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EIIC

2012

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IPLIN CONF
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Electronic International Interdisciplinary Conference 2012


September, 3. - 7. 2012

ENCE
ER

Creativity and innovation as the driving power of


entrepreneurship
Jasmina Luki, Assistant Professor,
Faculty of Tourism and Hospitality Management, University of Kragujevac
Vrnjaka Banja, Serbia
jasmina.lukic@kg.ac.rs
Abstract - The aim of this paper is to introduction to the
entrepreneurial process and its components, analyze the
contribution of creativity and innovation in this process as well
as determining the techniques and methods to stimulate
creativity and innovation. Based on the Schumpeter definitions
of entrepreneur as an innovator who is a creative destructor
and Drucker definition of entrepreneur as "someone who
maximizes business opportunities", it can be said that business
opportunities are at the heart of entrepreneurship. The
entrepreneur must be creative and innovative in order to
identify the true entrepreneurial opportunities and adequately
use them. In this sense, entrepreneurial creativity and
innovation are seen as two sides of the same coin. For the
realization of the entrepreneurial idea into a successful
business venture it is necessary to balance creativity and
innovation with entrepreneurs abilities.
Keywords: entrepreneurial process, creativity, innovation,
entrepreneurship, entrepreneur, techniques and methods to
stimulate creativity.

Entrepreneurship is the process of creating something


new and valuable, by investing time and effort, accepting
risk and gaining a reward for the risk and effort invested. An
entrepreneur, as an individual, perceives new business
opportunities and develops ideas on how to implement
them. Perceived business opportunity can give the desired
results only if entrepreneur strongly believes in it. In order
to turn perceived business idea into a successful business
venture, entrepreneur has to be creative and innovative and
ready to make sacrifices and accept the risks and uncertainty
that the job entails. Creativity can be defined as the ability to
notice problems and develop methods (products, services,
processes) for their solution. Innovation is defined as
bringing new product/service/process in general use.
Therefore, innovation and creativity play an important role
in the process of identifying problems, methods of solving
them and use of opportunities that companies face every
day. The entrepreneur who continuously creates new ideas
and innovates will be able to meet the changes and needs of
contemporary society.

I. ENTERPRENEURIAL PROCESS AND PERSONALITY


OF ENTERPRENEUR
Small companies and entrepreneurs are very important
factors for social and economic development of every

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country. Their importance lies in the fact that they create


new jobs and are key actors in creating and maintaining the
welfare of the economy. In support of the importance of
small companies and entrepreneurs is the fact that this sector
accounts for about 99% of the total number of companies in
the European Union and employs about 67% of the total
number of employees. Encouraging entrepreneurship is seen
as a means of releasing currently unused chances that are
inherent in individuals, rejected technologies and
combinations of resources [1].
Entrepreneurship involves the creation of value, the
process of starting or developing new, profitable business,
the process of providing new product or service and
intellectual creation of value through organization of an
individual or a small group of partners [2]. The
entrepreneurial process, as the process of working on a new
venture, includes all functions and activities associated with
the perception of business opportunity and creating
organization to exploit these opportunities to create value
[3]. The person who starts the entrepreneurial process and
accepts the risk in order to gain profit is called entrepreneur.
Therefore, entrepreneur who invests his/her cash funds in
the perceived market opportunity to make profit has a
central role in the entrepreneurial process. An individual
becomes an entrepreneur when he/she perceives the chance,
creates an idea and believes in its success. Ability to
perceive the market opportunity is the key point in
entrepreneurship. The task of entrepreneur is to investigate
people's needs, whether there are areas in which these needs
have not been met or have been met in a manner that is not
acceptable to consumers. Entrepreneur should recognize
his/her opportunity in this. An individual or an
entrepreneurial team can participate in implementation of
perceived business opportunity. Numerous researches show
that an entrepreneurial team contributes to the growth and
development of business and an individual entrepreneur
contributes only to the creation of means of livelihood.
Therefore, entrepreneurs who plan to develop a large and
profitable business must form a team of managers who will
help them do that [4].
Entrepreneurship is described by the following terms:
new, innovative, creative, flexible, dynamic and prone to
take risks [2]. Entrepreneur, in addition to the resources,
possibilities and organization, is a component of the
entrepreneurial process. Figure 1 shows the importance of
entrepreneur in the entrepreneurial process [5].

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2012

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is invention. Thus, the invention is the design of a new idea,


the creation of a new possibility for new or improved
product or process [8]. Creativity is a precondition for
innovation, i.e. innovation is the transformation of creative
ideas in a particular product/service/ process. Figure 2
shows a relationship between invention, innovation and
entrepreneurship.

