Entrepreneurship

PowerPoint Presentation by Charlie Cook
The University of West Alabama
Part I
The Entrepreneurial Mindset
in the 21st Century
C H A P T E R 1
© 2009 South-Western, a part of Cengage Learning.
All rights reserved.
Entrepreneurship:
Evolutionary
Development—
Revolutionary
Impact

© 2009 South-Western, a part of Cengage Learning. All rights reserved. 1–2
Chapter ObjectivesChapter Objectives
1.1. To examine the historical development ofTo examine the historical development of
entrepreneurshipentrepreneurship
2.2. To explore and debunk the myths of entrepreneurshipTo explore and debunk the myths of entrepreneurship
3.3. To define and explore the major schools ofTo define and explore the major schools of
entrepreneurial thoughtentrepreneurial thought
4.4. To explain the process approaches to the study ofTo explain the process approaches to the study of
5.5. To set forth a comprehensive definition ofTo set forth a comprehensive definition of
6.6. To examine the Entrepreneurial Revolution taking placeTo examine the Entrepreneurial Revolution taking place
todaytoday
7.7. To illustrate today’s entrepreneurial environmentTo illustrate today’s entrepreneurial environment

Entrepreneurs—Challenging the UnknownEntrepreneurs—Challenging the Unknown
• EntrepreneursEntrepreneurs
 Recognize opportunities whereRecognize opportunities where
others see chaos or confusionothers see chaos or confusion
 Are aggressive catalysts forAre aggressive catalysts for
change within the marketplacechange within the marketplace
 Challenge the unknown andChallenge the unknown and
continuously create the futurecontinuously create the future

Entrepreneurs versusEntrepreneurs versus
Small Business Owners: A DistinctionSmall Business Owners: A Distinction
• Small Businesses OwnersSmall Businesses Owners
 Manage their businesses by expecting stable sales,Manage their businesses by expecting stable sales,
profits, and growthprofits, and growth
• EntrepreneursEntrepreneurs
 Focus their efforts on innovation, profitability andFocus their efforts on innovation, profitability and
sustainable growthsustainable growth

Entrepreneurship: A MindsetEntrepreneurship: A Mindset
• Entrepreneurship is more than the mere creationEntrepreneurship is more than the mere creation
of business:of business:
 Seeking opportunitiesSeeking opportunities
 Taking risks beyond securityTaking risks beyond security
 Having the tenacity to push an idea through to realityHaving the tenacity to push an idea through to reality
• Entrepreneurship is an integrated concept thatEntrepreneurship is an integrated concept that
permeates an individual’s business in anpermeates an individual’s business in an
innovative manner.innovative manner.

The Evolution of EntrepreneurshipThe Evolution of Entrepreneurship
• Entrepreneur is derived from the FrenchEntrepreneur is derived from the French
entreprendreentreprendre, meaning “to undertake.”, meaning “to undertake.”
 TheThe entrepreneurentrepreneur is one who undertakes to organize,is one who undertakes to organize,
manage, and assume the risks of a business.manage, and assume the risks of a business.
 Although no single definition of entrepreneur existsAlthough no single definition of entrepreneur exists
and no one profile can represent today’s entrepreneur,and no one profile can represent today’s entrepreneur,
research is providing an increasingly sharper focus onresearch is providing an increasingly sharper focus on
the subject.the subject.

A Summary DescriptionA Summary Description
of Entrepreneurshipof Entrepreneurship
• Entrepreneurship (Robert C. Ronstadt)Entrepreneurship (Robert C. Ronstadt)
 The dynamic process of creating incremental wealth.The dynamic process of creating incremental wealth.
 This wealth is created by individuals who assumeThis wealth is created by individuals who assume
major risks in terms of equity, time, and/or careermajor risks in terms of equity, time, and/or career
commitment of providing value for a product orcommitment of providing value for a product or
service.service.
 The product or service itself may or may not be newThe product or service itself may or may not be new
or unique but the entrepreneur must somehow infuseor unique but the entrepreneur must somehow infuse
value by securing and allocating the necessary skillsvalue by securing and allocating the necessary skills
and resources.and resources.

An Integrated DefinitionAn Integrated Definition
• EntrepreneurshipEntrepreneurship
 A dynamic process of vision, change, and creation.A dynamic process of vision, change, and creation.
• Requires an application of energy and passion towards theRequires an application of energy and passion towards the
creation and implementation of new ideas and creativecreation and implementation of new ideas and creative
solutions.solutions.
 Essential ingredients include:Essential ingredients include:
• The willingness to take calculated risksThe willingness to take calculated risks——in terms of time,in terms of time,
equity, or career.equity, or career.
• The ability to formulate an effective venture team; the creativeThe ability to formulate an effective venture team; the creative
skill to marshal needed resources.skill to marshal needed resources.
• The fundamental skills of building a solid business plan.The fundamental skills of building a solid business plan.
• The vision to recognize opportunity where others see chaos,The vision to recognize opportunity where others see chaos,
contradiction, and confusion.contradiction, and confusion.

