CHAPTER 1
INTRODUCTION TO
ENTREPRENEURSHIP
INTRODUCTION TO ENTREPRENEURSHIP
According to the 2015-16
Global Entrepreneurship
There is tremendous Monitor (GEM) study
interest in covering 112 countries,
entrepreneurship in the 11.9% of Americans
U.S. and around the are actively engaged in
world. starting a business, or are
the owner/manager of a
business that is less than
3½ years old.
INTRODUCTION TO ENTREPRENEURSHIP
WHAT IS ENTREPRENEURSHIP AND
WHY IS IT IMPORTANT?
The word entrepreneur derives from the French
words entre, meaning “between,” and prendre,
meaning “to take.”
It was originally used to describe people who “take
on the risk” between buyers and sellers or who
“undertake” a task such as starting a new venture.
What Entrepreneurs Do?
Entrepreneurs assemble and then integrate all the
resources needed – the money, the people, the
business model, the strategy – to transform an
invention or an idea into a viable business.
WHAT IS ENTREPRENEURSHIP AND
WHY IS IT IMPORTANT?
Academic Definition (Stevenson & Jarillo)
Entrepreneurship is the process by which
individuals pursue opportunities without regard
to resources they currently control.
Venture Capitalist definition(Fred Wilson)
Entrepreneurship is the
art of turning an idea into
a business.
CORPORATE ENTREPRENEURSHIP
Corporate Entrepreneurship
Is the conceptualization of entrepreneurship at
the firm level.
All firms fall along a conceptual continuum that
ranges from highly conservative to highly
entrepreneurial.
The position of a firm on this continuum is
referred to as its entrepreneurial intensity.
One of the most persuasive indications of
entrepreneurship’s importance is the degree of
effort undertaken to behave entrepreneurially.
CORPORATE ENTREPRENEURSHIP
Entrepreneurial Firms Conservative Firms
• Proactive • Take a more “wait and see”
• Innovative posture.
• Risk taking • Less innovative
• Risk averse
WHY BECOME AN ENTREPRENEUR?
The three primary reasons that people become
entrepreneurs and start their own firms
Desire to be their own boss
Desire to pursue their
own ideas
Financial rewards
CHARACTERISTICS OF SUCCESSFUL
ENTREPRENEURS
Four Primary Characteristics
CHARACTERISTICS OF SUCCESSFUL
ENTREPRENEURS
Passion for the Business
The number one characteristic shared by
successful entrepreneurs is a passion for the
business.
Thispassion typically stems from the
entrepreneur’s belief that the business will
positively influence people’s lives.
Passion is particularly important
for both for-profit and not-for-profit
entrepreneurial organizations.
CHARACTERISTICS OF SUCCESSFUL
ENTREPRENEURS
CHARACTERISTICS OF SUCCESSFUL
ENTREPRENEURS
Product/Customer Focus
A second defining characteristic of successful
entrepreneurs is a product/customer focus.
An entrepreneur’s keen focus on products and
customers typically stems from the fact that most
entrepreneurs are, at heart, craftspeople.
A product/customer focus also involves the
diligence to spot product opportunities and to see
them through to completion.
CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
Tenacity Despite Failure
Because entrepreneurs are typically trying
something new, the failure rate is naturally high.
A defining characteristic for successful
entrepreneurs is their ability to persevere through
setbacks and failures.
Execution Intelligence
The ability to fashion a solid business idea into a
viable business is a key characteristic of
successful entrepreneurs.
CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
Execution Intelligence
The ability to effectively execute a business idea
means developing a business model, putting
together a new venture team, raising money,
establishing partnerships, managing finances,
leading and motivating employees, and so on.
Italso demands the ability to translate thought,
creativity, and imagination into action and
measurable results.
COMMON MYTHS ABOUT
ENTREPRENEURS
Myth 1: Entrepreneurs Are Born, Not Made
This myth is based on the mistaken belief that
some people are genetically predisposed to be
entrepreneurs.
The consensus of many studies is that no one is
“born” to be an entrepreneur; everyone has the
potential to become one.
Whether someone does or doesn’t become an
entrepreneur is a function of their environment, life
experiences, and personal choices.
COMMON MYTHS ABOUT
ENTREPRENEURS
Although no one is “born” to be an entrepreneur, there are
common traits and characteristics of successful entrepreneurs
• A moderate risk taker • Optimistic disposition
• A networker • Persuasive
• Achievement motivated • Promoter
• Alert to opportunities • Resource assembler/leverager
• Creative • Self-confident
• Decisive • Self-starter
• Energetic • Tenacious
• Has a strong work ethic • Tolerant of ambiguity
• Lengthy attention span • Visionary
COMMON MYTHS ABOUT
ENTREPRENEURS
Myth 2: Entrepreneurs Are Gamblers
Most entrepreneurs are moderate risk takers.
The idea that entrepreneurs are gamblers
originates from two sources:
Entrepreneurs typically have jobs that are less
structured, and so they face a more uncertain set
of possibilities than people in traditional jobs.