Possibilities

Entrepreneur
Provision and
management

Resources

Leadership and
guidance

Organization

Figure 1. Components of entrepreneurial process

It can been seen in the figure that entrepreneur is in the


heart of entrepreneurial process and that his/her task lies in
connecting the other three components of this process, and
the value is created as a result of their connection.
Therefore, entrepreneur connects possibilities (through their
identification in the market and the methods by which they
can be used) with the resources (through their provision and
the most efficient use) and organization (by directing
activities towards the goal of the organization). How much
is entrepreneur going to be successful in managing the
entrepreneurial process depends on the ability of
entrepreneur to meet the specific requirements of such
entrepreneurial process. His/her abilities are reflected
through characteristics, which are more or less identified
with each entrepreneur. These are the following [6]:

Self-accomplishment,
Self-confidence,
Independence,
Acceptance ofrisk,
Creativity,
Innovation,
Vision.

The matrix shows the relationship of entrepreneur and


his/her creativity and innovation, on one hand, and his/her
expertise and knowledge of business, on the other hand [9].

By looking at the matrix, it can be concluded that an


individual who wants to become an entrepreneur must have
a high level of expertise and knowledge of business, as well
as high creativity and innovation.

II. CREATIVITY AS A CHARACTERISTIC OF


ENTREPRENEUR
Creativity, i.e. ability to create something new and valuable
by the art of imagination also dominates among the above
characteristics of entrepreneur. In the definition of
entrepreneurship, the emphasis is on creativity, which
includes the following [10]:

Among the above characteristics, a special place related


to showing the character of entrepreneur belongs to
creativity and innovation. The entrepreneurial process
begins by identifying and assessing entrepreneurial chance
(opportunity), as well as by development of ideas in order to
exploit the perceived business opportunity. Perceiving new
business opportunities is often the result of knowledge and
expertise of entrepreneur, emerging by the combination of
education and experience, and the experience results from
various business events [7]. Creating and generating new
ideas makes a creative process and the result of this process

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Through application of creativity and innovation, it is


possible to solve problems and use chances which
companies face. Therefore, creativity and innovation have a
key role in the entrepreneurial process. Competitive
advantage can be achieved through the process of
innovating and creating new products/services/processes or
improving existing ones. The ability of entrepreneur is
reflected in the fact that he/she uses changes, i.e. uses
his/her creativity to turn obstacles and constraints into
advantages [8].

Creation of new business ventures and


organizations;
Creation of new combinations of goods and
services, production methods, markets;
Creative identification of new and existing
opportunities;
Creativity in using new and existing
opportunities.

Creativity is usually defined as a continuous search for


new and represents a precursor to innovation [8]. This
characteristic of entrepreneur is related to the perception of
problems and finding appropriate solutions. An individual is
creative when looking at things in a new, so far unknown

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Figure 2 Relationship between invention, innovation and entrepreneurship

way. Creativity can also be defined as the ability to connect


previously unconnected concepts or ideas in a whole [6].

Therefore, only a creative entrepreneur can identify new


business opportunities and chances, and he/she has skill to
use them properly. Modern business is characterized by a
high degree of uncertainty and risk. According to
Schumpeter, one of the characteristics of entrepreneur is
also acceptance of risk that a certain job involves. A
successful entrepreneur is an individual who knows how to
use the uncertainty that can represent an important source of
business ideas.
Recently, it is increasingly emphasized that creativity
depends on knowledge, intellectual abilities, personal
characteristics and motivations. These four causes are also
the characteristics of a successful, creative entrepreneur.
According to Gilford, creative people think divergently, i.e.
aspire to create more ideas and look for more ways to solve
a problem. A successful entrepreneur must constantly look
for changes, play a little, know how to accept the risks and
constantly ask 'What if? In this way, entrepreneurs develop
skills, acquire knowledge, and stimulate motivation, what is
the key to entrepreneurial success.
Creativity can be viewed as a continual process, which
consists of four phases: preparation, incubation, illumination
and verification [8], as illustrated in Fig. 3.