The Myths of EntrepreneurshipThe Myths of Entrepreneurship
• Myth 1:Myth 1: Entrepreneurs Are Doers, Not ThinkersEntrepreneurs Are Doers, Not Thinkers
• Myth 2:Myth 2: Entrepreneurs Are Born, Not MadeEntrepreneurs Are Born, Not Made
• Myth 3:Myth 3: Entrepreneurs Are Always InventorsEntrepreneurs Are Always Inventors
• Myth 4:Myth 4: Entrepreneurs Are Academic and Social MisfitsEntrepreneurs Are Academic and Social Misfits
• Myth 5:Myth 5: Entrepreneurs Must Fit the “Profile”Entrepreneurs Must Fit the “Profile”
• Myth 6:Myth 6: All Entrepreneurs Need Is MoneyAll Entrepreneurs Need Is Money
• Myth 7:Myth 7: All Entrepreneurs Need Is LuckAll Entrepreneurs Need Is Luck
• Myth 8:Myth 8: Ignorance Is Bliss For EntrepreneursIgnorance Is Bliss For Entrepreneurs
• Myth 9:Myth 9: Entrepreneurs Seek Success But ExperienceEntrepreneurs Seek Success But Experience
High Failure RatesHigh Failure Rates
• Myth 10:Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers)Entrepreneurs Are Extreme Risk Takers (Gamblers)

Figure
1.1 Entrepreneurial Schools-of-Thought Approach

Macro View: External Locus of ControlMacro View: External Locus of Control
• The Environmental School of ThoughtThe Environmental School of Thought
 Considers the external factors that affect a potentialConsiders the external factors that affect a potential
entrepreneur’s lifestyle.entrepreneur’s lifestyle.
• The Financial/Capital School of ThoughtThe Financial/Capital School of Thought
 Based on the capital-seeking processBased on the capital-seeking process—t—the search forhe search for
seed and growth capital.seed and growth capital.
• The Displacement School of ThoughtThe Displacement School of Thought
 Alienation drives entrepreneurial pursuitsAlienation drives entrepreneurial pursuits
• Political displacement (laws, policies, and regulations)Political displacement (laws, policies, and regulations)
• Cultural displacement (preclusion of social groups)Cultural displacement (preclusion of social groups)
• Economic displacement (economic variations)Economic displacement (economic variations)

Table
1.1 Financial Analysis Emphasis
Venture Stage Financial Consideration Decision
Start-up or
acquisition
Seed capital
Venture capital sources
Proceed or abandon
Ongoing Cash management
Investments
Financial analysis and
evaluation
Maintain, increase, or
reduce size
Decline or
succession
Profit question
Corporate buyout
Succession question
Sell, retire, or dissolve
operations

Micro View: Internal Locus of Control (cont’d)Micro View: Internal Locus of Control (cont’d)
• The Entrepreneurial Trait School of ThoughtThe Entrepreneurial Trait School of Thought
 Focuses on identifying traits common to successfulFocuses on identifying traits common to successful
entrepreneurs.entrepreneurs.
• Achievement, creativity, determination, and technicalAchievement, creativity, determination, and technical
knowledgeknowledge
• The Venture Opportunity School of ThoughtThe Venture Opportunity School of Thought
 Focuses on the opportunity aspect of ventureFocuses on the opportunity aspect of venture
developmentdevelopment—t—the search for idea sources, thehe search for idea sources, the
development of concepts, and the implementation ofdevelopment of concepts, and the implementation of
venture opportunities.venture opportunities.
• Corridor principle:Corridor principle: New pathways or opportunities will ariseNew pathways or opportunities will arise
that lead entrepreneurs in different directions.that lead entrepreneurs in different directions.

