MGMT8015 Chap.1 Defining Entrepreneurship and Innovation
Defining Entrepreneurship and Innovation
Invention is not yet innovation
The course starts by separating an invention, a new idea or device, from an innovation, which is an invention that adds value for its users and captures value for the organisation delivering it.
Two conditions decide the question: the idea must be new to the user or context, and it must work better than what exists.
What entrepreneurship means
Stevenson’s working definition treats entrepreneurship as a process of chasing opportunities that reach beyond the resources a person already controls.
It sets no limit on firm size, sector, country, profit motive or the founder’s background.
Why the two travel together
Schumpeter’s creative destruction casts entrepreneurs as the agents who carry innovation into the economy, displacing old industries as new ones form.
How this shows up in assessment
The two Week 1 readings disagree about whether innovation needs entrepreneurship, so expect exam questions that blur the two definitions.
In the business model task, the same tests decide whether your idea is an innovation at all: show what is new to your customers and why it beats what they use now.
What this chapter covers
- 01
Invention versus innovation
- 02
Novelty and improvement as two tests
- 03
Value created and value captured
- 04
Stevenson’s definition of entrepreneurship
- 05
Schumpeter and creative destruction
- 06
Productive and destructive entrepreneurship
- 07
Hoelzle and Kahn on whether the two go together
Worked example · free
Decide whether a reusable coffee-cup scheme is an innovation
- 2Novelty test: the scheme is new to this campus, which is enough, since novelty need not mean originality.
- 2Improvement test: waste falls by a third and costs fall, so it beats the existing option on both effectiveness and efficiency.
- 1Value created: students get a cheaper, lower-waste way to buy coffee.
- 1Value captured: the café saves on disposable cups, so it gains from delivering the scheme.
Key terms
- Invention
- A new idea, device or method that has not yet been turned into value for users or the organisation behind it.
- Entrepreneurship
- The process of chasing opportunities that go beyond the resources a person already controls, in Stevenson’s working definition.
- Destructive Entrepreneurship
- Entrepreneurial activity that harms society or nature, which Baumol distinguishes from productive and unproductive forms.
- Innovation
- An invention that is new to its users or context, works better than existing options, and creates and captures value.
Defining Entrepreneurship and Innovation FAQ
Why is an invention not automatically an innovation?
An invention becomes an innovation only once it delivers value. In the course’s terms it must be new to the user or setting and better than existing options, and the value has two sides: benefit for customers and a return for the organisation that delivers it. A brilliant prototype nobody adopts stays an invention.
Can someone working inside a large company be an entrepreneur?
Yes. Stevenson’s definition sets no boundary on organisation size, and the Week 11 lecture adds that entrepreneurship is management and can happen anywhere. An employee who pursues an opportunity using resources they must borrow or persuade others to provide is acting entrepreneurially, whether or not a new firm is founded.
What did Schumpeter mean by creative destruction?
Schumpeter argued that innovation keeps disrupting existing economic structures, making old industries obsolete while new ones form, with entrepreneurs as the agents of that change. The course uses the idea to explain why entrepreneurship and innovation appear together, and returns to it when it discusses artificial intelligence at the macro-economic level.
Does an innovation have to be completely original?
No. The Week 11 lecture states that novelty need not mean originality: an idea only has to be new to the user, the context or the application. Bringing a method that works elsewhere into a setting that has never used it can count, provided it also improves on the alternatives already available there.
Is innovation always good for society?
The course treats this as an open question. The Week 1 recap asks whether innovation always has positive effects, and Week 11 discusses Baumol’s distinction between productive, unproductive and destructive entrepreneurship, along with the environmental and social costs of recent technologies. Argue it with evidence rather than assuming a benefit.
Exam move
Write the two tests, new to the user and better than before, at the top of a page. For three products you use daily, record the evidence for each test and say who captures the value. Then rewrite Stevenson’s definition in your own words and check that your version still sets no limit on who can be an entrepreneur.
Finish by writing three sentences that keep the definitions apart: one on innovation, one on entrepreneurship, and one on a case where both happen together. Revisit the page before the exam, since both Week 1 readings argue over these definitions.
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