Technical articles

MGT602
Theme-13
Entrepreneurship Ecosystem and Ethical Considerations
Entrepreneurship ecosystem is an important concept and it is critical to see it in detail understand
it. In the beginning of this course we shared some development stats (i.e. 14 pillars of
entrepreneurial ecosystem by GEI) with you and discussed our position as a country in an
entrepreneurial ecosystem region wise and worldwide.
All the details we have been through during the whole of this course will be discussed under the
umbrella of the concept of ecosystem. An entrepreneurial ecosystem discusses the tasks an
entrepreneur performs, the resources and planning he needs to do so and the environmental factors
which he comes across. An ecosystem is defined in multiple ways like “it is a community of living
organism in conjunction with the non-living components of their environment (things like air,
water and mineral soil), interacting as a system.” The Global Entrepreneurship and Development
Institute (GEDI) defines the ecosystem as “A system which is organized in a set of interacting and
interdependent subsystems that function together as a whole to achieve a purpose” source: GEDI
The integration of resources, economic activities among the contributors of a system, subsystems
is called as ecosystem. Our university, faculty members, students, campuses, cities, courses,
content, degrees are all the part of an ecosystem. Actually we are all working in an ecosystem,
means you are not working in isolation and secondly you are an integral part of the system just
like other parts you too have the equal importance. “An ecosystem is a purposeful collaborating
network of dynamic interacting systems and subsystems that has an ever changing set of
dependencies within a given context” source: GEDI

“An entrepreneurial ecosystem at socioeconomic level having properties of self-organization

scalability and sustainability as dynamic institutionally embedded interaction between
entrepreneurial attitudes abilities and aspirations by individuals which drive the allocation of
resources through the creation and operation of new ventures” source: GEDI
 In order to understand this complex definition in simple way let us divide it into further layers.
Consider yourself as an entrepreneur who have basic entrepreneurial motivation with attitude,
ability and aspirations. (Inner layer)
You interact with the dynamic environment (changing needs and behaviors of customers,
markets, resources and organizations) around you. (Mid layer)
Furthermore you interact with the subsystems i.e. corporate sector (competitors), financial sector
(investors, capital sources), research and development (innovations in the market), government
(regulators, policy makers), market structure, and the education sector within your geographic
vicinity. These all subsystems are interlinked and connected as a system which creates and
enabling environment for you to conduct an entrepreneurial activity. (Outer layer)

GEI defines 14 Pillars of an entrepreneurial ecosystem, explained in the following table.

Entrepreneurship doesn't take place in a vacuum — a whole host of factors determine how easy
(or difficult) it is to start up. Our National Expert Survey (NES) looks at the national context in
which individuals start businesses
Source: Global Entrepreneurship Monitor
1. Financing for Entrepreneurs
2. Governmental Support and Policies
3. Taxes and Bureaucracy
4. Governmental Programs
5. Basic School Entrepreneurial Education and Training
6. Post School Entrepreneurial Education and Training
7. R&D Transfer
8. Commercial and Professional Infrastructure
9. Internal Market Dynamics
10. Internal Market Openness
11. Physical and Services Infrastructure
12. Cultural and Social Norms

Taking discussion on entrepreneurial ecosystem to further step let us have a look on

entrepreneurial ecosystem from another angle. “Entrepreneurial ecosystem is a set of
interdependent actors and factors coordinated in such a way that they enable productive
entrepreneurship in a particular territory. ”
Source: F.C. Stam & Ben Spigel, 2016. "Entrepreneurial Ecosystems," Working Papers 16-13,
Utrecht School of Economics.
Similarly, Isenberg’s model of an entrepreneurship ecosystem has 6 indicators.
1- Conducive culture
2- Enabling policies
3- Availability of appropriate finance
4- Quality of human capital
5- Venture friendly markets for products
6- Institutional and infrastructure support

Ease of doing business index is closely related to an entrepreneurial ecosystem. It has further
indicators given in the following paragraph.
 Starting a business:
 Dealing with construction permits
 Getting electricity
 Registering property
 Getting credit
 Protecting investors
  Paying taxes
 Trading across borders
 Enforcing contracts
 Resolving insolvency
Source: World Bank Group
Pakistan entrepreneurial ecosystem.

Consumer and non-consumer/business markets:

