IB - Module 7

Founders and entrepreneurs

founder starts sth new, entrepreneurs also start sth new but in the process destroy sth old; Founder is usually an entrepreneur but not always

imprinting theory

focuses on the whole of the founders; Founder&Founding characteristics -> Imprint -> Persistence

Founder & Founding characteristics

during some brief periods organisations are particularly sensitive to internal and external influences

Imprint

the organisation develops salient features which are characteristic of the people or environment

Persistence

these organisation features persist, even when the context subsequently changes again

Theory of creative destruction

entrepreneurs differ from founders that before they start sth new, they must destroy sth old

Creative destruction in the music players industry

phonograph -> graphophone -> compact disc (CD's) -> MP3

Sole trader, Hair Dresser, Start up - characteristics

owner owns the business, owner controls the business

Partnership, law firm - characteristics

two or more partners own the business; partners control the business (sometimes they may hire a manager)

Private company; small to medium sized companies, but also large firms

Shareholders own the business, Directors and managers control the business

Public limited company

Many shareholders own the business, directors and managers control it

Public sector organizations

government own the business, directors control it

Agency problem

a conflict inherent in any relationship where one party (agent) is expected to act in the best interests of another (principal); Possible conflicts of interest

Moral hazard

risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities or credit capacity

Adverse selection

situation where the agent has more information than the principal has or vice versa about some aspect of the work

Functions of executive - Chester Barnard

Communication, Defining purpose, Securing essential services from individuals

Communication as an executive

establish formal communication lines, securing informal organisation

Defining purpose

make the strategic choices of the firm, assignment of responsibilities

Securing essential services from individuals

Bringing people into cooperative relationship with the organization; making sure they do the work

authority of position

people are assigned authority through the office they hold, to a considerable extent independent of personal ability

authority of leadership

people are assigned authority due to a superior ability

How to be an effective manager according to Peter Drucker

be a great manager of time; focus on results and meaningful contributions; make decisions based on strengths, not on weaknesses; do first things first, second things not at all

Penrose's views of the firm

firm is a mix of physical and Human Resources; the extent to which the firm can rely on effective managers is the key limiting to the growth; Managerial capacity; Excess managerial capacity is needed in rapid growth situations, i.e. after acquisitions

Managerial capacity

managerial services and ability to capture management know-how, which exists in finite quantities

Upper Echelon Theory

How certain background characteristics of managers in part explain organizational actions and outcomes of the firm