The Foundations of Entrepreneurship Chapter 1

Chapter 1: Entrepreneurship

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The Evolution of Entrepreneurship

Entrepreneur

is derived from the French entreprendre, meaning to undertake. Although no single definition of entrepreneur exists and no one profile can represent todays entrepreneur, research is providing an increasingly sharper focus on the subject.
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Who is an Entrepreneur?
One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

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The World of the Entrepreneur

A new business is born every 11 seconds in the United States Study of influential Americans the defining issue of the 21st Century: Entrepreneurship! One of 12 Americans is actively involved in trying to start a new business.

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Entrepreneurial Activity Across the GlobeTheory of Religious belief by Max Weber

Percentage of Adult Population Working to Start a New Business
United States
Canada

8.5% 6.8%
5.4%

Israel Italy 3.4% 3.3% 2.2% 2.0% 1.8% 1.6% 1.4%

Country

Great Britain Germany Denmark France Japan Finland

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Percent

ENTREPRENEUR RICH NDIA

India has no dearth of entrepreneurs. In fact, India has over 42 million enterprises as compared to fewer than 6 million in the US.

Many of these would be microenterprises like the vegetable vendors, the paan shops and the like
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Chapter 1: Entrepreneurship

Question 1: What is entrepreneurship?

Entrepreneurship Strategic thinking and risk-taking behavior that results in the creation of new opportunities for individuals and/or organizations. Entrepreneurs Risk-taking individuals who take actions to pursue opportunities and situations others may fail to recognize or may view as problems or threats.
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Who are entrepreneurs?

Entrepreneurs are
Founders

of businesses that become largescale enterprises. People who:

Buy a local franchise outlet Open a small retail shop Operate a self-employed service business
People

who introduce a new product or operational change in an existing organization.

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Chapter 1: Entrepreneurship

Personal traits and characteristics of entrepreneurs.

Chapter 1: Entrepreneurship

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Typical entrepreneurial backgrounds and experiences:

Parents were entrepreneurs or self-employed. Families encouraged responsibility, initiative, and independence.Theory of Group Level pattern by Young Have tried more than one business venture. Have relevant personal or career experience. Become entrepreneurs between 22 and 45 years of age. Have strong interests in creative production and enterprise control.Theory of Social Change by Hagen Seek independence and sense of mastery..Theory of Xefficiency by Leibenstein..Gap in resource utilization

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Classification
Basis Timing
Socio-cultural background

Types Early starters, experienced and mature

First generation, business family, Minority, Woman

Activity level

Novice, Serial entrepreneur, Portfolio Entrepreneur

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The Cultural Diversity of Entrepreneurship

Young entrepreneurs Women Minority-owned enterprises Immigrant entrepreneurs Part-time entrepreneurs Home-based businesses Family businesses Copreneurs Corporate dropouts
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Chapter 1: Entrepreneurship

Changing face of entrepreneurship

Necessity-based

entrepreneurship

Driven by absolute need. Few to no employment or career options elsewhere.

Social

entrepreneurship

Seeks novel ways to solve social problems at home and abroad. May include job training for homeless, improving literacy among disadvantaged youth, providing start-up capital for minority-owned businesses.

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Characteristics of Entrepreneurs

Desire for responsibility Preference for moderate risk Confidence in their ability to succeed Desire for immediate feedback High level of energy Future orientation Skilled at organizing Value achievement over money

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Other attributes

Intelligence for opportunity sensing and clarity of vision

Learnability

is more important-Murthy

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Physical and emotional health for greater efforts and lesser self doubt. Patience for not jumping to conclusions and take hasty decisions. Optimism that outcome of venture will be superior than projected material and psychological gain. Due diligence as substitution for risk taking.

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The Type E Personality

Common Traits of Entrepreneurs:

Aggressively pursues goals; pushes self and others Seeks autonomy, independence and freedom from boundaries Sends consistent messages; very focused Acts quickly, often without deliberating

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Keeps distance and maintains objectivity

Pursues simple, practical solutions Willing to take risks; comfortable with uncertainty Exhibits clear opinions and values; has high expectations Impatient; just do it mentality Positive, upbeat, optimistic; communicates confidence
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Stages in the life cycle of an entrepreneurial firm.

