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MANAGING HUMAN CAPITAL ENTREPRENEURSHIP USING TIMMON MODEL

OF ENTREPRENEURSHIP

By

Samuel Gibbs

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Table of Content

Table of Content..............................................................................................................................2

Introduction......................................................................................................................................3

Literature Review and Critical Analysis..........................................................................................3

Timmon’s Model..........................................................................................................................3

1. Opportunity.......................................................................................................................3

2. The entrepreneur...............................................................................................................5

Entrepreneurial Team Formation.............................................................................................7

3. Resources..........................................................................................................................7

Critical Analysis..............................................................................................................................8

Conclusion.....................................................................................................................................10

References......................................................................................................................................11

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Managing Human Capital Entrepreneurship

Introduction

Entrepreneurship is a process that results in the creation of new venture that meets certain

needs and create value. Entrepreneurship is a key driver of economic growth as it leads to job

creation, and wealth creation (Fisher, 2009). However, the entrepreneurship process is often

viewed as unpredictable and disorderly. Various models have been established in attempts to

explain this process. Timmon’s model is one of the theoretical models that have been developed

to explain the entrepreneurial process. According to the model, three elements are necessary for

the start a successful new business; the opportunity; the entrepreneur, and the resources needed

to start the company and make it grow (Bygrave and Zacharakis, 2011).

Literature Review

Timmon’s Model

Entrepreneurship is a complex process. According to Timmon’s model, the entrepreneurial

process comprises of three major components; the opportunity, the entrepreneur, and resources.

1. Opportunity

The entrepreneurial process begins with the capacity of the entrepreneurial individual to

recognize opportunities. An opportunity is generally an idea (Klein, 2008). However, not all

ideas are opportunities. According to Timmon (2009), there are several characteristics that an

idea must possess in order for it to be considered an entrepreneurial opportunity. The first

characteristic is attractiveness. The idea must present an attribute that is desirable to the

entrepreneur (Kruger, 2004). One of these attributes is the size of the market. The market for the

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opportunity must be large and growing in order for it to be considered attractive. Another

characteristic that defines attractiveness is cost. The costs associated with developing the

opportunity must be low enough to justify investments. Where costs are high, the return must

also be high enough to justify investment.

Durability is also a critical characteristic that an idea must possess in order for it to be

considered an opportunity (Klein, 2008). This implies that the idea must present sustainable

benefit to the entrepreneur. Ideas that present short term benefits may not be suitable in terms of

supporting entrepreneurship. Durability can be viewed in terms of the concept, marketing,

management, growth, replicability, scalability, and other attributes (Kruger, 2004). Replicability

refers to the level to which the ideas can be reproduced. For an idea to be durable, it must be

possible to replicate this idea in different environments. Replicability also means that the idea

should enable standardization so at it can be produced in the absence of the entrepreneur (Smith,

Mathews & Schenkel, 2009). McDonalds is one of the organizations that have excelled thorough

the ability to replicate their idea. McDonald has replicated the vision and concept developed by

the founder among thousands of entrepreneurs around the world through training. Scalability

refers to the level to which the idea can be implemented in large scale (Smith, Mathews &

Schenkel, 2009). It is similar to replicability, but scalability is largely concerned with reducing

the cost of production. An idea that can be produced in large scale will enable the entrepreneur to

recover cost and make profits. An idea that requires the personal touch of the entrepreneur has

limited scalability. The idea must also be easy to sell. This is what marketing is about. The

concept and benefits of the idea must be easy to communicate to the potential customers (Smith,

Mathews & Schenkel, 2009). Growth implies that the idea should enable sharing with other in

order to create additional wealth to investors. The idea should also be easy to manage.

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An idea must also be timely in order for it to be considered as an opportunity (Belgrund,

2007). This implies that it must come at a time when it is needed most in terms addressing the

need of a market. It must respond to the existing conditions within the business market. For

instance, Microsoft’s idea of developing the operating system was timely because it came at a

time when the computing technology was gaining impetus. An opportunity must also be founded

on a product or service (Timmon, 2009). This implies that it must add value to customers. The

product must also be affordable to consumers.

Many people have the misconception that entrepreneurship entails the invention of new

products. However, this is not the case. It may entail producing existing product using new

technology thus delivering the product at affordable prices (Rumelt, 2010). It may also entail

discovery of a new method of distribution that adds value to the customer or a new method of

packaging products that also add value to the consumer.

