©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. UNDERSTANDING ENTREPRENEURSHIP 1

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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.

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Role of Entrepreneurship  Three schools of thought: 1.An integrated input/output model 2.The career assessment approach 3.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)

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. New Venture Creation Process Figure 1.1

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Growth  Technological innovation  Globalization  Shift of lower-skilled jobs outside U.S.  China and India

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Entrepreneurship and Technological Change Figure 1.2

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 Figure 1.3

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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.

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Nature of Entrepreneurial Startups  An entrepreneurial venture brings something new to the marketplace.  Three primary characteristics: 1.Innovative 2.Value-creating 3.Growth-oriented

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. Figure 1.4

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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.

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Starts and Closures of Employer Firms, e Estimate 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. Table 1.1 Category Births 628,917644,122670,058633,100 e 627,200 e Closures 541,047565,745599,333571,300 e 595,600 e Bankruptcies 34,317 39,201 19,695 28,322 43,546

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Entrepreneurial Revolution  United States founded on the principle of free enterprise.  The term entrepreneur didn’t come into popular use until the 1980s.

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Entrepreneurial Evolution Figure 1.5

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Entrepreneurial Trends  Global economic turmoil  Green power  The women’s market  The internet, social media, and mass mingling

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Looking Ahead  Part One: Entrepreneurial Opportunity Chapter 1: Understanding Entrepreneurship Chapter 2: Preparing for the Entrepreneurial Journey Chapter 3: Recognizing and Shaping an Opportunity Chapter 4: Developing and Testing a Business Model  Part Two: Feasibility Analysis (Ch 5-8)  Part Three: Business Design (Ch 9-15)  Part Four: Planning for Growth and Change (Ch 16-18)

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. New Venture Action Plan Read broadly about entrepreneurs and new ventures. Interview and entrepreneur. Become more aware of new trends, particularly in an industry in which you’re interested.