ENTREPRENEURSHIP A PROCESS PERSPECTIVE Robert A. Baron Scott A. Shane A. Rebecca Reuber Slides Prepared by: Sandra Malach, University of Calgary Copyright © 2008 by Nelson, a division of Thomson Canada Limited

1 ENTREPRENEURSHIP: A FIELD—AND AN ACTIVITY Copyright (c) 2008 by Nelson, a division of Thomson Canada Limited.

Copyright © 2008 by Nelson, a division of Thomson Canada Limited LEARNING OBJECTIVES Define “entrepreneurship” as a field of business. Explain why the activities of entrepreneurs are so important to the economies of their countries, and why entrepreneurship is an increasingly popular career choice. Describe the process perspective on entrepreneurship, and list the major phases of this process. Explain why entrepreneurship can be viewed as arising out of the intersection of people and opportunities. Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited LEARNING OBJECTIVES Explain why certain sources of knowledge about entrepreneurship are more reliable and useful than others. Describe the basic nature of systematic observation, experimentation, and reflection. Explain the role of theory in the field of entrepreneurship. Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” (Sir Winston Churchill) Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited DEFINITION Entrepreneurship seeks to understand how opportunities to create something new arise and are discovered or created by specific persons who then use various means to exploit or develop them, thus producing a wide range of effects. (Shane & Venkataraman) Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited FURTHER DEFINED Intersection of opportunities generated by changing economic, technological, and social conditions and enterprising people capable of distinguishing potentially valuable opportunities from less valuable ones and of actively exploiting them. Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited KEY ACTIVITIES Identifying an opportunity Exploiting or developing this opportunity Launching a new venture Running a new business successfully Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited INTRAPRENEURS Persons who create something new inside an existing company Allows them to adapt to changing conditions in the business environment. (Keil) Develop a corporate culture receptive to new ideas and provide concrete rewards for innovation.(Koen & Baron) Copyright © 2008 by Nelson, a division of Thomson Canada Limited

SOCIAL ENTREPRENEURSHIP Entrepreneurship to benefit humanity Ventures may be for-profit or not-for-profit Most important goals are social Economic development, Environmental sustainability and Disaster relief. Copyright © 2008 by Nelson, a division of Thomson Canada Limited

ENTREPRENEURSHIP STATISTICS More than 125,000 new businesses are launched annually (Industry Canada, 2005) Over 2.5 million (15%) individuals are self-employed. (Industry Canada, 2005) Activity is highest for those aged 25-34. (Riverin et al) 40% of the private sector GDP is produced by SME’s (Industry Canada, 2005). Copyright © 2008 by Nelson, a division of Thomson Canada Limited

TREND TOWARDS ENTREPRENEURSHIP Media accounts of successful entrepreneurs Change in “employment contract” Desire for an independent lifestyle Copyright © 2008 by Nelson, a division of Thomson Canada Limited

FOUNDATIONS IN OTHER DISCIPLINES (1) the economic, technological, and social conditions from which opportunities rise, (2) the entrepreneurs who recognize these opportunities (3) the business techniques and legal structures they use to develop them, and (4) and the economic and social effects produced by such development. Copyright © 2008 by Nelson, a division of Thomson Canada Limited

FOUNDATIONS IN OTHER DISCIPLINES Economics behavioural science Psychology, cognitive science Sociology Copyright © 2008 by Nelson, a division of Thomson Canada Limited

MACRO AND MICRO PERSPECTIVES behaviour and thoughts of individuals or groups Macro Perspective Environmental factors Economic, financial, political Both are key in understanding the entrepreneurial process Copyright © 2008 by Nelson, a division of Thomson Canada Limited

A CONFLUENCE OF FACTORS Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited THE PROCESS Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited VARIABLES Copyright © 2008 by Nelson, a division of Thomson Canada Limited

THE ESSENCE OF ENTREPRENEURSHIP The intersection of valuable opportunities and enterprising individuals is the essence of entrepreneurship. Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited “There are three principal means of acquiring knowledge: observation, reflection and experimentation. Observation collects facts; reflection combines them; experimentation verifies the result of that combination…” --Diderot Copyright © 2008 by Nelson, a division of Thomson Canada Limited

SYSTEMATIC OBSERVATION Observe aspects of the world systematically Generate and test hypothesis Use this information as a basis for conclusions Doesn’t resolve question of causation Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited EXPERIMENTATION Determines Causation Systematically changes one variable in order to see if changes affect one or more other variables Involves active intervention Difficult to use in the study of entrepreneurship Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited REFLECTION Combining facts in a careful and systematic way to reach conclusions Central to case method and other qualitative methods of research Qualitative Method Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited THEORY Moves beyond efforts to merely describe phenomena Moves to the point at which we can explain why and how things happen as they do Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited DEVELOPING A THEORY Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited TWO FINAL POINTS Theories are never proven in any final, ultimate sense Research should never be undertaken to prove or verify a theory Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited “’Tis a sort of duty to be rich, that it may be in one’s power to do good…” --Lady Mary Montagu Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Copyright © 2008 by Nelson, a division of Thomson Canada Limited TO DO GOOD Entrepreneur’s products and services improve the lives of countless millions of persons Entrepreneurs are often extremely generous in their donations to worthy causes Copyright © 2008 by Nelson, a division of Thomson Canada Limited