Many entrepreneurs have a strong need to
achieve and set challenging goals, a behavior that
is often equated with risk taking.
COMMON MYTHS ABOUT
ENTREPRENEURS
Myth 3: Entrepreneurs Are Motivated Primarily by
Money
While it is naive to think that entrepreneurs don’t
seek financial rewards, money is rarely the reason
entrepreneurs start new firms.
In fact, some entrepreneurs warn that the pursuit
of money can be distracting.
COMMON MYTHS ABOUT
ENTREPRENEURS
Myth 4: Entrepreneurs Should Be Young and
Energetic
Entrepreneurial activity is fairly easily spread out
over age ranges.
While it is important to be energetic, investors often
cite the strength of the entrepreneur as their most
important criteria in making investment decisions.
What makes an entrepreneur “strong” in the eyes of an
investor is experience, maturity, a solid reputation, and
a track record of success.
These criteria favor older rather than younger people.
COMMON MYTHS ABOUT
ENTREPRENEURS
COMMON MYTHS ABOUT
ENTREPRENEURS
Myth 5: Entrepreneurs Love the Spotlight
Many entrepreneurs avoid public notice.
TYPES OF START-UP FIRMS
CHANGING DEMOGRAPHICS OF
ENTREPRENEURS
Women Entrepreneurs Minority Entrepreneurs
• There were 6.2 million • There has been a
women-owned businesses substantial increase in
in 2002 (the most recent minority entrepreneurs in
statistics available) the U.S. from 1996 to 2010.
• This number was up 20% • The biggest jump has come
from 1997. in Latino entrepreneurs,
which increased from 11%
• There are a growing
number of organizations to 23% from 1996 to 2010.
that support and advocate
for women-owned
businesses.
CHANGING DEMOGRAPHICS OF
ENTREPRENEURS
Young Entrepreneurs Senior Entrepreneurs
• Interest among young people in • The percentage of U.S.
entrepreneurial careers entrepreneurs who are seniors
is high. jumped from 15% to 23% from
• According to a Harris Interactive 1996 to 2010.
survey, 40% of people eight to 21 • The increase is attributed to
years old said they’d like to start corporate downsizing, a desire
their own business someday. among older workers for more
• A total of 59% of the 8- to 21- year fulfillment in their lives, a need
olds said they know someone who for additional income, and
has started their own business. similar factors.
CHANGING DEMOGRAPHICS OF
ENTREPRENEURS
ECONOMIC IMPACT OF ENTREPRENEURIAL
FIRMS
Innovation
Isthe process of creating something new, which is central to
the entrepreneurial process.
Several studies have found that small businesses outperform
their larger counterparts in terms of obtaining patents.
Job Creation
Small businesses are the creators of most new jobs in the
U.S., and employ half of all private sector employees.
According to a Kauffman Foundation survey, 92% of
Americans say entrepreneurs are critically important to job
creation.
NEW INDUSTRY FORMATION
New industries are born when technological change
produces a new opportunity that an enterprising
entrepreneur seizes.
Disruptive or metamorphic technologies that destroy
previous technologies and create new industries
display a different pattern of behavior.
The pattern of growth, shakeout, stabilization, and
decline of industry can be interrupted at any time by
the entry of another disruptive technology.
INDUSTRY LIFE CYCLES
JOB CREATION
The most recent data from 2003 indicate that
small businesses created 1,990,326 net new
jobs as compared to 994,667 for large firms.*
THE NATURE OF ENTREPRENEURIAL START-UPS
An entrepreneurial venture brings something new
to the marketplace.
Three primary characteristics:
1. Innovative
2. Value-creating
3. 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
ENTREPRENEURIAL FIRMS’ IMPACT ON SOCIETY
AND LARGER FIRMS
Impact on Society
Theinnovations of entrepreneurial firms have a dramatic
impact on society.
Think of all the new products and services that make our
lives easier, enhance our productivity at work, improve our
health, and entertain us in new ways.
Impact on Larger Firms
Many entrepreneurial firms have built their entire business
models around producing products and services that help
larger firms become more efficient and effective.
THE ENTREPRENEURIAL PROCESS
The Entrepreneurial Process Consists of Four Steps
Step 1: Deciding to become an entrepreneur.
Step 2: Developing successful business ideas.
Step 3: Moving from an idea to an entrepreneurial
firm.
Step 4: Managing and growing the entrepreneurial
firm.
THE ENTREPRENEURIAL REVOLUTION
Free enterprise as foundation of entrepreneurial
motivation
MarcAndressen, Netscape Communications
Howard Schultz, Starbucks
THE ENTREPRENEURIAL EVOLUTION
ENTREPRENEURIAL TRENDS
Women and minority-owned businesses
Social responsibility
The Internet
Globalization
STEPS IN THE ENTREPRENEURIAL PROCESS
Step 1 Step 2
Developing Successful Business Ideas
STEPS IN THE ENTREPRENEURIAL PROCESS
Step 3 Step 4