Chapter 1

Understanding Entrepreneurship

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.

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All rights reserved.Definition of Entrepreneurship • Entrepreneurship is a mindset that is: – opportunity-focused – innovative – growth-oriented Copyright © Houghton Mifflin Company. 1 |3 .

The Promise of Entrepreneurship • • • An integrated input/output model The career assessment approach The new venture creation process Copyright © Houghton Mifflin Company. All rights reserved. 1 |4 .

All rights reserved.1: The Entrepreneurship Process Copyright © Houghton Mifflin Company. 1 |5 .Figure 1.

2: Entrepreneurship and Technological Change Copyright © Houghton Mifflin Company.Figure 1. 1 |6 . All rights reserved.

Outcomes of Entrepreneurship • • • Economic growth New industry formation Job creation Copyright © Houghton Mifflin Company. All rights reserved. 1 |7 .

and decline of industry can be interrupted at any time by the entry of another disruptive technology.New Industry Formation • • New industries are born when technological change produces a new opportunity that an enterprising entrepreneur seizes. shakeout. Copyright © Houghton Mifflin Company. All rights reserved. 1 |8 • . Disruptive or metamorphic technologies that destroy previous technologies and create new industries display a different pattern of behavior. stabilization. The pattern of growth.

All rights reserved. Real Cost Reduction.Figure 1. G. “Growing by Leaps and Inches: Creative Destruction. 1-19 (January 2003).3: Industry Life Cycles Source: Adapted from M. January 2003. pp. Copyright © Houghton Mifflin Company. Zucker. Darby and L. 1 |9 . and Inching Up. R.” Economic Inquiry.

1 | 10 .667 for large firms. All rights reserved.990.326 net new jobs as compared to 994. Administrative Office of the U. Copyright © Houghton Mifflin Company. Courts.* *U. Endogenous Growth and Entrepreneurial Activities. Bureau of the Census.Job Creation • The most recent data from 2003 indicate that small businesses created 1.S.S.

The Nature of Entrepreneurial Start-ups • An entrepreneurial venture brings something new to the marketplace. Growth-oriented Copyright © Houghton Mifflin Company. • Three primary characteristics: 1. Value-creating 3. 1 | 11 . Innovative 2. All rights reserved.

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 Copyright © Houghton Mifflin Company. All rights reserved. 1 | 12 .

pp. (2000) National Panel of U. Amsterdam: JAI/Elsevier Inc.4: Social. Copyright © Houghton Mifflin Company. Business Start-ups: Background and Methodology. 4. 1 | 13 . Political. 153-227.S. Reynolds. Vol. All rights reserved. and Economic Context of the Entrepreneurial Process Source: Paul D.Figure 1. Databases for the Study of Entrepreneurship.

1 | 14 . All rights reserved. Survival has been attributed to sufficient capital. having employees.New Business Failure • Not all entrepreneurs succeed in growing their start-up into an established business. • Copyright © Houghton Mifflin Company. and the entrepreneur’s intention in starting the business.

S. Employment and Training Administration.S.S. 1 | 15 . Administrative Office of the U. Bureau of the Census. Copyright © Houghton Mifflin Company. Department of Labor.1: Starts and Closures of Employer Firms.Table 1. 2001-2005 Sources: U. and U. Courts. All rights reserved.

” • Copyright © Houghton Mifflin’s people. inspire youth to be more successful. support the world during times of extreme need. and promote compassionate capitalism.Socially Responsible Entrepreneurship • Today more than 85 percent of the company’s employees are involved in philanthropy. 1 | 16 . All rights reserved. technology and relationships to improve our communities. One company uses the following mission: The mission is to “use Salesforce.

All rights reserved. Netscape Communications – Howard Schultz.The Entrepreneurial Revolution • Free enterprise as foundation of entrepreneurial motivation – Marc Andressen. 1 | 17 . Starbucks Copyright © Houghton Mifflin Company.

1 | 18 .5: The Entrepreneurial Evolution Copyright © Houghton Mifflin Company.Figure 1. All rights reserved.

All rights reserved. 1 | 19 .Entrepreneurial Trends • • • • Women and minority-owned businesses Social responsibility The Internet Globalization Copyright © Houghton Mifflin Company.

Looking Ahead • Part One: The Opportunity – Chapter 1: Introduction to Entrepreneurship – Chapter 2: The Entrepreneur’s Perspective – Chapter 3: Opportunity Recognition – Chapter 4: The Business Concept and Model • Part Two: Feasibility Analysis (Ch 5-8) • Part Three: The Business Plan (Ch 9-16) • Part Four: Growth and Change (Ch 17-19) Copyright © Houghton Mifflin Company. 1 | 20 . All rights reserved.

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