Business opportunities spread across consumer markets, business markets, and institutional
markets. As an entrepreneur we need to realize that business opportunities have heavier magnitude
of opportunities in business, institutional and governmental markets thus these markets serve a
larger chunk of business opportunities. The dynamics of non-consumer markets are different to the
dynamics of consumer markets i.e. buying decision
Buying decision in consumer markets is done by an individual or maximum by a family unit. In
business markets the buying decision is being performed by a system. It does not mean that there
is no involvement of humans in these sort of decisions. But it is important to understand that these
decisions take humanly input through an integrated system (all the decision makers are the part of
a system in this case). This system has some certain requirements and entry dynamics which are
needed to be well understood in order to enter and penetrate into these markets.
Business markets buy two types of products: 1) for their own consumption, 2) for the further
production of products and services they deemed to produce and deliver to consumer, institutional
or government markets. Their demand is derived demand which is based on their personal potential
markets. Unlike business markets, the government markets’ dynamics are pretty different. Within
any type of economy i.e. market economy, government is the biggest buyer and the largest
consumer of products and services. Government’s span of servicing includes health, education,
defense, policing, transportation and infrastructure.
Institutional markets either governed by the government or non-government entities, profit or non-
profit organizations. Let’s take the example of a prison. A service providing institute for captives.
All the service (health, hygiene, food, education, and skill development) requirements of a prison
need to be sourced. Similarly hospitals from the private and public sector both are the examples of
institutional markets. Institutional (government) buying decisions are systematic, careful and
legally bound by the PEPRA rules, they need to open tenders for sourcing and buying.
Institutional markets (private sector public limited companies) are legally bound to show
transparency to their stakeholders and they also need to open tenders. So tender is a big science. It
needs market intelligence, information seeking. A tender has its own specific requirements pre
requirements and post tender requirements. So here comes the element of mall practices which are
performed to crack the tender related market and real time facts. It is more critical to understand
that in between these mall practices as an entrepreneur you must not betray yourself form the
principals of better, cheaper and faster. Ideally you need to focus on the quality and pricing of your
offerings and further you need to be quick to get accurate marketing information resources.
It is important to know for a startup that it can target consumer, business, institutional, government
markets with equal effectiveness and efficient if the entrepreneur has the right approach,
information seeking ability, and exposure to legal mechanisms of these different types of markets.
It is critical to know the entry preparation requirements for non-consumer or the
business/institutional markets. The preparatory requirements depend upon the objective of the
startup itself. Generally a startup focuses on increasing the sales volume, market share and the
return on investment on top priority. Firms dealing in B2C markets attach B2B market in its
business portfolio to muscle up its market share, sales volume and return on investment. B2C and
B2B are totally different organisms to deal with. The strategies and planning of sales, marketing,
servicing, pricing, recovery etc. for B2C are totally different to B2B. Conditioned to the type of
product you are offering it is the liberty of dealing both B2C and B2B at the same time that you
can switch to B2C in case of problems in B2B and vice versa.
When you are growing as an entrepreneur then you need to approach institutional and government
markets in order to increase market share and introduce your innovative products to a larger
market.
Business and ethics
Whether you are a service provider or you deal only in products or both, whether you deal with
B2B markets or B2C markets in each of these situations you come across multiple types of business
practices, people, transactions and situations. Therefore, you need to learn and practice the
business ethics. If you do not practice business ethics and involve in business malpractices then
you may get the short term benefits but it will not help you sustain in the market. Ethics is the
branch of knowledge that defines the moral principles to deal with people and society. Generally,
it involves the moral principles that govern and guide an individual's behavior while living in a
society for conducting activities in general interest of society.

Business ethics is the study of appropriate business policies and practices regarding potentially
controversial subjects. (The waste of a chemical factory will pollute the environment)
Some issues that come up in a discussion of ethics include corporate governance, insider trading,
bribery, discrimination, social responsibility, and fiduciary responsibilities. (Unfair means to win
a tender from an institutional client, gender biasness in employee promotions etc.)
The law usually sets the tone for business ethics, providing a basic guideline that businesses can
choose to follow to gain public approval. (to dispose off chemical factory waste in a proper way,
you own rules and decisions to morally power your business)
Source: https://www.investopedia.com/terms/b/business-ethics.asp
Ethical Boundaries

Religion, personal values, government rules, consumers ‘values, cultural values, and societal
values decide your ethical boundaries.

An entrepreneur must have some certain acts or behaviors to display business ethics. These set of
business ethics signal the (business ethic) reputation of an entrepreneur to the business community
and the clients and help grow and sustain business as well.
1) Trustworthiness: Being transparent and honest in all actions and communications (i.e.
warranty claim conditions must be clear, transparent and justified). Trustworthiness creates
your image as a good employer among the internal customers (employees) and a good
brand among the external customers (consumers, suppliers and the competitors).
2) Respect: Respect for employees and customers is equally important along with being a
trusted business entity. The way an entrepreneur treat you during a business transaction i.e.
mutual respect or the way he treats his employees while performing a business activity.
Respect to you customers and employees is a non-monetary reward ensures the return in
form of loyal employees and customers.
3) Fairness: Fairness in dealings with customers and employees is very critical. (Warranty
properly claimed or not, and similarly the worker get the salary and other financial benefits
as per contract or verbal agreement).
 4) Respect for governing laws, rules and regulations: Avoid illegal practices i.e. an
entrepreneur must be a tax payer is a great symbol of being ethical. Similarly an
entrepreneur who does not employee child labor is considered as a fair businessman. The
more you adhere to the government laws the more you are reputed among the business
community.
5) Workplace environment: Diversity, harassment, equal opportunity right, wages, basic
rights etc. add to the business ethics reputation of an entrepreneur.
Why Business ethics?
Practicing business ethics are important for the following reasons.
 Business image and credibility and reputation
 Employees’ trust and loyalty and retention
 Consumers’ trust and brand loyalty
 Stake holders and shareholders trust and loyalty
 Cost effective strategy
It is concluded that for a long-term, sustainable business strategy the development and practice of
business ethics and their display in business transactions is critically important for entrepreneurs.

Written by
Jawad Hassan