Table
1.2 Definitions And Criteria Of One Approach To The Micro
View
Entrepreneurial
Model Definition Measures Questions
“Great Person” “Extraordinary Achievers” Personal principles
Personal histories
Experiences
What principles do you have?
What are your
achievements?
Psychological
Characteristics
Founder
Control over the means
of production
Locus of control
Tolerance of ambiguity
Need for achievement
What are your values?
Classical People who make innovations
bearing risk and uncertainty
“Creative destruction”
Decision making
Ability to see opportunities
Creativity
What are the opportunities?
What is your vision?
How do you respond?
Management Creating value through
the recognition of business
opportunity, the management
of risk taking . . . through the
communicative and management
skills to mobilize . . .
Expertise
Technical knowledge
Technical plans
What are your plans?
What are your capabilities?
What are your credentials?
Leadership “Social architect”
Promotion and protection
of values
Attitudes, styles
Management of people
How do you manage people?
Intrapreneurship Those who pull together
to promote innovation
Decision making How do you change and
adapt?
Source: Adapted from J. Barton Cunningham and Joe Lischeron, “Defining
Entrepreneurship,” Journal of Small Business Management (January 1991): 56.

Micro View… (cont’d)Micro View… (cont’d)
• The Strategic Formulation School of ThoughtThe Strategic Formulation School of Thought
 Emphasizes the planning process in successfulEmphasizes the planning process in successful
venture development.venture development.
• Ronstadt’s ViewRonstadt’s View
 Strategic formulation is a leveraging of uniqueStrategic formulation is a leveraging of unique
elements:elements:
• Unique MarketsUnique Markets——mountain gap strategiesmountain gap strategies
• Unique PeopleUnique People——great chef strategiesgreat chef strategies
• Unique ProductsUnique Products——better widget strategiesbetter widget strategies
• Unique ResourcesUnique Resources——water well strategieswater well strategies

Process Approaches to EntrepreneurshipProcess Approaches to Entrepreneurship
• Integrative ApproachIntegrative Approach
 Built around the concepts of inputs to theBuilt around the concepts of inputs to the
entrepreneurial process and outcomes from theentrepreneurial process and outcomes from the
entrepreneurial process.entrepreneurial process.
 Focuses on the entrepreneurial process itself andFocuses on the entrepreneurial process itself and
identifies five key elements that contribute to theidentifies five key elements that contribute to the
process.process.
 Provides a comprehensive picture regarding theProvides a comprehensive picture regarding the
nature of entrepreneurship that can be applied atnature of entrepreneurship that can be applied at
different levels.different levels.

Figure
1.2 An Integrative Model of Entrepreneurial Inputs and
Outcomes
Source: Michael H. Morris, P. Lewis, and Donald L. Sexton, “Reconceptualizing Entrepreneurship:
An Input-Output Perspective,” SAM Advanced Management Journal 59, no.1 (Winter 1994): 21–
31.

Process Approaches… (cont’d)Process Approaches… (cont’d)
• Entrepreneurial Assessment ApproachEntrepreneurial Assessment Approach
 Stresses making assessments qualitatively,Stresses making assessments qualitatively,
quantitatively, strategically, and ethically in regard toquantitatively, strategically, and ethically in regard to
the entrepreneur, the venture, and the environmentthe entrepreneur, the venture, and the environment
• Multidimensional ApproachMultidimensional Approach
 Views entrepreneurship as a complex,Views entrepreneurship as a complex,
multidimensional framework that emphasizes themultidimensional framework that emphasizes the
individual, the environment, the organization, and theindividual, the environment, the organization, and the
venture process.venture process.

Figure
1.3 Entrepreneurial Assessment Approach
Source: Robert C. Ronstadt, Entrepreneurship (Dover, MA: Lord Publishing Co., 1984), 39.

Our Entrepreneurial Economy—Our Entrepreneurial Economy—
The Environment for EntrepreneurshipThe Environment for Entrepreneurship
• Entrepreneurship is the symbol of businessEntrepreneurship is the symbol of business
tenacity and achievement.tenacity and achievement.
• Entrepreneurs are the pioneers of today’sEntrepreneurs are the pioneers of today’s
business successes.business successes.
• Two perspectives on entrepreneurship:Two perspectives on entrepreneurship:
 Statistical:Statistical: numbers that emphasize the importance ofnumbers that emphasize the importance of
entrepreneurs to the economy.entrepreneurs to the economy.
 Academic:Academic: trends in entrepreneurial research andtrends in entrepreneurial research and
education.education.

Predominance of New VenturesPredominance of New Ventures
in the Economyin the Economy
• Entrepreneurial Activity: Growth in SmallEntrepreneurial Activity: Growth in Small
BusinessesBusinesses
 New business incorporations average 600,000 perNew business incorporations average 600,000 per
year over the past decade.year over the past decade.
 There are over 25 million small businesses; theThere are over 25 million small businesses; the
number continues to grow 2% annually.number continues to grow 2% annually.
 One of every 150 adults participates in the founding ofOne of every 150 adults participates in the founding of
a new firm each year.a new firm each year.
 Approximately 600,000 to 800,000 are added eachApproximately 600,000 to 800,000 are added each
year.year.

