Chapter 1

1. New Venture Creation
Chapter 1: Introduction to
Entrepreneurship and Review
Modified from Barringer and Ireland (2008)

2. Introduction to Entrepreneurship
 Very exciting time to be involved in entrepreneurship
 GEM Studies
 2005: 330 million people, 14% adults in 35 countries involved in
forming new businesses
 2005: 12.4% of US population engaged in entrepreneurial behavior
 New businesses responsible for significant new job growth
 ENT Education Surging
 Enrollment in entrepreneurship programs increasing
 To spur economic activity, many firms provide funding to ENT
programs across the US
 Government Resources for ENTs growing
 Small Business Administration (SBA) resources
 Business incubators

3. What is Entrepreneurship?
 Entrepreneurship Defined
 The process by which individuals pursue opportunities without regard to
the resources they currently control with the ultimate goal of creating new
“value”
 Involves identifying opportunities, putting useful ideas into practice
 Requires creativity, drive, and a willingness to take risks
 Inventor ≠ Entrepreneur
 An inventor creates something new
 Entrepreneurs put the resources together to commercialize inventions
 Entrepreneurs assemble resources (e.g., money, people, strategy, and risk
bearing ability) to transform inventions into viable businesses
 Entrepreneurship requires a different set of skills that can be learned and
honed
 That’s why we’re here!!!

4. Another Type of Entrepreneurship
 Corporate Entrepreneurship
 Is entrepreneurship at the firm level
 Involves an existing firm acting entrepreneurially
 Successful examples: Apple, Google, McDonald’s, Virgin Group, Darden
 Unsuccessful examples: Delta’s Song, Continental Lite
 To determine firms’ entrepreneurial orientations, imagine a conceptual
continuum ranging from highly conservative to highly entrepreneurial
 The position of a firm on this continuum is its entrepreneurial intensity
 Highly ENT intense firms are proactive, innovative, and risk taking
 Conservative firms take a more “wait and see” posture, are less innovative,
and are risk averse

5. What Motivates People to Become
Entrepreneurs?
 3 primary reasons
 Desire to be their own boss
 Most common reason
 Due to frustration with traditional jobs
 When this is the only reason, firms are usually small-to-
medium sized at full growth
 Desire to pursue their own ideas
 Passion to see ideas realized
 Identify a problem and a solution to that problem
 Many established firms resist change/innovation
 Financial rewards
 Secondary concern
 GEM study: In 1997, only 13.3% of owners of SMEs in the
US made more than $50,000/year

6. 1. Passion for the Business
• #1 characteristic shared by successful entrepreneurs
• Stems from beliefs that firm positive effect on society
• Caution: Don’t wear “rose-colored glasses”
2. Product/Customer Focus
• Keeping a focus on the products and customers
needs/requirements is very important
• Main point: successful entrepreneurs introduce
products/services that fulfill needs versus introducing them
for the sake of introducing them
 Ex: Apple’s Steve Jobs vs. Infomercials (e.g., iPod Flea); iPhone
4 Main Characteristics of Successful Entrepreneurs

7. 4 Main Characteristics of Successful Entrepreneurs
3. Tenacity Despite Failure
• Because entrepreneurs generally try new things, failure rate is naturally
high
• The ability to persevere through setbacks is key
• Example: Thomas Edison and electricity
4. Execution Intelligence
• Ability to translate thought, creativity, and imagination into action and
measurable results
• Involves developing a business model, assembling a new venture team,
raising money, establishing partnerships, managing finances, managing
employees, etc.
 Successful example: Starbucks
 Problematic examples: The Singing Machine, Segway

8. Misconceptions of Entrepreneurs and Theory
 Neoclassical school
 Fundamental attributes of people determine if they become entrepreneurs
 Psychological school
 In addition to fundamental attributes, people must have ability and
initiative
 Austrian Economics school
 Not everyone can be an entrepreneur
 The possession of certain information determines who becomes an
entrepreneur

9. 5 Common Myths about Entrepreneurs
1. Entrepreneurs are Born not Made
• Entrepreneurs are not genetically predisposed but there are common
characteristics of successful entrepreneurs and these can be developed
via one’s social context (on next slide)
2. Entrepreneurs are Gamblers
• Actually entrepreneurs are moderate risk takers
3. Entrepreneurs are Motivated Primarily by Money
4. Entrepreneurs should be Young and Energetic
• Average age is 35-45 with 10+ years of work experience
• Investors look at experience, maturity, reputation, and track record
5. Entrepreneurs Love the Spotlight
• Often their work involves proprietary products/services

