Introduction to entrepreneurship AND Becoming an entrepreneur CHAPTER 1 Introduction to entrepreneurship AND Becoming an entrepreneur

Learning Objectives Define entrepreneurship. Explain the role of entrepreneurship in economic growth. Distinguish entrepreneurial ventures from small businesses in terms of their purpose and goals. Describe the evolution of entrepreneurship as a field of study since the 1960s. Identify today’s broad trends in the field of entrepreneurship.

Learning Objectives (Cont’d) Dispel myths about entrepreneurs. Understand the many pathways to entrepreneurship. Prepare to become an entrepreneur.

Definition of Entrepreneurship “The process by which individuals—either on their own or in organizations—pursue opportunities without regard to the resources they currently control.” ~ Stevenson Entrepreneurship is a mindset that is: Opportunity-focused Risk taking Innovative Growth-oriented

The Role of Entrepreneurship Three schools of thought: An integrated input/output model The career assessment approach The new venture creation process Affected by three categories of variables: The entrepreneur and what he/she brings to process The environment (external variables) The organization (strategic aspects of the new venture)

New Venture Creation Process

Economic Growth Technological innovation Globalization Shift of lower-skilled jobs outside U.S. China and India

Entrepreneurship and Technological Change

New Industry Formation New industries are born when technological change produces a novel opportunity that an enterprising entrepreneur seizes. Industry life cycles: birth, growth, decline

The Industry Life Cycle Source: Adapted from M. R. Darby and L. G. Zucker, “Growing by Leaps and Inches: Creative Destruction, Real Cost Reduction, and Inching Up,” Economic Inquiry (January 2003), pp. 1-19.

Job Creation Small businesses represent 99.7 percent of all employers and pay more than 45 percent of the total U.S. private payroll. Small businesses have generated 65 percent of net new jobs over the past 15 years.

Job Creation (cont’d) Economic development in three categories of countries: Factor-driven economies Created out of necessity and rely on unskilled labor and extraction of natural resources Efficiency-driven economies Growing and in need of improving their production processes and quality of goods produced Innovation-driven economies The most advanced and where business compete based on innovation and entrepreneurship

The Nature of Entrepreneurial Startups An entrepreneurial venture brings something new to the marketplace. Three primary characteristics: Innovative Value-creating Growth-oriented

New Business Formation Entrepreneurs use identifiable milestones to measure their progress: Deciding to start a business Researching the concept Preparing for launch Securing the first customer Obtaining the business license Other activities which signal the business is in operation

Social, Political, and Economic Context of the Entrepreneurial Process Source: From Paul D. Reynolds, “National Panel of U.S. Business Start-ups: Background and Methodology,” in Databases for the Study of Entrepreneurship, edited by J.A. Katz, pp. 153–227. Copyright © 2000, with permission from Elsevier. Modified by Launching New Ventures author to reflect the concept of the fuzzy front end and its associated probabilities.

Business Failure Not all entrepreneurs succeed in growing their startup into an established business. Survival has been attributed to sufficient capital, having employees, and the entrepreneur’s intention in starting the business.

Starts and Closures of Employer Firms, 2004-2008 Category 2004 2005 2006 2007 2008 Births 628,917 644,122 670,058 633,100e 627,200e Closures 541,047 565,745 599,333 571,300e 595,600e Bankruptcies 34,317 39,201 19,695 28,322 43,546 eEstimate using percentage changes in similar data provided by the U.S. Department of Labor, Employment and Training Administration. Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; and U.S. Department of Labor, Employment and Training Administration.

The Entrepreneurial Revolution United States founded on the principle of free enterprise. The term entrepreneur didn’t come into popular use until the 1980s.

The Entrepreneurial Evolution

Entrepreneurial Trends Global economic turmoil Green power The women’s market The internet, social media, and mass mingling

Seven Myths Entrepreneurs start businesses solely to make money It takes a lot of money to start a business It takes a great idea The bigger the risk, the bigger the reward A business plan is required for success Entrepreneurship is for the young and reckless Entrepreneurship cannot be taught

Paths to Entrepreneurship The home-based entrepreneur The serial or portfolio entrepreneur The nonprofit entrepreneur The corporate entrepreneur

The Corporate Entrepreneur Entrepreneurial mindset in large corporations: Senior management commitment A champion or several champions Corporate interoperability Clearly defined stages and metrics A superior team Spirit of entrepreneurship

Challenges and Opportunities with the Entrepreneur Career Path Table 2.1 Challenges and Opportunities with the Entrepreneur Career Path

Preparing for Entrepreneurship Figure 2.1

Build a Professional Network Networking The exchange of information and resources among individuals, groups, or organizations whose common goals are to mutually benefit and create value for the members Strong ties – close friends and family Weak ties – acquaintances and business contacts Brokering

Understand Personality and Business Preferences Barriers to self-employment: Lack of confidence Financial needs Startup logistics Personal or family issues Time constraints Lack of skills

Critical Entrepreneurial Skills Table 2.4 Analysis and critical thinking Persuasion and negotiation Opportunity recognition Written and oral communication Resource gathering Leadership and people management Organizational and time management Decision making Calculated risk taking Storytelling