Effects of EntrepreneurshipEffects of Entrepreneurship
• The Global Entrepreneurship Monitor (GEM)The Global Entrepreneurship Monitor (GEM)
 Provides an annual assessment of the entrepreneurialProvides an annual assessment of the entrepreneurial
environment of 42 countries.environment of 42 countries.
 Latest GEM study: the U.S. outranks the rest of theLatest GEM study: the U.S. outranks the rest of the
world in important entrepreneurial support.world in important entrepreneurial support.
• Entrepreneurs lead to growth by:Entrepreneurs lead to growth by:
 Entering and expanding existing markets.Entering and expanding existing markets.
 Creating entirely new markets by offering innovativeCreating entirely new markets by offering innovative
products.products.
 Increasing diversity and fostering minority participationIncreasing diversity and fostering minority participation
in the economy.in the economy.

Entrepreneurs in the United StatesEntrepreneurs in the United States
• Reasons for the exceptional entrepreneurialReasons for the exceptional entrepreneurial
activity in the U.S. include:activity in the U.S. include:
 A national culture that supports risk taking andA national culture that supports risk taking and
seeking opportunities.seeking opportunities.
 Americans’ alertness to unexploited economicAmericans’ alertness to unexploited economic
opportunity and a low fear of failure.opportunity and a low fear of failure.
 U.S. leadership in entrepreneurship education at bothU.S. leadership in entrepreneurship education at both
the undergraduate and graduate level.the undergraduate and graduate level.
 A high percentage of individuals with professional,A high percentage of individuals with professional,
technological or business degrees who are likely totechnological or business degrees who are likely to
become entrepreneurs.become entrepreneurs.

The Age of GazellesThe Age of Gazelles
• A “Gazelle”A “Gazelle”
 A business establishment with at least 20% salesA business establishment with at least 20% sales
growth in each year for five years, starting with a basegrowth in each year for five years, starting with a base
of at least $100,000 in annual sales.of at least $100,000 in annual sales.
• Gazelles as leaders in innovation:Gazelles as leaders in innovation:
 Produce twice as many product innovations perProduce twice as many product innovations per
employee as do larger firms.employee as do larger firms.
 Have been responsible for 55% of the innovations inHave been responsible for 55% of the innovations in
362 different industries and 95% of all radical362 different industries and 95% of all radical
innovations.innovations.
 Obtain more patents per sales dollar than do largerObtain more patents per sales dollar than do larger
firms.firms.

Table
1.3 Mythology Associated with Gazelles
Gazelles are the goal of all entrepreneurs.
Gazelles receive venture capital.
Gazelles were never mice.
Gazelles are high-tech.
Gazelles are global.
Source: NFIB Small Business Policy Guide (Washington, D.C., November 2000), 31.

Survival of GazellesSurvival of Gazelles
• How many gazelles survive?How many gazelles survive?
 The simple answer is “none.” Sooner or later, allThe simple answer is “none.” Sooner or later, all
companies wither and die.companies wither and die.
• The Common Myth of Failure:The Common Myth of Failure:
 85% of all firms fail in the first year85% of all firms fail in the first year—i—in actuality, aboutn actuality, about
half of all start-ups last between 5 and 7 years.half of all start-ups last between 5 and 7 years.

Entrepreneurial Firms’ ImpactEntrepreneurial Firms’ Impact
• Entrepreneurial components of the U.S.Entrepreneurial components of the U.S.
Economy:Economy:
1.1. Large firms have increased profitability by returning toLarge firms have increased profitability by returning to
their “core competencies through restructuring andtheir “core competencies through restructuring and
downsizing.downsizing.
2.2. New entrepreneurial companies have beenNew entrepreneurial companies have been
blossoming in new technologies and new markets.blossoming in new technologies and new markets.
3.3. Thousands of smaller firms established by women,Thousands of smaller firms established by women,
minorities, and immigrants have strengthened theminorities, and immigrants have strengthened the
economy.economy.

Entrepreneurial Firms’ Impact Cont’d)Entrepreneurial Firms’ Impact Cont’d)
• Entrepreneurial firms make two indispensableEntrepreneurial firms make two indispensable
contributions to an economy:contributions to an economy:
1.1. They are an integral part of the renewal process thatThey are an integral part of the renewal process that
pervades and defines market economies.pervades and defines market economies.
2.2. They are the essential mechanism by which millionsThey are the essential mechanism by which millions
enter the economic and social mainstream of society.enter the economic and social mainstream of society.