10. Other Characteristics of Successful Entrepreneurs
 Achievement motivated
 Alert to opportunities
 Creative
 Decisive
 Energetic
 Strong work ethic
 Moderate risk taker
 Lengthy attention span
 Is a networker
 Optimistic disposition
 Persuasive
 Promoter
 Resource assembler/ leverager
 Self-confident
 Self-starter
 Tenacious
 Tolerant of ambiguity
 Visionary
• Research suggests that people with entrepreneur parents are more likely to
become entrepreneurs and people who know an entrepreneur are > twice as
likely to start a business versus those who do not.
• The lesson: a person’s social context helps to shape these characteristics

11. Types of New Ventures
 Lifestyle or part-time firms (e.g., lifestyle firms, micro-businesses):
 Usually pursued part-time and only until “something better comes along”
 Sometimes allows founder(s) to pursue a special interest or hobby
 Traditional small businesses (e.g., SMEs, salary-substitutes businesses):
 Allow founders to earn a salary similar to a traditional job
 No high growth aspirations and usually only one office location
 Original founder(s) maintain control over the firm
 Plan to operate the firm indefinitely
 High-growth ventures (e.g., entrepreneurial firms):
 Founder(s) intend to grow the firm in scale (multiple sites)
 Target markets are generally at the national or international level
 Founders usually do not maintain control over the firm indefinitely and hand it over
to more qualified individuals when it grows to a certain level

12. Why Entrepreneurship is Important:
Creative Destruction
 Creative Destruction occurs when new and/or improved products
replace existing ones
 Impacts consumer demand
 Stimulates economic activity
 First discussed by Joseph Schumpeter in 1934 The Theory of
Economic Development
 Argued the new products and technologies make others obsolete through
creative destruction
 Start-up ventures initiate creative destruction as they are
“innovators” or “agents of change”

13. Why Entrepreneurship is Important:
Economic Impact on Society
 Innovation
 The process of creating something new, is central to the entrepreneurial process
 Impactful when solve a problem or satisfy a need in a new and cost-effective way
 Small firms responsible for over 55% all innovations in U.S.
 Ex: Nistevo trucking; eBay; uShip
 Job Creation
 1970: Fortune 500 employed 20% US labor force
 1997: 52% of the workforce employed by small firms
 67% first jobs obtained through small firms
 Between 1993-1996, new high-growth firms created 2/3 of new jobs in US
 Globalization
 2008: 97% of U.S. exporters are SMEs with < 500 employees
 2005 GEM report shows trend for entrepreneurship across the US and world is
increasing

14. Why Entrepreneurship is Important:
Impact on Society and Larger Firms
 Impact on Society
 Innovations of entrepreneurial firms have a dramatic impact on society
 Think of new products and services that make our lives easier, more
productive, healthier, and more entertained
 PCs, Internet, digital media, George Foreman grill (“Knock the Fat Out!”)
 Impact on Larger Firms
 Many firms build their entire business models around helping larger
firms become more efficient and effective
 Examples: Small biotech firms; shipping companies (e.g., FedEx); HRM
companies
 Porter’s Value Chain will help us to identify business models that fill this
need (we’ll discuss this later in the semester)

15. Changing Demographics of Entrepreneurs
Women Entrepreneurs
 1997: ≈ 5.4 million
 2002: ≈ 6.5 million
 Primary Industries:
 Health care, Professional services,
Construction, Agriculture,
Transportation, Communications
Young Entrepreneurs
 ≤ 21 entrepreneurs increasing in
prevalence
 Due to education/training
 Access to key resources and fewer
opportunity costs
Minority Entrepreneurs
 Significantly increasing in prevalence
 Primary Industries:
 Initially service industries
 Increasing prevalence in all industry
sectors
Senior Entrepreneurs
 2000: ≈ 1.7 million 55+
 2005: ≈ 2.1 million 55+
 Industries:
 Consulting
 Lifestyle ventures

16.  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
 Throughout the semester, we will cover these steps
The Entrepreneurial Process