Verification

Illumination

Incubation

Preparation

Figure 3. Phases of creative process

The essence of the preparation phase is to precisely


define the problem, because well-defined problem is often
half the solution. Creative problem solving requires a
complete understanding of the problem but, for better
orientation, entrepreneur needs to know what he/she aspires,
which is the ultimate goal. Experience, knowledge and
information that entrepreneur has are very important for an

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adequate understanding of the problem, for only thus he/she


can identify the right opportunity and create idea(s).
Incubation (discovery) phase refers to that part of the
creative process when entrepreneur consciously moves away
from the problem. It is believed that creative solutions often
occur below the threshold of consciousness, because ideas
and information are then connected in a more liberal way.
Therefore, at this phase, the entrepreneur is focused on other
activities unrelated to the problem. It should be mentioned
that this is a complex phase because the creative solutions
cannot occur so easily.
Illumination phase is practically part of the incubation
phase, where possible solution to the problem suddenly
appears at a certain moment. Illumination phase is the
moment when an innovative idea occurs. Defined solution
to the problem is analyzed and studied within the
verification phase. This phase is extremely important,
because it is very important to test the feasibility of the
solution itself. If we come to the conclusion that the solution
is not feasible, we return to the beginning of the process, i.e.
the preparation phase.

III. INNOVATION AS A CHARACTERISTIC OF


ENTREPRENEUR
A very important task of entrepreneur is to create value
in the market. Value is created through the production of
new products/services/processes or improving existing ones,
which is achieved through the process of innovation and
learning. Therefore, it can be said that innovation is a very
important factor of vitality and competitiveness of
companies and thus a very important characteristic of
entrepreneur [8].
Therefore, innovation is a different way of performing
some production, service, entrepreneurial activity that has
not previously been seen in the market, whether a
completely new product/service/process is being produced
or an existing one is being improved. Otherwise, Peter
Drucker defines innovation as 'a specific tool of
entrepreneurs, the means by which they use changes as
favorable opportunities for some other business or service
activity, so entrepreneurs must create something new,
something different, they must change or transform value'
[11].
Since creativity and innovation are important
characteristics of entrepreneur and are very often considered
to be synonyms, it is necessary to make a distinction
between the creative process and the process of innovation.
We are talking in fact about two related processes, where

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the process of innovation is built and based on the creative


process. Namely, the idea is created within the creative
processes. New idea that has not yet been realized, i.e.
turned into a new product/service/process is an invention. In
the process of innovation, a new idea is turned into a market
product/service/process. Figure 4 shows the process of
creation and development of a product.

Discovery

Idea
development

Invention

Product
development

Innovation

Figure 4: Innovation process

According to Drucker, changes are the basis of all


innovation. Therefore, the point is to find new products/
services/processes, i.e. create an innovation that will be 'a
powerful weapon' of entrepreneur in dealing with changes.
Through innovations, entrepreneur is trying to use changes
and turn them into advantages that can be a source of high
profits. However, high profits are generated only in the
beginning. In time, income decreases due to the appearance
of imitators of innovation. For these reasons, an
entrepreneur must permanently, constantly, continuously
search for new ideas which he/she will successfully turn into
innovations, and which will bring him/her high profits.

IV. TECHNIQUES FOR DEVELOPMENT OF


CREATIVITY AND INNOVATION
Value of entrepreneur is recognized by the concepts such
as creativity and innovation. Schumpeter believes that
entrepreneur can only be a person who is different from
others. Therefore, entrepreneur is an individual who is
extremely talented, capable to introduce novelty, prepare
creative ideas, initiate and use changes. It was believed
earlier that entrepreneurs were born, so an individual who
had a good intuition could conduct such work. However, the
situation is slightly different today. Namely, today's
entrepreneurs grow into professionals who rely more on
their knowledge, gained by education, and intellectual
abilities they have. There are three types of skills that
potential entrepreneurs must master before they enter the
business project: technical, human and conceptual [8]. It is

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Some entrepreneurs are less, some more talented to carry


out entrepreneurial activities, and therefore the techniques
for stimulating creativity and innovation have been
formulated. According to [12], there are six methods of
stimulating creativity and innovation:
(1) Brainstorming - means the emergence of new idea,
suddenly, all at once. Group members suggest as
many ideas as possible, on the basis of which the
potential solution to the problem is defined.

Creativity

Idea generation

believed that by mastering these skills, entrepreneurship can


be learned like any other profession. Therefore,
entrepreneurs are not born, but created.