21st Century Trends in Entrepreneurship Research21st Century Trends in Entrepreneurship Research
Venture
Financing
Social
Entrepreneurship
Corporate
Entrepreneurship
Trends in
Entrepreneurship
Research
Entrepreneurial
Cognition
Global
Entrepreneurial
Movement
Family
Businesses
Women
and Minority
Entrepreneurs
Entrepreneurial
Education

21st Century Trends in Entrepreneurship Research21st Century Trends in Entrepreneurship Research
• Major Research Themes:Major Research Themes:
 Venture FinancingVenture Financing: venture capital and angel capital financing: venture capital and angel capital financing
and other financing techniques strengthened in the 1990s.and other financing techniques strengthened in the 1990s.
 Corporate EntrepreneurshipCorporate Entrepreneurship and the need for entrepreneurialand the need for entrepreneurial
cultures has drawn increased attention.cultures has drawn increased attention.
 Social EntrepreneurshipSocial Entrepreneurship has unprecedented strength within thehas unprecedented strength within the
new generation of entrepreneurs.new generation of entrepreneurs.
 Entrepreneurial CognitionEntrepreneurial Cognition is providing new insights into theis providing new insights into the
psychological aspects of the entrepreneurial process.psychological aspects of the entrepreneurial process.
 Women and Minority EntrepreneursWomen and Minority Entrepreneurs appear to face obstacles andappear to face obstacles and
difficulties different from those that other entrepreneurs face.difficulties different from those that other entrepreneurs face.
 TheThe Global Entrepreneurial MovementGlobal Entrepreneurial Movement is increasing.is increasing.

21st Century Trends… (cont’d)21st Century Trends… (cont’d)
• Major Research Themes (cont’d):Major Research Themes (cont’d):
 Family BusinessesFamily Businesses have become a stronger focus of research.have become a stronger focus of research.
 Entrepreneurial EducationEntrepreneurial Education has become one of the hottest topicshas become one of the hottest topics
in business and engineering schools throughout the world.in business and engineering schools throughout the world.

Key ConceptsKey Concepts
• EntrepreneurshipEntrepreneurship
 A process of innovation and new-venture creationA process of innovation and new-venture creation
through four major dimensions—individual,through four major dimensions—individual,
organizational, environmental, process—that is aidedorganizational, environmental, process—that is aided
by collaborative networks in government, education,by collaborative networks in government, education,
and institutions.and institutions.
• EntrepreneurEntrepreneur
 A catalyst for economic change who uses purposefulA catalyst for economic change who uses purposeful
searching, careful planning, and sound judgmentsearching, careful planning, and sound judgment
when carrying out the entrepreneurial process.when carrying out the entrepreneurial process.

Key ConceptsKey Concepts
• Entrepreneurial ManagementEntrepreneurial Management
 The discipline of entrepreneurial management:The discipline of entrepreneurial management:
• Entrepreneurship is based upon the same principles.Entrepreneurship is based upon the same principles.
• It matters not who or what that the entrepreneur isIt matters not who or what that the entrepreneur is——anan
existing large institution or an individual, for-profit business orexisting large institution or an individual, for-profit business or
a public-service organization, a governmental or non-a public-service organization, a governmental or non-
governmental institution.governmental institution.
• The rules are much the same: things that work and those thatThe rules are much the same: things that work and those that
don’t are much the same, and so are innovations and wheredon’t are much the same, and so are innovations and where
to look for them.to look for them.

Key Terms and ConceptsKey Terms and Concepts
• better widget strategiesbetter widget strategies
• corridor principlecorridor principle
• displacement school of thoughtdisplacement school of thought
• entrepreneurentrepreneur
• entrepreneurial assessmententrepreneurial assessment
approachapproach
• entrepreneurial managemententrepreneurial management
• Entrepreneurial RevolutionEntrepreneurial Revolution
• entrepreneurial trait school ofentrepreneurial trait school of
thoughtthought
• entrepreneurshipentrepreneurship
• environmental school ofenvironmental school of
thoughtthought
• external locus of controlexternal locus of control
• financial/capital school offinancial/capital school of
thoughtthought
• gazellegazelle
• great chef strategiesgreat chef strategies
• internal locus of controlinternal locus of control
• macro view ofmacro view of
• micro view of entrepreneurshipmicro view of entrepreneurship
• mountain gap strategiesmountain gap strategies
• strategic formulation school ofstrategic formulation school of
thoughtthought
• venture opportunity school ofventure opportunity school of
thoughtthought
• water well strategieswater well strategies

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