Chapter 1

Understanding
Entrepreneurship
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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 todays broad trends in the field of
entrepreneurship.

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Definition of Entrepreneurship
Entrepreneurship is a mindset that is:
opportunity-focused
innovative
growth-oriented
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The Promise of Entrepreneurship
An integrated input/output model
The career assessment approach
The new venture creation process
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Figure 1.1:
The Entrepreneurship Process
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Figure 1.2: Entrepreneurship and
Technological Change
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Outcomes of Entrepreneurship
Economic growth
New industry formation
Job creation
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New Industry Formation
New industries are born when technological
change produces a new opportunity that an
enterprising entrepreneur seizes.
Disruptive or metamorphic technologies that
destroy previous technologies and create new
industries display a different pattern of
behavior.
The pattern of growth, shakeout, stabilization,
and decline of industry can be interrupted at
any time by the entry of another disruptive
technology.

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Figure 1.3: Industry Life Cycles
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 (January 2003).
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Job Creation
The most recent data from 2003 indicate that
small businesses created 1,990,326 net new
jobs as compared to 994,667 for large firms.*




*U.S. Bureau of the Census; Administrative Office of the U.S. Courts; Endogenous
Growth and Entrepreneurial Activities.

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The Nature of Entrepreneurial Start-ups
An entrepreneurial venture brings something
new to the marketplace.
Three primary characteristics:
1. Innovative
2. Value-creating
3. Growth-oriented
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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
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Figure 1.4: Social, Political, and Economic Context
of the Entrepreneurial Process
Source: Paul D. Reynolds. (2000) National Panel of U.S. Business Start-ups: Background and Methodology.
Databases for the Study of Entrepreneurship, Amsterdam: JAI/Elsevier Inc. Vol. 4, pp. 153-227.
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New Business Failure
Not all entrepreneurs succeed in growing their
start-up into an established business.
Survival has been attributed to sufficient
capital, having employees, and the
entrepreneurs intention in starting the
business.

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Table 1.1: Starts and Closures of
Employer Firms, 2001-2005
Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; and U.S. Department of Labor,
Employment and Training Administration.
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Socially Responsible Entrepreneurship
Today more than 85 percent of the companys
employees are involved in philanthropy.
One company uses the following mission: The
mission is to use Salesforce.coms people,
technology and relationships to improve our
communities, inspire youth to be more
successful, support the world during times of
extreme need, and promote compassionate
capitalism.
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The Entrepreneurial Revolution
Free enterprise as foundation of
entrepreneurial motivation
Marc Andressen, Netscape Communications
Howard Schultz, Starbucks
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Figure 1.5:
The Entrepreneurial Evolution
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Entrepreneurial Trends
Women and minority-owned businesses
Social responsibility
The Internet
Globalization
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Looking Ahead
Part One: The Opportunity
Chapter 1: Introduction to Entrepreneurship
Chapter 2: The Entrepreneurs 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)