Entreprenuers

Chapter 1
Understanding
Entrepreneurship

Copyright © Houghton Mifflin Company. All rights reserved. 1 | 2
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.

Definition of Entrepreneurship
• Entrepreneurship is a mindset that is:
– opportunity-focused
– innovative
– growth-oriented

The Promise of Entrepreneurship
• An integrated input/output model
• The career assessment approach
• The new venture creation process

Figure 1.1:
The Entrepreneurship Process

Figure 1.2: Entrepreneurship and
Technological Change

Outcomes of Entrepreneurship
• Economic growth
• New industry formation
• Job creation

Difference between
Entrepreneurs & Intrapreneurs
Entrepreneurs
1. Visionary
2. Found anywhere their vision
takes them
3. Face many hurdles, and are
sometimes ridiculed and riddled
with setbacks
4. Work to raise resources and
may find it difficult
5. May lose everything when they
fail
6. know the business on a macro
scale
Intrapreneurs
1. Implementation: attention to
details
2. Work within an organization
3. May sometimes have to deal with
conflict within the organization
but can not afford to have dis-
respect
4. Work with resources readily
available to them
5. Still have a paycheck to look
forward to (at least for now) if
they fail
6. Are highly skilled and specialized

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.

Figure 1.3: Industry Life Cycles
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 (January 2003).

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.*
*U.S. Bureau of the Census; Administrative Office of the U.S. Courts; Endogenous
Growth and Entrepreneurial Activities.

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

Figure 1.4: Social, Political, and Economic Context
of the Entrepreneurial Process
Source: Paul D. Reynolds. (2000) National Panel of U.S. Business Start-ups: Background and Methodology.
Databases for the Study of Entrepreneurship, Amsterdam: JAI/Elsevier Inc. Vol. 4, pp. 153-227.

New Business Failure
• Not all entrepreneurs succeed in growing their
start-up into an established business.
• Survival has been attributed to sufficient
capital, having employees, and the
entrepreneur’s intention in starting the
business.

Table 1.1: Starts and Closures of
Employer Firms, 2001-2005
Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; and U.S. Department of Labor,
Employment and Training Administration.

Socially Responsible Entrepreneurship
• Today more than 85 percent of the company’s
employees are involved in philanthropy.
• One company uses the following mission: The
mission is to “use Salesforce.com’s people,
technology and relationships to improve our
communities, inspire youth to be more
successful, support the world during times of
extreme need, and promote compassionate
capitalism.”

The Entrepreneurial Revolution
• Free enterprise as foundation of
entrepreneurial motivation
– Marc Andressen, Netscape Communications
– Howard Schultz, Starbucks

Figure 1.5:
The Entrepreneurial Evolution

Entrepreneurial Trends
• Women and minority-owned businesses
• Social responsibility
• The Internet
• Globalization

Looking Ahead
• Part One: The Opportunity
– Chapter 1: Introduction to Entrepreneurship
– Chapter 2: The Entrepreneur’s Perspective
– Chapter 3: Opportunity Recognition
– Chapter 4: The Business Concept and
Model
• Part Two: Feasibility Analysis (Ch 5-8)
• Part Three: The Business Plan (Ch 9-16)
• Part Four: Growth and Change (Ch 17-19)

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