2. The entrepreneur

The entrepreneur plays a significant role in the entrepreneurship process. He is the

initiator of the idea. Without the entrepreneur, the enterprise cannot be conceived (Mazzarol,

2008). The entrepreneur is also the dynamic force that brings together all the other components

of the entrepreneurial process. They are considered as key agents of creativity, who lead to the

development of new opportunity or new growth. They are highly innovative, and growth

oriented. Kruger (2004) argues that entrepreneurs have cognitive structures that are oriented

towards entrepreneurial events. These structures enable them to make sense out of uncertain

events. They are able to distinguish opportunities from ideas, exploit these opportunities, and

turn them into valuable goods and services.

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Risk taking is one critical skill that defines an entrepreneur (Burdus, 2010). Generally,

people can be classified as risk takers and risk avoiders. Entrepreneurs identify new business

opportunity and take risks with the hope of making profits and achieving growth. Another

critical skill that defines an entrepreneur is market timing (Gompers & Covner, 2008). An

entrepreneur must have the skill to know the right time to venture into an area. Entrepreneurs

must also posses the skill to analyze the market, segment customers and select the most suitable

customers to target. This requires skills in terms of conducting market research and identifying

the needs of the market. The entrepreneur is also responsible for identifying technologies that

will be used to meet the needs of the market. The propensity of taking risk develops when a

person develops the ability to understand uncertainty. Douglas and Shephers pointed out that

while development of entrepreneurial skills is critical in the making of an entrepreneur the most

critical requirement is the development of entrepreneurial attitude (Kruger, 2004). This is

because, while skills and abilities can be improved through training, it is very difficult to change

a person’s attitude.

Entrepreneurs are also responsible for managing the enterprise (Burdus, 2010). They

establish the vision of the organization and inspire members of the organization to rally behind

the vision. They also establish strategies for ensuring that the vision of the organization is

realized. Kruger (2004) argues that effective entrepreneurial behavior is founded on development

of strategic orientation and awareness. The entrepreneur must have the ability to develop suitable

strategies for sustaining his enterprise. They are also able to blend imagination and creative

thinking with logical and realistic ways of viewing things (Levine & Rubinstein, 2013). They

possess adequate skills in organizing, coordinating and managing the activities of the

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organization. They are not only people who establish new business, but can also be found among

employees of an organization.

Entrepreneurial Team Formation

Timmon’s model also identified entrepreneurial team formation as a critical part of the

entrepreneur process. While the lead entrepreneur is responsible for recognizing the opportunity,

he needs to form an effective team in order to ensure that the new venture is able to make

optimal use of the opportunity. Minniti, et al (2006) noted that many enterprises are stated

without the mobilization of a skilled and experienced team. In emphasis on the critical role of the

entrepreneurial team, Minniti et al (2006) stated that it is better to have a grade B idea, but have a

grade A team. This is because right people will always find ways of changing the idea into the

right product. The entrepreneurial team drives the start-up and expansion of the new enterprise.

The strategy of team formation needs to be mapped with the opportunity (Tihula, 2009).

3. Resources

Resources are also a critical part of the entrepreneurial process. Rumelt (2010) defined

entrepreneurship as a process that entails organizing resources in a new way in order to create

some element of novelty. Once an individual has identified an opportunity, he must mobilize

resources including finances and human resource in order to take advantage of the opportunity.

The entrepreneur has the responsibility to attract investment including finances, physical assets,

knowledge, brand names, and goodwill. Many scholars only emphasize on the need to mobilize

financial resources. However, other resources are also critical to the development of the

enterprise. The entrepreneur must acquire the right skills in order to implement his or her

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strategic plan. He must also acquire equipment and technologies that are needed in order to

convert the opportunity into goods and service.

Resources are also important in terms of giving an enterprise a competitive advantage

(Kruger, 2004). The modern business environment has become extremely competitive. New

ideas are copied by other organization as soon as they hit the market. Copying of ideas hinders

the entrepreneur from leaping returns for efforts and investments made. In order to avoid this,

entrepreneurs need to develop distinctive characteristics that make it difficult for competitors to

replicate their ideas. Resources can be an essential source of distinctiveness. Minniti, et al (200)

defined entrepreneurship as opportunities that are delivered through systems and competencies

that differ significantly from existing organization. Thus, distinctiveness is a critical

characteristic that defines entrepreneurship. The entrepreneur is expected to combine his

resources and capabilities in order to create unique patterns making it difficult for other

organization to copy ((Bryson, Ackermann & Eden, 2007). While the resources of the

organization entrepreneur may not be unique, the entrepreneur can create unique patterns by

combining different resources and capabilities.

