Reviewer for Entrepreneurship

1. 1
Entrepreneurship
Abstract
This article focuses on the concept of entrepreneurship from its
nascent beginnings, to the present day period. First, we shall
review the various definitions applied to entrepreneurship, con-
cluding with a fundamental definition of the term. Next, we'll
consider entrepreneurial trait characteristics associated with suc-
cessful entrepreneurship, highlighting a real-life entrepreneur
as a prime example. Also, we'll explore entrepreneurship in its
global context - examining the latest findings of a global survey
involving 42 countries, relating to entrepreneurship traits, moti-
vations, demographics, and types of ventures undertaken.
Overview
As a global economic driver, entrepreneurship adds real value
through the creation of new jobs and the production of innova-
tive products and services. In short, entrepreneurship promotes
the generation of wealth. Yet, a review of the literature indicates
many definitions of entrepreneurship have been conceived over
the years by researchers in the field.Asingle, commonly accepted
definition of the term is simply nonexistent, though common ele-
ments tend to meet across the spectrum. Given this conundrum, a
functional definition of entrepreneurship upon which to base our
discussion is necessary.
Entrepreneurship Defined
The origin of the word entrepreneurship is derived from the
French word "entreprende," which means "to undertake," as
in undertaking a particular activity. Likewise, some research-
ers give credit for the word entrepreneur (in a business context)
to eighteenth-century French businessman Richard Cantillon,
who, in his published work Essai Sur la Nature du Commerce
en General, "described entrepreneurs as 'undertakers' engaged in
market exchanges at their own risk for the purpose of making a
profit" (Roberts and Woods, 2005, p.46).
Definitions of entrepreneurship are generally situated within
three broad categories: the occupational notion of entrepreneur-
ship, the behavioral notion, and entrepreneurship on the basis
of new venture creation. The occupational notion of entrepre-
neurship refers to owning and managing one's own business
enterprise. "Its 'practitioners' are called entrepreneurs, self-
employed or business owners" (Sternberg & Wennekers, 2005
p.193). An early nineteenth-century pioneer of the occupational
notion (and behavioral notion) was French economist Jean Bap-
tiste Say. According to Say, the entrepreneur is a business owner
who creates value by transforming economic resources from
areas of low productivity into areas of higher productivity, which
in turn provide greater yields (Say, 1855). In essence, the entre-
preneur is a creator of value.
The behavioral notion on the other hand, emphasizes the act of
entrepreneurs recognizing and seizing economic opportunity,
engaging in innovative practices, or assuming entrepreneur-
ial risk —that is, pursuing new untapped markets, developing
product innovations, etc. In fact, according to this behavioral
notion, entrepreneurs need not be business owners — they may
be what are referred to as intrapreneurs(Sterner and Wennekers,
2005). Contextually situated in ongoing businesses, intrapre-
neurship (also known as corporate entrepreneurship) encourages
Abstract
Overview
Entrepreneurship Defined
Application
Personality Traits of Entrepreneurs
Entrepreneurial Exemplar
Global Entrepreneurship
Demographics
Conclusion
Terms & Concepts
Bibliography
Suggested Reading
Table of Contents
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2. 2 ​​​Entrepreneurship​
organizations' employees to engage in innovative entrepreneur-
ial behavior. According to Pinchot (1985) — originator of the
intrapreneurship concept — the intrapreneurial employee is an
opportunistic innovator, engaging in creative business practices
within his or her organization and introducing new products and
services, production processes, and methods of distribution, all
of which are pursued in the hope of achieving greater organi-
zational growth and profits. However, in our present context,
entrepreneurship should not to be substituted for or confused
with the term intrapreneurship.
Cantillon’s work provided the intellectual foundation for three
prominent twentieth-century economic theorists. Joseph Schum-
peter emphasized the role of the entrepreneur as an innovator,
Frank Knight stressed entrepreneurs' willingness to assume risk,
and Israel Kirzner highlighted the pursuit of entrepreneurial
opportunity (Roberts and Woods, 2005).
Schumpeter, a noted University of Chicago economist, identi-
fies entrepreneurial innovation as a key driver in economic
development. His definition of entrepreneurship focuses on new
combinations of innovative behaviors felt to embody entrepre-
neurial behavior:
1. Developing new and innovative products;
2. Proposing new forms of organization;
3. Exploring new markets;
4. Introducing new production methods;
5. Searching for new sources of supplies and materials
(Schumpeter, 1975).