(2) Brainwriting - means presenting the problem to


the group, where individuals write down ideas for
solving the problem and then change their sheets
and discuss ideas.
(3) Method of Creative Orientation - is a method
which includes: bionics as a skill that is based on
the application of knowledge on living systems for
solving social problems; searching for solutions
according to heuristic principles, starting from the
existing product where possible changes in such
product are examined; searching of examination
area starting from observation of the current
situation from another angle.
(4) Method of Creative Confrontation - is a method
which includes: classic synectics, synectics
conference, visual synectics, analysis by
stimulating words, BBB method, Force-Fit game,
Tilmag method, method of integration of adjacent
fields, semantic intuition, forced connection,
catalog technique.
(5) Method of Systematic Structuring - is a method
which includes: morphological box, specifying the
list of attributes, showing problem fields,
sequential morphology, decision tree, process
analysis. These methods try to encourage
intellectual and rational thinking of people.
(6) Method of Systematic Specification of Problem is a method which includes: progressive
abstraction, epistemological analysis, K-J method,
N-M method, hypothesis matrix, relevance tree.
According to [7], techniques for stimulating creative
ideas and innovations are the following:
(1) Brainstorming - develops ideas about the problem
within a limited period of time, along with
spontaneous contributions of participants;
(2) Reverse Brainstorming - is based on finding
shortcomings of an idea;

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[2]

M.K. Coulter, Entrepreneurship in Action, Prentice Hall, London,


2001, pp. 3-4.

(3) Brainwriting - is a written form of brainstorming;


[3]

(4) Gordon Method - is based on the unknown of


problem by the participants;

B. Paunovi, Preduzetnitvo i upravljanje malim preduzeem,


Centar za izdavaku delatnost Beograd, 2012, pp. 56.

[4]

(5) Method of Checklist - develops ideas through


perception of related problems;

J.A. Timmons, Opportunity Recognition: The Search for Higherpotential Ventures, at: Bygrave, W.D. (ed.) The Portable MBA in
Entrepreneurship, John Wiley, 1994, pp. 33.

[5]

(6) Free Association - is a method where participants


can use free association for generating new ideas;

P. A. Wickham, Strategic Entrepreneurship: A Decision Making


Approach to New Venture Creation and Management, Prentice Hall,
2001, pp.37.

[6]

D. Pokraji, Karakteristike uspenih preduzetnika, Ekonomski


anali br. 162. Beograd, 2004. str. 30.

[7]

R. Hisrich, M. Peters, D. Shepherd, Poduzetnitvo, MATE d.o.o.


Zagreb, str. 143-151.

[8]

D. uriin, S. Janoevi, . Kalianin, Menadment i strategija,


Centar za izdavaku delatnost Beograd, 2012, str.26 - 613

[9]

. ivkovi, M. Jeli, N. Popovi, Osnove menadmenta DIPBakar, Bor, 2005.

(7) Forced Relationships - develops new ideas


through observation of a combination of products;
(8) Method of Joint Notes - develops new ideas in a
way that group members write down the ideas;
(9) Writing of Characteristics - develops new ideas
through the perception of positive and negative
aspects;

[10] P. A. Wickham, Strategic Entrepreneurship, Prentice Hall, New


Jersey, 2004.

(10) Big Dream Approach - develops ideas through


thinking without limitations;

[12] M. Milisavljevi, R. Seni, S. Janoevi, Inovacije i tehnoloka


strategija preduzea, Ekonomski fakultet Beograd, 1993. str. 88

[11] P.F. Drucker, Innovation and Entrepreneurship: Practice and


Principles, 1st ed., NewYork: Harper & Row, 1985.

(11) Analysis of Parameters - develops a new idea


through analysis of parameters.

CONCLUSION
An individual who leads and manages the
entrepreneurial process is called an entrepreneur. It is a
person oriented towards the future that has a vision and
develops ideas, tries to predict events and changes and use
them in an adequate manner, is able to recognize the
opportunity that others have not noticed or have not gave
importance to. Entrepreneurs more or less differ among
themselves, but successful entrepreneurs are characterized
by hard work, perseverance in their work, determination and
flexibility. In order to survive, entrepreneur must
continually innovate. Entrepreneur sees the sources of
innovation in changes and, therefore, it is said that changes
are something the entrepreneur is 'living with'. Therefore, in
order to take advantage of changes, entrepreneur must be
creative and innovative. Creativity is defined as creation of a
new idea by the art of imagination. Innovation is bringing
idea (invention) in general use. Individuals who do not have
expressed these two characteristics of entrepreneur can
improve them by techniques for development of creativity
and innovation.

REFERENCES
[1]

V. A. Gilsing, A. Elco van Burg, G. L. Romme, Policy principles for


the creation success of corporate and academic spin-offs,
Technovation, 1st ed., vol.30, 2010, pp.12.

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