Entrepreneurship

Module 1
UNI VERS I TY O F S T. LA S ALLE BACO LO D
CO LLEGE O F BU S I NES S A ND
A CCO U NTA NCY

1st Semester
A.Y. 2020-2021
Entrep101
Entrepreneurial Behavior/Foundation

Identify and be familiarized with the entrepreneurial traits,

behaviours and competencies; entrepreneurial
management styles, ethics and duties and responsibilities.
Be able to evaluate them to determine their level of
predisposition to entrepreneurs. Be able to learn and
appreciate the role of social responsiveness in being an
entrepreneur and document socially responsible
entrepreneurs and enterprises.

ROWENA GINAFE V. GRACIANO, MBA

The Concept of Entrepreneurship

Entrepreneurship started in France after the French Revolution. It was the

start of capitalism and feudalism (20th century)
The word entrepreneur was coined by Jean Baptiste Say – a renowned French
economist
It promotes doing something different (new) rather than making the existing
better.
Joseph Schumpeter believed that entrepreneurship provides a dynamic
disquilibria brought about by the innovative entrepreneur that brings a healthy
economy.

ROWENA GINAFE P. VARGAS, MBA

Entrepreneurship
By definition:
◦ Economists –
◦ “...consists in doing things that are not generally done in the ordinary
course of business routine; it is essentially a phenomenon that comes
under a wider aspect of leadership.
--Cantillon, 1725
◦ “entrepreneurship, rigorously defined, refers to the creation of a new
economic entity centered on a novel product or service or, at the very
least, one which differs significantly from products or services offered to
elsewhere in the market”
--Joseph schumpeter,1934

ROWENA GINAFE P. VARGAS, MBA

The Evolution of Entrepreneurship
Contributor and Year Contribution to Entrepreneurship and/or The
of Contribution Entrepreneurship Thought Contributed
Jean Baptiste Say Refers to the shifting of economic resources out of an area of
1800 lower and into higher productivity and greater yield.
Carl Menger Involves in obtaining information, calculation, an act of will and
1871 supervision.
Joseph Schumpeter The finding and promoting new combinations of productive
1910 factors.

Harvey Liebenstein The reduction of organizational inefficiency.

1970
Israel Kirzner The identification of market arbitrage opportunities.
1975
Albert Shapiro Involves a kind of behavior that includes initiative taking,
1975 organizing, and recognizing social mechanism to turn
resources and situations to practical account and the
acceptance of risks and failures.

ROWENA GINAFE P. VARGAS, MBA

The Evolution of Entrepreneurship
Contributor and Year Contribution to Entrepreneurship and/or The
of Contribution Entrepreneurship Thought Contributed
W. Ed Mc Mullan and The building of new growth for organizations.
Wayne A. Long
1990
Howard Stevenson The pursuit of opportunity beyond the resources currently
1992 under one's control.
Jeffrey Timmons The ability to create and build a vision from practically nothing.
1994
Peter Drucker The process of starting one's own, new and small business. It
1998 is also the process of innovation and new venture creation
through four major dimensions - individual, organizational,
environmental, process - aided by the collaborative networks
in government, education and institutions.
Robert Hisrich Involves the creation process, requires the devotion of the
2001 necessary time and effort, assumes the accompanying
financial, psychic and social risks and receives the resulting
rewards of monetary and personal satisfaction and
independence.
ROWENA GINAFE P. VARGAS, MBA
The Role of Entrepreneurship in

Economic Growth
◦ Is the increase in value of goods and services
produced by an economy.
◦ It is measured as the percent rate of increase in real
gross domestic product or GDP.
◦ In economics, economic growth refers to growth of
potential output (production) at full employment,
which is caused by growth in demand, or output.
I. Contributions of Entrepreneurship to the
Economy
◦ Entrepreneurship employs the various resources present in
the economy.
◦ Entrepreneurs need manpower for the business operations.
◦ It is said that Entrepreneurship is the backbone of the
economy.
◦ An entrepreneur is in their ability to innovate goods and
services.
◦ An entrepreneur is their ability to gain international
popularity and prestige for their country.
◦ Their willingness to take risk, risk that society will otherwise
be hesitant to take.
◦ Although many people do not recognize it, entrepreneurs also
profoundly inspire budding and potential entrepreneurs.
Theories that Explain how Economies
Grow
Theories of economic growth maybe classify
into three broad groups:
◦ Consists of theories viewing economic growth as a natural and
inevitable process.
◦ Explains economic development as a rational process brought
about when men respond to opportunities in the environment to
promote their own self-interest or material welfare.
◦ Views economic development as a result of economically
irrational yet psychologically and sociologically satisfying
activities of enterprising men.
Theories on Entrepreneurship as a natural and
inevitable process.

GENERAL EXPLANATIONS:
1. Law of nature - in 1932, Spengler explained economic development by
likening a culture or society to a living organism that grows, lives, and
dies; it is a part of life and is something to be expected.
2. Invisible Hand – 18th century, Adam Smith advanced the principle.
According to Smith, any society including a very under developed one
can be made to prosper with little or no intervention from government
because economic is brought about as a natural course of things.
3. Cultural Diffusion – Anthropologist introduced the idea that over the
ages and across the years, societies have been involved in different social
experiments in various economic, political, religious or social aspects of
life.
Theories on Entrepreneurship as a natural and
inevitable process.

