лекция 1 (дополненная английская версия)

To win a prize of £20,000, you have to pick up a black ball, which of these two pots will you choose?

1.Risk

2.Uncertainty

What events do you consider to have an uncertain distribution

versus a known distribution?

Internal and external uncertainty

•Managers of large businesses more likely to face the difficulty of translating their ‘vision’ of the business to their employees (internal uncertainty)

•Owners of small businesses can limit such uncertainty by ‘managing by walking about’ but more likely to face a challenging environment (external uncertainty)

Dimensions of external uncertainty: market uncertainty

•Key difference between large and small businesses is market power: the small businesses more likely to be a price taker than a price maker

•Limited number of customers

•Tend to be concentrated in particular (easy to get into) sectors

•Focused on ‘niche’ advantages (e.g. specialist, timely or geographical advantages)

Dimensions of external uncertainty: customer uncertainty

•Employees tend to be fairly certain of their wages. Entrepreneurs are more uncertain of their revenue

•Can limit this by having a subcontracting relationship with the customer

Dimensions of external uncertainty: aspirational uncertainty

•Huge diversity of motivations for setting up and running a business (e.g. to grow the business, to earn an income, to provide for a family)

•Differences in aspirations greater if we include those with more than one business (portfolio entrepreneurs) or business run by a team

•Mostly very small business has no intention of growing

•Entrepreneurs tend to be ‘super optimists’

The ways a small business can limit uncertainty

1.Register as a limited company – this may protect the personal assets of the entrepreneur

2.Focus on short-term survival

3.Invest less heavily in equipment (e.g. machinery)

4.Establish a portfolio of businesses – this spreads the risks faced by the entrepreneur

5.Provide differentiated products and services

6.Enter business activities that are not required a sufficient amount of initial capital

Key differences between small and large businesses

Key differences between small and large businesses (Cont.)

Baumol’s Typology

•Productive entrepreneurship (maximises individual (private) and social benefits)

•Unproductive entrepreneurship (maximises individual (private) but not necessarily social benefits)

•Destructive entrepreneurship (maximises individual but not social benefits)