Howard Stevenson and his co-workers in Harvard University Business School define entrepreneurship as way to create or seizing an opportunity along with pursuing it no matter of the resources currently controlled. This strategy, Stevenson maintains, has significantly contributed towards the success of entrepreneurs. He points out that most entrepreneurs seek to utilize the minimum possible amount of a myriad of resources at each stage in their enterprise’s growth. These resources include HR, financial assets, resources and a business program. Instead of have the sources entrepreneurs need, they seek to control themaccording to Stevenson. Research suggests that entrepreneurs with this kind of approach towards company significantly reduce the risk in pursuing opportunities.
Since the amount of capital needed will be smaller, it’ll mitigate risk by reducing their financial exposure and their dilution of their creator’s equity. Flexibility: entrepreneurs are in a better place to perpetrate along with decommit quickly when they do not have a source. The pliability of company consequently gathered can be very helpful to a company, since it lets them respond faster and reach conclusions quickly. In addition to this, the entrepreneurial strategy to sources allows tactical experiments, meaning that ideas can be completely analyzed without committing to the possession of assets and resources in the company. It’s clever to raise capital progressively as the need arises, otherwise one might end up spending it too soon on wrong decisions.Inflexibility also results from committing indefinitely to a specific technology, management or software system. Low Sunk Cost: The cost of closing down a company or a venture will also be lower if the ownership of resources is less. In case the up front capital commitment is huge, abandoning such a project will likely also be very costly. Costs: Fixed costs will likely be lower, which may have a positive affect on breakeven. Reduced Risk: Aside from reducing risk generally, other risk event like risk of obsolescence of resource are also lower. Biotechnology companies used venture leasing as a way to supplement sources of equity financing.
One shouldn’t assume incorrectly that this approach implies that a firm can’t afford to purchase resources. The reality is that not having ownership has its own advantages and choices in the shape of flexibility of company and reduced risk. In the same time these conclusions are very complex, and considerations like tax implications of leasing vs. Buying along with other existing regulations and laws have to be thought of completely and carefully. Shilpi Ganguly is a blogger who often writes on numerous topics.