4. Racial Heritage – The belief that one race is superior to

another on the basis of color, build and other genetic
heritage has been around for a long time.
5. Climate conditions – Ellsworth Huntington, wrote the most of
the great civilizations flourished in the tropics or the far
north. He maintained that the most stimulating climate for
man involves an average temperature range between winter
and summer of 40 to 60 F with moderate rainfalls and
frequent mild storms.
6. Challenge of the natural environment – advanced by A,J.
Toynbee, it traces economic and cultural changes to a
combination of natural (geographic) phenomena and socio-
psychological pressure of stimuli.
Economic Development as a rational
process

ECONOMIC EXPLANATIONS:
1. Technology improvements and division of labor – Adam Smith, believed
that the intervention of better machines and equipments brought about
increased productivity, which together with specialization or division of
labor made economic growth possible.
2. Neo-classical growth model – develop by Robert Solo and Paul Samuelson
in the 1950’s, this model assumes that countries use their resources
efficiently and that there are diminishing returns to capital and labor
increases.
3. Endogenous Growth Theory – included a theory of technological
advancement. These models also incorporated a new concept of human
capital, the skills and knowledge that make workers productive.
 Economic Development as a rational
process

4. Big Push Theory – one popular theory in the 70’s was that of the “Big Push”
which suggested that countries needed to jump from one stage to another
through a virtuous cycle in which large investments in infrastructure and
education coupled to private investment would move the economy to a
more productive stage.
5. Population Changes – according to David Ricardo, population increases
eventually lead to stagnation or a final stationary state o the economy.
However, according to John Maynard Keynes, the capitalist or entrepreneurs
are most likely to invest their resources when there is demand for the
commodity.
6. Entrepreneurship – economist recognized that for production to take place,
someone had to mobilize all resources ( land, labor and capital ).
Economic Development as a result of economically
irrational yet psychologically and sociologically
satisfying

SOCIO - PSYCHOLOGICAL EXPLANATIONS:

1. Sociological Factors – sociologist explain economic growth in
terms of social or cultural values, norms and other structures
that differentiate modern and traditional economies.
2. Psychological Factors – identified positively as one, which
enterprising individuals seek to fulfill in the need to achieve.
As a product of individual human behavior, that is, of a
person’s decision thoughts and actions.
Modern Societies Traditional Societies
a. Unemotional a. Emotional
b. Interested in themselves b. Interested in the general welfare of
the community
c. Able to relate to others (social roles as c. Relate to others in
buyers, sellers, qualities middlemen, in terms of unique qualities
etc.)
d. Known for accomplishments d. Known for who they are (status,
position in the organization, etc. )
e. Able to relate to others such as specific d. Tie-up economic relationship
employer – employee customer, etc) manufacturer and limited by a
labor contract and with all sorts of
other relationship involving
kinship, political, religious and
other social structures
What is Entrepreneurship?
The act of building and creating a business
enterprise.
A process of doing something new (CREATIVE) and
something different (INNOVATIVE) for the purpose of
creating wealth for the individual and adding value
to society.

ROWENA GINAFE P. VARGAS, MBA

CATEGORIES OF ENTERPRISES
Micro-Enterprise
Asset Size: less than P3 Million
Small Enterprise
Asset Size: Over P3M to P15M
Medium Enterprise
Asset Size: Over P15M to P100M
Large Enterprise
Asset Size: Over P100M
ASSET SIZE EXCLUDES THE VALUE OF LAND

ROWENA GINAFE P. VARGAS, MBA

Benefits of Entrepreneurship

Creates employment

Improves quality of life

Contributes to more equitable distribution of income and therefore eases

social unrest

X
Risks of
Entrepreneurship
Risk of failure

Unpredictable business conditions

Long hours of work

Unwanted or unexpected responsibilities

Rewards of Entrepreneurship
Have unlimited opportunity to make money

Be your own boss

Tap your creativity

Overcome challenges and feel fulfilled

Entrepreneurs may be categorized into the following:
1. The intrapreneur - an entrepreneur with an existing organization
referred to as the corporate entrepreneur.
2. The solo self-employed individual - includes all agents,
repairmen, brokers, accountants, physicians who operate
alone or only with a few employees and perform works
personally.
3. The dealer to dealers – include highly knowledgeable
businessmen engaged in various forms of trades frequently,
directly or indirectly related to their line of work.
4. The team builders – individuals who go on building larger
companies using hiring and delegation.
5. The independent innovators – include person who hit upon
ideas for better products or services and the create companies
to develop, produce and sell.
6. The pattern multipliers – who spot an effective business pattern
7. The economy scale exploiters - entrepreneurs who
locate their business in lower rent and tax areas.
8. The capital aggregators – smart entrepreneurs who use
their experience and expertise in pooling a group of
financiers to engage in a business.
9. The acquirers - entrepreneurs who acquires business.
10. The independent investors- include pure inventors
who develop their new product or inventions and take
care of marketing them.
11. The buy and sell artists - they include the wise guys
referred to as corporate raiders and brokers who turn
around sell and liquidate.
 Entrepreneurial Process
Opportunity

Decide to Start a New Define and Analyze New Economics of New

business Ventures Businesses

LAUNCH

Attracting Stakeholders Business Legal form of Org.

and Resources & taxation issues
Financing
Planning

GROWTH

Grow and Operate the business

HARVEST

Become Cash Cow Sell the Business Go Public Liquidate