Uncertainty, Innovation and Entrepreneurial Functions - Working Out an Entrepreneurial Management Approach

Abstract

Uncertainty has a lot of different faces and goes along with opportunities and threats as well. In case of certainty in decision-making e.g. innovation management would not make any sense as neoclassic theory tells us referring to the model of perfect competition. Therefore, innovation and uncertainty cannot be separated. Innovation management, therefore, intends to take the chances and business opportunities the market process offers - and to create new ones. This goes along with numerous risks as the 'dark side' of uncertainty. In order to make the most of the innovative efforts, innovation management is to be accompanied by other managerial tasks. Against this background, the research question of this paper is how to take the chances of innovations in an uncertain and volatile world where risks can destroy the innovations' profit potentials immediately. In this context we look for a managerial framework rooted in economic theory that covers the challenges of (innovation) management in an uncertain and dynamic environment and helps to manage the complex interplay of innovation and uncertainty. Moreover, this framework should help to explain economic performance.

To this end, entrepreneurship theory provides us with the debate on the entrepreneurial functions. By now, the entrepreneurial functions play a role on the market/industry level and the personal level (entrepreneurial traits) as well. Little is done in order to transfer the findings to the firm level and to make use of these functions for managerial purposes. This paper makes use of the findings from entrepreneurship theory and makes an additional step in theory development by introducing a managerial framework based on a multi-functional system of entrepreneurship. The respective functions are innovation, coordination, market-making (arbitrage), and risk management. The execution of these functions enables the firm - as the unit of analysis of this paper - to renew the organization, to exploit the innovation potentials created by innovation management, and to protect the firm as a system from all the negative consequences going along with uncertainty. Cause and effect relationships are introduced in order to point out the consequences of the execution of entrepreneurial functions.

Keywords: Uncertainty, Entrepreneurial Functions, Entrepreneurship, Innovation management

JEL Classification: D80, D81, M13