1
Introduction to entrepreneurship AND Becoming an
entrepreneur
CHAPTER
Learning Objectives
Define entrepreneurship.Explain the role of entrepreneurship in
economic growth. Distinguish entrepreneurial ventures
from small businesses in terms of their purpose and goals.
Describe the evolution of entrepreneurship as a field of study since the 1960s.
Identify today’s broad trends in the field of entrepreneurship.
Learning Objectives (Cont’d)
Dispel myths about entrepreneurs.Understand the many pathways to
entrepreneurship.Prepare to become an entrepreneur.
Definition of Entrepreneurship
“The process by which individuals—either on their own or in organizations—pursue opportunities without regard to the resources they currently control.” ~ Stevenson
Entrepreneurship is a mindset that is: Opportunity-focused Risk taking Innovative Growth-oriented
The Role of Entrepreneurship
Three schools of thought:1. An integrated input/output model 2. The career assessment approach 3. The new venture creation process
Affected by three categories of variables: The entrepreneur and what he/she brings to
process The environment (external variables) The organization (strategic aspects of the new
venture)
New Venture Creation Process
Economic Growth
Technological innovationGlobalizationShift of lower-skilled jobs outside U.S.China and India
Entrepreneurship and Technological Change
New Industry Formation
New industries are born when technological change produces a novel opportunity that an enterprising entrepreneur seizes.
Industry life cycles: birth, growth, decline
The Industry Life Cycle
Source: Adapted from M. R. Darby and L. G. Zucker, “Growing by Leaps and Inches: Creative Destruction, Real Cost Reduction, and Inching Up,” Economic Inquiry (January 2003), pp. 1-19.
Job Creation
Small businesses represent 99.7 percent of all employers and pay more than 45 percent of the total U.S. private payroll.
Small businesses have generated 65 percent of net new jobs over the past 15 years.
Job Creation (cont’d)
Economic development in three categories of countries: Factor-driven economies
Created out of necessity and rely on unskilled labor and extraction of natural resources
Efficiency-driven economies Growing and in need of improving their production
processes and quality of goods produced Innovation-driven economies
The most advanced and where business compete based on innovation and entrepreneurship
The Nature of Entrepreneurial Startups
An entrepreneurial venture brings something new to the marketplace.
Three primary characteristics:1. Innovative2. Value-creating3. Growth-oriented
New Business Formation
Entrepreneurs use identifiable milestones to measure their progress:• Deciding to start a business• Researching the concept• Preparing for launch• Securing the first customer• Obtaining the business license• Other activities which signal the
business is in operation
Social, Political, and Economic Context of the Entrepreneurial Process
Source: From Paul D. Reynolds, “National Panel of U.S. Business Start-ups: Background and Methodology,” in Databases for the Study of Entrepreneurship, edited by J.A. Katz, pp. 153–227. Copyright © 2000, with permission from Elsevier. Modified by Launching New Ventures author to reflect the concept of the fuzzy front end and its associated probabilities.
Business Failure
Not all entrepreneurs succeed in growing their startup into an established business.
Survival has been attributed to sufficient capital, having employees, and the entrepreneur’s intention in starting the business.
Starts and Closures of Employer Firms, 2004-2008
eEstimate using percentage changes in similar data provided by the U.S. Department of Labor, Employment and Training Administration.Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; and U.S. Department of Labor, Employment and Training Administration.
Category 2004 2005 2006 2007 2008
Births 628,917 644,122 670,058 633,100e 627,200e
Closures 541,047 565,745 599,333 571,300e 595,600e
Bankruptcies 34,317 39,201 19,695 28,322 43,546
The Entrepreneurial Revolution
United States founded on the principle of free enterprise.
The term entrepreneur didn’t come into popular use until the 1980s.
The Entrepreneurial Evolution
Entrepreneurial Trends
Global economic turmoilGreen powerThe women’s marketThe internet, social media, and
mass mingling
Seven Myths
1. Entrepreneurs start businesses solely to make money
2. It takes a lot of money to start a business3. It takes a great idea4. The bigger the risk, the bigger the reward5. A business plan is required for success 6. Entrepreneurship is for the young and
reckless7. Entrepreneurship cannot be taught
Paths to Entrepreneurship
The home-based entrepreneur The serial or portfolio entrepreneur The nonprofit entrepreneur The corporate entrepreneur
The Corporate Entrepreneur
Entrepreneurial mindset in large corporations: Senior management commitment A champion or several champions Corporate interoperability Clearly defined stages and metrics A superior team Spirit of entrepreneurship
Challenges and Opportunities with the Entrepreneur Career Path
Table 2.1
Preparing for EntrepreneurshipFigure 2.1
Build a Professional Network
Networking The exchange of information and resources
among individuals, groups, or organizations whose common goals are to mutually benefit and create value for the members
Strong ties – close friends and family Weak ties – acquaintances and business
contacts Brokering
Understand Personality and Business Preferences
Barriers to self-employment: Lack of confidence Financial needs Startup logistics Personal or family issues Time constraints Lack of skills
Critical Entrepreneurial Skills
Analysis and critical thinking
Persuasion and negotiation
Opportunity recognition
Written and oral communication
Resource gathering Leadership and people management
Organizational and time management
Decision making
Calculated risk taking Storytelling
Table 2.4