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The Development of Entrepreneurship Theory

18th Century

Richard Cantillon: Coins term entrepreneur (go-between or between taker)

Entrepreneur bears risks and plans, supervises, organizes, and owns factors of production
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The Development of Entrepreneurship Theory

19th Century

Jean Baptiste Say: Proposed that profits from entrepreneurship were separate from profits of capital ownership

Distinction made between those who supplied funds and earned interest and those who profited from managerial abilities

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The Development of Entrepreneurship Theory

20th Century

Joseph Schumpeter: Described the entrepreneur as someone who is an innovator and someone who creatively destructs

Peter Drucker: Described the entrepreneur as someone who maximizes opportunity

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Conceptual development
Year 1755 1776 1934 1961 Author Cantillon Smith Schumpeter McClelland Contribution Used the term entrepreneur as rational decision maker who took risks and provided management. Equated entrepreneur with capitalist Innovation is the distinguished feature of entrepreneurship. Creative imitation. Achievement motivation-desire to excel, challenging achievable goals, calculated risks, assume personal responsibility. Identified four types of entrepreneurial groups- Craftsmen, family men, risk lovers and managers Study on 234 entrepreneurs found the motivators are: Extrinsic rewards, Independence/Autonomy, Intrinsic rewards, Family security
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1989 1997

Lafuente and Salas Kuratko et al.

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Contd.
Year 1890 Author Alfred Marshal Contribution Organization is the coordinating factor of production and entrepreneurship is driving element. Socio-cultural characteristics like family background, education level, personal values, motivation, role modeling effect and other support system

1990

Hisrich

1986

Lessem

Entrepreneurs can be found in both small and large organizations. Their certain attributes are: risk taking ability, need for achievement, locus of control, desire for autonomy, deviancy, creativity, opportunism and intuition. Suggests to differentiate between entrepreneurial behaviour and act of creating new entity.
Integrative framework. Five high intensity elements in non-restrictive environment are: personal resourcefulness, achievement orientation, strategic vision, opportunity seeking
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1980
1997

Vesper
Balakrishnan, Gopakumar and Kanungo

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Common Themes in Definitions of Entrepreneurship

Process Uniqueness

The Entrepreneur

Growth

Defining Entrepreneurship

Innovation

Profit or Nonprofit

Creating Value

Organization Creation

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Entrepreneurial orientations
by Mathew J. Manimala-Professor-IIM Bangalore (2008)
Factors Cautious growth through existing products and customers Description Customer orientation, Desire to start big

Competing through resourcefulness

Exploiting others resources Opportunistic diversification Self-Contained operations

Exploiting others weaknesses, Flexibility, braving competition

Exploiting others financial resources Aggressive marketing, spreading of risk to several units Continuance in business, desire to own capabilities, growth ideas for existing products Readiness to move according to market/resources, Networking

Response to immediate environment

Spreading risks to compatible partners Preference for compatible partner, Spreading risk to several partner
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Entry through imitation

Entry through imitation

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Myths About Entrepreneurship

1. Successful entrepreneurship takes only a great idea.

2. Entrepreneurship are born not made.

3. Entrepreneurship is a risky gamble.

4. Entrepreneurship is found only in small businesses.

5. Entrepreneurs are motivated primarily by money.
6. They should be young and energetic. 7. They love spotlight
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Contd.
Entrepreneurs are their own bosses and completely independent Money is the most important start up ingradient If an entrepreneur is talented, success will happen in a year or two Any entrepreneur with good idea can raise venture capital

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Differences Between Small Businesses and Entrepreneurial Ventures

Independently owned, operated, and financed Less than 100 employees Doesnt emphasize new or innovative practices

Innovative practices Goals are profitability and growth Seeks out new opportunities Willingness to take risks

Little impact on industry

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Eight reasons why many small businesses fail.

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Management 9/e -

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Small Businesses
Make up 99% of all businesses in the United States. Employ 53% of the nation's private sector workforce. Create more jobs than big businesses. Are leaders in offering training and advancement opportunities to workers.

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Small Businesses
(continued)

Produce 51% of the nation's private GDP. Account for 47% of business sales. Create 4X more innovations per R & D dollar spent than medium-size firms and 24X as many as large companies.

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