©2008 Prentice Hall/G.Yelle 1-1 BUS Entrepreneurial Functions Prof. Gene Yelle Office: Kunsela Hall - Room B206 Office Hours: Wed 5 pm-6 pm School of Business

©2008 Prentice Hall/G.Yelle 1-2 Chapter 1 Entrepreneurship: Successfully Launching New Ventures, 2/e Bruce R. Barringer R. Duane Ireland

©2008 Prentice Hall/G.Yelle 1-3 Introduction to Entrepreneurship Interest in entrepreneurship is Global. According to the GEM 2005 study, about 330 million people, or 14% of the adults in the 35 countries surveyed, are involved in forming new businesses

©2008 Prentice Hall/G.Yelle 1-4 Entrepreneurship or Small Business Owner How do they differ? EntrepreneurSmall Business Owner Creative & Innovative Traditional Mobilizes Resources Uses Resources Moderate Risk TakerRisk Aversive Seeks Growth and Sustains Operations Profitability Rewarded by the Accomplishment Rewarded by a Pay Check

©2008 Prentice Hall/G.Yelle 1-5 Entrepreneur or Inventor How do they differ? EntrepreneurInventor An entrepreneur would put together the resources needed (money, people, strategy) and bear the risk to transform the invention into a viable business. An Inventor simply creates something new.

©2008 Prentice Hall/G.Yelle 1-6 Entrepreneurship – Conceptual Definition FREE ENTERPRISE INNOVATION CAPITAL RISK

©2008 Prentice Hall/G.Yelle 1-7 Corporate Entrepreneurship –Conceptualization of entrepreneurship at the firm level. –All firms fall along a conceptual continuum that ranges from highly conservative to highly entrepreneurial. –Entrepreneurial intensity is the position of a firm on this continuum (sometimes called Intrapreneurship).

©2008 Prentice Hall/G.Yelle 1-8 Corporate Entrepreneurship Entrepreneurial FirmsConservative Firms Proactive Innovative Risk taking Take a more “wait and see” approach Less innovative Risk adverse

©2008 Prentice Hall/G.Yelle 1-9 Why People Pursue Entrepreneurship? Three primary reasons people become entrepreneurs and start their own firms: To be your own boss (Self-Employment) To pursue your own ideas To reap the Financial Rewards

©2008 Prentice Hall/G.Yelle 1-10 Characteristics of Successful Entrepreneurs

©2008 Prentice Hall/G.Yelle 1-11 Common Myths About Entrepreneurs Myth 1: Entrepreneurs Are Born Not Made –There is a mistaken belief that some people are genetically predisposed to be entrepreneurs. –Many Conflicting /Contradictory Studies –There is no proven characteristics to predict suitability as an Entrepreneur or the Entrepreneur’s possible success

©2008 Prentice Hall/G.Yelle 1-12 Common Myths About Entrepreneurs Although no one is “born” to be an entrepreneur, there are some personality traits and characteristics of successful entrepreneurs Achievement motivated Alert to opportunities Creative Decisive Energetic Has a strong work ethic Is a moderate risk taker Lengthy attention span Optimistic disposition Persuasive Promoter Resource assembler Self-confident Tenacious Tolerant of ambiguity Visionary

©2008 Prentice Hall/G.Yelle 1-13 Common Myths About Entrepreneurs Myth 2: Entrepreneurs Are Gamblers –Entrepreneurs are gamblers and take big risks. –The truth is, most entrepreneurs are moderate risk takers and understand that calculated risks may be necessary.

©2008 Prentice Hall/G.Yelle 1-14 Common Myths About Entrepreneurs Myth 3: Entrepreneurs Are Motivated Primarily by Money –While it is naïve to think that entrepreneurs don’t seek financial rewards, money is rarely the reason entrepreneurs start new firms.

©2008 Prentice Hall/G.Yelle 1-15 Common Myths About Entrepreneurs Myth 4: Entrepreneurs Should Be Young And Energetic –The most vibrant age range for early stage entrepreneurial activity is 25 to 34 years old. –While it is important to be energetic, investors often cite the strength of the entrepreneur as their most important criteria in making investment decisions. Strength Attributes: experience, maturity, a solid reputation, good credit history and a track record of success.

©2008 Prentice Hall/G.Yelle 1-16 Types of Start-Up Firms Range of Start-up Firms

©2008 Prentice Hall/G.Yelle 1-17 Changing Demographics of Entrepreneurial Firms Women Entrepreneurs –There were 6.5 million women-owned businesses in 2002, the most recent year the U.S. Census Bureau collected business ownership data. (Up 20% from 1997) Minority Entrepreneurs –Minority-owned businesses have risen sharply since 1997: African-American owned businesses in 2002, 1.2 mil. up 45%. Asian-owned businesses in 2002, 1.1 mil. up 24%. Native American-owned businesses in 2002, 206.1K up 24%.

©2008 Prentice Hall/G.Yelle 1-18 Changing Demographics of Entrepreneurial Firms Senior Entrepreneurs –There is little research data on senior entrepreneurs (55 years +). –Evidence suggests that there are number of seniors starting their own businesses for these reasons: Corporate Downsizing Personal fulfillment in retirement. Additional income in retirement.

©2008 Prentice Hall/G.Yelle 1-19 Changing Demographics of Entrepreneurial Firms Young Entrepreneurs –Young People are interested in entrepreneurship –Gallup study shows 7 out of 10 high school students want to start their own companies. Interest in entrepreneurship on college campuses is growing. According to a recent study, 1,992 two- and four-years colleges and universities now offer at least one course in entrepreneurship, up from 300 in the school year.

©2008 Prentice Hall/G.Yelle 1-20 Economic Impact of Entrepreneurial Firms Innovation - Small entrepreneurial firms are responsible for 55% of all U.S. innovations. Job Creation – Small firms have more entrepreneurial activity due to their unique ability to innovate and act with less “red tape.”

©2008 Prentice Hall/G.Yelle 1-21 Economic Impact of Entrepreneurial Firms Globalization –97% of all U.S. exporters are small businesses (those with 500 or fewer employees.)* –Export markets are vital to the U.S. economy and provide outlets for the sale of U.S. produced products and services. SBA Size Standards

©2008 Prentice Hall/G.Yelle 1-22 Entrepreneurial Firms’ Impact on Society and Larger Firms Impact on Society –The innovations of entrepreneurial firms have a dramatic impact on society. –Think of all the new products and services that make our lives easier, enhance our productivity at work, improve our health, and entertain us in new ways. Impact on Larger Firms –Many entrepreneurial firms have built their entire business models around producing products and services that help larger firms become more efficient and effective.

©2008 Prentice Hall/G.Yelle 1-23 The Entrepreneurial Process The Entrepreneurial Process: Step 1: Decision 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 an entrepreneurial firm.

©2008 Prentice Hall/G.Yelle 1-24 Steps in the Entrepreneurial Process Step 1Step 2 Developing Successful Business Ideas

©2008 Prentice Hall/G.Yelle 1-25 Steps in the Entrepreneurial Process Step 3Step 4