One of the utmost misconceptions is that an individual must have all the essential

resources so as to establish an enterprise. This is not the case. Once a person has identified good

opportunities, finding money and other resources is not a significant challenge.

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Figure 1: Timmons model

Critical Analysis

Timmons model gives fluid boundaries to the process of entrepreneurship. It points out

that the foundation of the entrepreneurship process lies in the entrepreneur’s ability to recognize

opportunities, marshal resources, and create an effective team. It views entrepreneurship as

means of integrating resources, team and opportunity. The model also gives a holistic view of the

entrepreneurial process (Minniti, 2006). It highlights how the three components of the

entrepreneurship process must work collaboratively so as to establish a successful enterprise.

One of the elements that has been emphasized in Timmon’s model is the ability to balance

between the three components; resources, opportunities, and team. The model points out to the

importance of realizing a balance among the three components of the entrepreneurship process.

A risk develops where there is an imbalance between the three components. Similarly, an impact

Opportunit

y

Resourc

es

TEAM

The Entrepreneur

Leadership

Communication

Creativity

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on one of the three components affects the other two components. For instance, the

entrepreneurship process will stall where the entrepreneur is able to identify an opportunity but is

unable to mobile the resources required to exploit these opportunities.

Another element that has been emphasized in Timmon’s model is the role of leadership,

creativity and communication (Bygrave, & Zacharakis, 2009). According to the model,

individual leadership is a critical component in the development of the entrepreneurship process.

It is the responsibility of leader to ensure that all the three components of the entrepreneurial

process are able to fit into each other. The leader must find a balance between the venture

variables. The leader is also responsibility for establishing the vision and communicating this

vision to the rest of the team. Without the vision or poor communication of the vision, the

entrepreneurial team becomes paralyzed by ambiguity (Smith, Mathews & Schenkel, 2009). The

entrepreneur leader is also responsible for setting creating the work climate and ensuring that the

team is highly motivated. Creativity is also a critical part of the entrepreneurship process. The

entrepreneur is engaged in constant experimentation and improvisation.

The only limitation of Timmons model is that it emphasizes on the role played by

personal factors in promoting the success of the entrepreneurship process (Nassif, et al, 2010). It

highlights the entrepreneurship process as a phenomenon that originates from the

entrepreneurship skills, abilities, and traits that enable him to organize the other components of

the entrepreneurship process. There are other models that have expressed different views from

that of Timmon. One of these models is the Carol Moore’s model. Moore’s model of

entrepreneurial process suggests that the entrepreneurial process is not influenced by personal

factors only (Neergaard, 2007). The process is also influenced by environmental and sociological

processes. The model implies that an individual can get an idea for a new venture either through

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deliberate action or by chance. Therefore, sociological and environmental factors also play a

significant role in the development of entrepreneurship. Moore refers to these factors as trigger

events. Trigger events may include lack of better career prospects or poor salaries working for

someone, role models, creativity, competition, government policies and resources.

Figure 2: Carol Moore Model

Moore’s model of entrepreneurship provides a realistic view of the entrepreneur and the

entrepreneurship process (Bygrave, 2009). It acknowledges that entrepreneurship does not

always emerge from factors that are innate to the entrepreneur but is also brought about by social

and environmental factors. Unlike Timmon’s model, Moore’s model does not take a snapshot

PersonalLocus of controlToleranceRisk takingPersonal valuesEducationExperience

SociologicalNetworksTeamsParentsFamilyRole Model

OrganizationalTeamStrategyStructureCultureProducts

EnvironmentalOpportunitiesRole models Creativity Raw materials

EnvironmentalCompetitionResourcesIncubatorGovernment policy

EnvironmentalCompetitorsCustomersSuppliersInvestors BankersLawyer

PersonalEntrepreneurLeaderVisionManagerCommitment

Innovation Trigger event Implementation Growth

PersonalJob dissatisfactionEducation Age Risk takingJob loss

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approach in defining the entrepreneurship process, but takes a dynamic and comprehensive

approach (Nassif, et al, 2010).

Conclusion

Entrepreneurship is the bedrock of economic development in all countries of the world

(Burdus, 2010). Timmon’s model provides a structured approach of evaluating and

understanding the entrepreneurial process. This model suggest that the entrepreneurial process

comprises of three main components; the entrepreneur, the opportunity, and resources. In order

for a new venture to thrive, there must be a balance between these three components. The model

also emphasizes on the role of leadership in the entrepreneurial process. The leader is responsible

for creating a vision and communicating this vision throughout the enterprise. He is also

responsible for coordinating the three components of the entrepreneurial process.

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