Substitution (“mom ‘n’ pop”), Income Supplementing (part time), and Hobby/Lifestyle New Venturing.

type8# Income Substitution (“mom ‘n’ pop”) New Venturing. An Income Substitution New Venture is founded with the intent of replacing the income of an individual or family. The intent of the founders of Income Substitution New Ventures is not to create an organization that will rapidly grow to major corporate status. Their primary intent is, instead, to generate an income comparable with what the individuals involved in the business could make working for someone else. Not all Income Substitution firms are successful at generating an income comparable with what the individuals could earn from employment with someone else, but that is the reason for creation of the business. Most small family businesses are Income Substitution businesses.

type9# Income Supplementing (Part Time) New Venturing. A classic example of the Income Supplementing New Venture is a consulting business started by a business professor. Most professors who start consulting businesses have no intention of giving up their faculty positions to consult full-time. This desire to keep the consulting business on a part-time basis severely limits the growth potential of the business and impacts the strategies that can be used for marketing and managing the firm.

type10# Hobby or Lifestyle New Venturing. Hobby or Lifestyle Ventures are started with the intent of helping the founder to pay some of the expenses of the hobby or activity itself. The venture is not really intended to make a profit, but rather, to decrease the cost of the hobby. As an example, in many port cities along the Pacific and Atlantic coasts there are numerous sail boat enthusiasts who could not afford their 30 to 40 foot sailboats plus mooring without the income they earn by taking tourists sailing on the weekends for a fee.

To summarize, the ten classes of entrepreneurial activity are:

Reference:

Kunkel, S. W. (2001). Toward a typology of entrepreneurial activities. Academy of Entrepreneurship Journal7(1), 75-90. Download PDF

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By Dr. Jingjing Lin

Behaviorist; Researcher; Education and Training Consultant. Keen on behavioral psychology and its application to teaching and learning. Integrate people, resources, and training in the unit "community", and cultivate the development of the community of practice locally is a way out to better entrepreneurial activities and success in the economy. Yes, that is what I believe.

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