Frank H. Knight, another notable University of Chicago econo-
mist, offers that it is the willingness to assume risks in the face
of uncertainty that distinguishes entrepreneurship. Such risks
may include a possible loss of business capital or the personal
financial security risk associated with the uncertain outcome
of an entrepreneurial undertaking (Knight, 1921). On the other
hand, leading economist Israel Kirzner's theory of entrepreneur-
ship focuses on the detection of entrepreneurial opportunities for
profit, which requires an alertness of opportunity. It is this alert-
ness which allows the entrepreneur to exploit market arbitrage
opportunities that have been overlooked or gone undiscovered
by others—arbitrage being the identification of undervalued fac-
tors of production and the sale of them for an amount higher than
the purchase price (Kirzner, 1973).
Similarly, acclaimed management theorist Peter Drucker states:
"Entrepreneurs see change as the norm and as healthy. Usually,
they do not bring about the change themselves. But, and this
defines the entrepreneur and entrepreneurship — the entrepre-
neur always searches for change, responds to it and exploits it as
an opportunity" (Drucker, 1985, p.28). In defining entrepreneur-
ship, the general public most often associates entrepreneurship
with small business ownership. According to Drucker, the act of
starting or owning a small business does not in itself make one
an entrepreneur, so much as the ability to innovate and exploit
opportunity.
Carland (1984) follows a similar track, pointing out that one
may be a small business owner but not necessarily engaged in
entrepreneurship. He posits that while an entrepreneur and small
business owner may establish and manage a business for profit,
what sets the entrepreneur apart is the ability and willingness to
employ innovative techniques and ways of thinking, as well as
strategic management practices in the enterprise.
Another conception of entrepreneurship focuses on a more
direct approach, defining entrepreneurship as new venture cre-
ation. Gartner (1988) believes entrepreneurship to be the act of
creating Organizations: “What differentiates entrepreneurs from
non-entrepreneurs is that entrepreneurs create organizations,
while non-entrepreneurs do not" (Gartner, 1988, p.11). In simple
terms, this concept of entrepreneurship focuses on the establish-
ment of new business enterprises which create value.
Clearly, definitions for entrepreneurship are far from uniform,
and each has its own merits. However, for the present dialogue,
the most appropriate definition is that devised by the Global
Entrepreneurship Monitor (GEM). Similar to Gartner (1988),
GEM defines entrepreneurship as "any attempt at new business or
new venture creation, such as self-employment, a new business
organisation, or the expansion of an existing business by an indi-
vidual, teams of individuals, or established business"(Harding,
2004, p.9). Later in this article, the purpose of GEM will be
discussed, including a review of research findings concerning
global entrepreneurship.
Application
Personality Traits of Entrepreneurs
A great deal of empirical research on the traits of success-
ful entrepreneurs was conducted in the 1980s and 1990s. An
early forerunner of entrepreneurial trait research was Harvard
psychologist David McClelland (1961), who found that entre-
preneurs are inclined to have the following characteristics:
1. High need for achievement — Entrepreneurs display a
higher need for achievement than the general population,
and hence are motivated by this high achievement need.
2. Moderate risk taking propensity — Entrepreneurs tend to
be moderate risk takers. Unlike the common misconcep-
tion, entrepreneurs are not the high rolling speculative
gamblers that some associate with entrepreneurship. In
short, entrepreneurs have a decided willingness to take
calculated risks with a reasonable probability of success.
In addition to the characteristics shown above, J.A. Timmons's
study of entrepreneurial traits (as cited in Zimmerer and Scarbor-
(c) 2014 Salem Press. All Rights Reserved.

3. 3​​​Entrepreneurship​
ough, 1996) lists a number of trait characteristics associated with
successful entrepreneurs:
• Commitment and determination;
• Desire to accept responsibility for their venture's out-
come;
• Opportunity Obsession — constantly seeking out op-
portunities;
• High self-confidence in themselves;
• Creativity and flexibility in problem solving;
• Desire immediate performance feedback;
• High levels of energy;
• Future oriented — i.e. possess a long-term perspective;
• Willingness to learn from failure — they are unafraid of
failure;
• Visionary leadership ability.
It is important to note that successful entrepreneurs may or may
not possess the majority of these characteristics, and in some
cases, they may possess more of one trait and less of another.
History dictates that entrepreneurs come in all shapes and sizes,
yet these personal qualities serve as a general guide on what is
known about the personality traits most associated with entre-
preneurs.
Entrepreneurial Exemplar
An excellent example of a highly successful entrepreneurial ven-
ture is Federal Express and its founder and CEO, Frederick K.
Smith. The following narrative provides ample evidence of the
entrepreneurial prowess of Fred Smith, displaying risk-taking,
opportunity-seeking, and innovative behaviors (American Enter-
prise Online, 2004).
