This document provides an overview of entrepreneurship and new venture creation. It discusses key findings from the Global Entrepreneurship Monitor that over 300 million adults worldwide are involved in entrepreneurship. New businesses are responsible for significant job growth. The document defines entrepreneurship as pursuing opportunities without regard to current resources with the goal of creating new value. Successful entrepreneurs have passion for their business, focus on customers, are tenacious despite failures, and can execute their ideas. Entrepreneurship involves identifying problems and solutions and transforming inventions into viable businesses.

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