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The Nature and Importance of Entrepreneurship

McGraw-Hill/IrwinEntrepreneurship, 7/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 1

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Development of Entrepreneurship (1 of 2)

Earliest Period Entrepreneurs would sign contracts with a money

person. Example: Marco Polo

Middle Ages Entrepreneurs were actors and people who

managed large production projects. 17th Century

Entrepreneurs entered into contractual arrangements with the government.

Example: Mississippi Company

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Development of Entrepreneurship (2 of 2)

18th Century With global industrialization taking place, entrepreneurs

were distinguished from capital providers. Inventions developed during this time were reactions to

the changing world. Example: Edison & Whitney

19th and 20th Centuries Entrepreneurs were not distinguished from managers. They were viewed mostly from an economic

perspective. Concept of innovation and newness was an integral

part. Example: Andrew Carnegie

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Definition of Entrepreneurs Today

Entrepreneurship is the process of creating something new and assuming the risks and rewards.

Four aspects of being an entrepreneur today: Involves creation process. Requires devotion of time and effort. Involves rewards of being an entrepreneur. Requires assumption of necessary risks.

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Entrepreneurs Versus Inventors

Inventor: Creates something for the first time; highly driven and motivated by his or her own work and personal ideas.

Differentiating characteristics of an inventor: Education. Level of experience. Problem-solving skills. Level of self-confidence. Willingness to take risks. Ability to tolerate ambiguity and uncertainty. View of monetary benefits in measuring success.

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The Entrepreneurial Process

Four distinct phases: Identify and evaluate the opportunity.

Window of opportunity.

Develop a business plan. Determine the resource requirement. Manage the resulting enterprise.

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Aspects of the Entrepreneurial Process

Table 1.1

<<Insert Table 1.1>>

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Types of Start-Ups

Lifestyle firm Privately held; usually achieves only modest growth.

Foundation company Created from research and development. Lays the foundation for a new business area.

High-potential venture Receives the greatest investment interest and

publicity. Starts out like a foundation company, but attains

rapid growth. Also called gazelles, is integral to the economic

development of an area.

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Role of Entrepreneurship inEconomic Development

Innovation is depicted as a key to economic development. Product-evolution process: Process through which

innovation is developed and commercialized. Iterative synthesis: Critical point in the product-

evolution process.

Three types of innovation: Ordinary Technological Breakthrough

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Product Evolution

Need RecognitionNeed Recognition

Initiate InnovationInitiate Innovation DevelopmentDevelopment

IndustrialIndustrial

Press to InventPress to Invent

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Government as an Innovator

One channel for commercializing the results of the synthesis of social need and technology. Frequently called technology transfer.

Relatively few innovations reach commercial markets. Lacks business skills necessary for successful

commercialization. Government bureaucracy and red tape act as

inhibitors.

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Corporate Entrepreneurship

Strengths of an existing business: Financial resources. Business skills. Marketing and distribution systems.

Factors that inhibit successful commercialization: Bureaucratic structure. Emphasis on short-term profits. A highly structured organization.

In the current era of hypercompetition, strategic business units (SBUs) are emerging.

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Independent Entrepreneurship

Factors that inhibit commercialization:

Managerial skills. Marketing capabilities. Financial resources. Unrealistic inventions. Lack of awareness on interfacing with necessary

entities (banks, suppliers, customers, venture capitalists, distributors, and advertising agencies).

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Ethics and Social Responsibility

Entrepreneurs usually develop an internal ethical code.

Personal value systems tend to be influenced

by: Peer pressure. General social norms in the community. Pressures from their competitors.

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Future

Entrepreneurship has gained mileage through a number of ways:

Entrepreneurial education. Increase in academic research. Societal support (media coverage). Corporate entrepreneurship.

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Entrepreneurial Universities

Activities Seminars Consulting Research Case Development Technology Development

& Transfer Joint Ventures & Strategic

Alliances

Structures Business Assistance

Centers Incubators Innovation Centers Industrial Parks Enterprise Development

Centers Venture Capital

Exchanges Inputs

Guest Lectures Board of

Advisors/Trustees Internships Student Projects Source of Funds