• Risk Taker — While a student at Yale University in the
mid-1960s, Fred Smith wrote an economics paper on the
shortcomings of the delivery system for the air freight
industry. He received a grade of "C" for his efforts, yet
he persisted with his idea. In 1971, after serving four
years of active duty as a pilot in the U.S. Marine Corps,
(including tours in Vietnam) he started a company called
Federal Express. In the early stages, Federal Express
nearly went bankrupt, and it did not turn a profit until
1975; by the early twenty-first century, however, the
company delivered billions of packages annually in over
200 countries. So, in spite of receiving an average grade
from his college professor and almost going bankrupt in
the early years of FedEx's operation, Smith persisted and
made his company a success.
• Opportunity Seeker — The impetus for Federal Express
rested on Smith's identification of an unrecognized oppor-
tunity — an air freight transportation system that could
deliver packages faster, cheaper, conveniently, and more
reliably than had ever been done previously. In addition,
Smith recognized that FedEx was selling more than a
delivery service — it was also in the business of selling
knowledge. This knowledge asset is predicated on the
ability to show customers the exact location and expected
delivery of their packages — in real-time.
• Innovator — A number of Federal Express innovations
include the pioneering use of hand-held computers and
satellite transponders on delivery trucks to keep track
of packages and accurately estimate expected delivery
times. Also, in order to eliminate the uncertainty of late
package deliveries — FedEx guarantees a full refund for
failure to provide on-time delivery. FedEx's just-in-time
delivery system is especially important to businesses in
that it reduces costly in-house inventory holding costs.
Obviously, Smith embodies the spirit of entrepreneurship to the
highest degree. With forward thinking and the ability to think
outside the box, Smith and Federal Express created a new para-
digm in the air freight industry, spurring economic growth and
opportunity via just-in-time delivery of overnight packages.
Global Entrepreneurship
With the increasing globalization of the world's economies, the
entrepreneurial mode of thinking must embrace a global mind-
set. In line with this thinking, we'll proceed with an examination
of what is known about global entrepreneurship based on the
Global Entrepreneur Monitor Results 2012, from a survey of
respondents in 69 countries. Initially the GEM research proj-
ect began in 1999 with 10 member countries; the scope of the
survey has expanded significantly over the years. The project is
the largest global study of entrepreneurship in the world, with a
purpose of providing annual assessments of the national levels of
entrepreneurial activity. Specifically, we'll examine the types of
entrepreneurial activity, entrepreneurial traits and motivations,
and demographic profiles.
In order to make proper use of the GEM data, a number of clari-
fications are necessary. GEM establishes several categories of
entrepreneurs:
• Potential entrepreneurs are interested in potentially creat-
ing a business and have identified opportunities to do so.
• Early-stage entrepreneurs are engaged in the beginning
steps of creating a business. If a business has not been
operating for over 42 months it is considered nascent, and
those managing it are early-stage entrepreneurs.
• Established entrepreneurs are those still managing a
successful business after the first 42 months—the time in
which a business is most likely to fail.
GEM considers early-stage entrepreneurship to be a good mea-
sure of the predisposition for entrepreneurial activity in a given
country. Likewise, established entrepreneurs are used as a key
indicator of the sustainability of entrepreneurial ventures. In ana-
(c) 2014 Salem Press. All Rights Reserved.

4. 4 ​​​Entrepreneurship​
lyzing these global entrepreneurial proclivities, GEM data makes
a distinction between middle and high income countries, based
on per capita GDP. Overall, countries with similar per capita
GDP often display parallel levels of entrepreneurial endeavors.
Early-stage entrepreneurship tends to be higher in countries with
a lower per capita GDP. Conversely, early-stage entrepreneurial
activity is relatively lower in higher income countries. Countries
that have more early-stage entrepreneurial activity often have
higher rates of successful business ownership.
Venture Types — In order of preference, most early-stage entre-
preneurs and established business owners have businesses in
consumer service activities (retail, restaurants, lodging, health
and social services, education, recreation). Next are transforma-
tion businesses (construction, manufacturing, transportation,
and wholesale distribution), followed by business to business
services, and businesses extracting products from the natural
environment (timber, mining, agriculture, etc.).
Traits — In comparing entrepreneurs' and non-entrepreneurs'
traits, entrepreneurs tend to be more self-confident in their own
skill-set, and they tend to be much like the opportunity-seekers
described earlier by Knight (1927), in that they are more alert
to the existence of unexploited market opportunities. Also, in
line with other empirical research, entrepreneurs tend to be less
apprehensive of failure than non-entrepreneurs.
Motivations — In this global environment, what motivates indi-
viduals to engage in entrepreneurial behavior? GEM data reveal
that individuals are motivated to start new business ventures for
two main reasons:
1. They want to take advantage of a potential business op-
portunity (opportunity entrepreneurs). GEM data reveals
that most early-stage entrepreneurs tend to be opportunity
entrepreneurs.
2. They pursue entrepreneurship because they have no other
satisfactory options for employment (necessity entrepre-
neurs).
Findings indicate the rate of opportunity entrepreneurship is
much higher than necessity entrepreneurship in high GDP
countries than in middle GDP countries. Also, necessity entre-
preneurship is relatively more common in middle GDP countries
than in high GDP countries. This may be due to the fact that
higher income countries tend to also have lower rates of unem-
ployment, indicating more choices for generating a living wage
and thus creating less of a need for entrepreneurship as a survival
mechanism.
Demographics
Gender — Men are more likely to start businesses than women.
In both high and middle income countries, the rate of male
opportunity entrepreneurship is higher than that of women. The
greatest gap exists in high income (GDP) countries, where men
are significantly more likely to be early stage or established busi-
ness owners than women.
Education — Entrepreneurial activity is higher among individu-
als with higher levels of education. Yet, in higher GDP countries,
people lacking formal qualifications are also likely to become
entrepreneurs.
Age — Overall, younger people (25–34 years old) are more
likely to be early stage entrepreneurs. Yet, older people (45–54
years old) are more likely to be established business entrepre-
neurs. These results are consistent from country to country. Also,
the age distribution of men and women are comparable as well,
regardless of the stage of entrepreneurship or country context.
Looking across cultures, one might expect to find vast differ-
ences in the venture types, motivations, traits, attitudes, and
demographics of entrepreneurs. With a few exceptions, the
GEM 2012 data indicate otherwise. An interesting point is that
most early-stage entrepreneurs tend to be of the type described
by Kirzner and Drucker — i.e. opportunity-seekers. Likewise,
as described by Knight, they perceive themselves as risk takers
willing to bear the uncertainty of an entrepreneurial venture.
Also, they view themselves as innovators, akin to the Schum-
peterian notion of entrepreneurship. Indeed, entrepreneurial
similarities span across cultures.
Conclusion
In theory, entrepreneurship may occur in a corporate environ-
ment or under the circumstance of starting and owning one's
own business. In either case, entrepreneurship involves risk
taking, innovative thinking, and an opportunity-seeking mindset.
Likewise, successful entrepreneurship requires perseverance,
determination, a long-term perspective, self-confidence, leader-
ship ability, creativity, and imperviousness to failure.Also, as the
Global Entrepreneurship Monitor results show, entrepreneurship
is not a culturally bound phenomenon but a global phenomenon.
Also, to reiterate, there is no single typology of a successful
entrepreneur. The Frederick Smiths of the world are but one
example of successful entrepreneurship. History is replete with
examples of individuals who possess more or less of the iden-
tified traits of successful entrepreneurs — some fail and some
succeed in spite of perceived shortcomings. Regardless of the
definition of choice for entrepreneurship, one thing is certain:
entrepreneurship creates jobs and likewise produces innovative
products and services, which subsequently add value to society.
Terms & Concepts
Arbitrage: The process of identifying undervalued factors of
production and then selling them for an amount higher than the
purchase price.
(c) 2014 Salem Press. All Rights Reserved.

5. 5​​​Entrepreneurship​
Corporate entrepreneurship: Another name for intrapreneur-
ship.
Early-stage entrepreneurs: Individuals engaged in the beginning
steps of creating a business. If a business has not been operating
for over 42 months it is considered nascent, and those managing
it are early-stage entrepreneurs.
Entrepreneurship: The act of new business creation, or the
expansion of an existing business.
Established entrepreneurs: Individuals still managing a suc-
cessful business after the first 42 months—the time in which a
business is most likely to fail.
Global Entrepreneurship Monitor: A global research project
with the purpose of providing annual assessments of the national
levels of entrepreneurial activity.
Intrapreneurship: Also known as corporate entrepreneurship,
intrapreneurship encourages organization's employees to engage
in innovative entrepreneurial behavior within their respective
organization.
Necessity entrepreneurs: Entrepreneurs who pursue entrepre-
neurship because all other options for employment are lacking
or unavailable.
Opportunity entrepreneurs: Entrepreneurs exploiting a per-
ceived business opportunity.
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6. 6 ​​​Entrepreneurship​
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Essay by Edwin D. Davison, M.B.A., J.D.
Mr. Davison is a licensed attorney from Dayton, OH, and holds advanced degrees in law and business administration. Specifically,
he holds a Master of Business Administration and a Doctor of Law degree from the University of Wisconsin-Madison. Also, he has
completed professional management training at the University of Michigan Ross School of Business, UCLAAnderson School of Man-
agement, and the University of South Carolina Moore School of Business. He has a wide breadth of over twenty years work experience
as a management consultant, business professor, entrepreneur, and U.S. Navy JAG attorney. As well, he has presented and published
research on multinational human resource practices. He is employed with the Educational Testing Service of Princeton, NJ.
(c) 2014 Salem Press. All Rights Reserved.