The Entrepreneurial Perspective: The Nature and Importance of Entrepreneurs

1
THE ENTREPRENEURIAL
PERSPECTIVE
CHAPTER 1
The Nature and Importance of Entrepreneurs
CHAPTER 2
The Entrepreneurial and Intrapreneurial Mind
CHAPTER 3
The Individual Entrepreneur
CASES FOR PART 1

1
THE NATURE AND IMPORTANCE OF
ENTREPRENEURS
LEARNING OBJECTIVES
1
To introduce the concept of entrepreneurship and its historical development.
2
To explain the entrepreneurial decision process.
3
To identify the basic types of start-up ventures.
4
To explain the role of entrepreneurship in economic development.
5
To discuss the ethics and responsibilities associated with entrepreneurship.
OPENING PROFILE
DAVID REYNOLDS
Are you sure the courses you are taking will help you fulfill your future goals?
Do you ever question what you will be doing next year? What about five years down
the road?
If any of these questions sound familiar to you then you have something in common
with 21-year-old David Reynolds. Like many young people, David was unsure about
his future plans when he entered university. In fact, the only reason he enrolled at
Mount Saint Vincent University (MSVU) was its close proximity to his house. David
readily admits that he graduated from high school with no clear future goals and lots
of questions: When I graduated from high school I felt like I was on top of the world
for about three weeks. Then I started to wonder, what would I do next? I knew I
wasnt a great student and was more than a little afraid about what I was going to
do at university or even why I was going.
As David was pondering his future career goals, MSVU was unveiling its Entrepre-
neurial Skills Program (ESP). The aim of this multidisciplinary program is to expose
students to entrepreneurship as a career option and to enhance the entrepreneurial
skills of future graduates. The program consists of extracurricular activities such as
starting and running a business, a mentorship program, access to entrepreneurship
counselling, and exposure to successful entrepreneurs through a speakers series.
By chance David enrolled in an introductory business class taught by the ESP coordi-
nators. When he heard about the program he decided to join. I signed up for the
access to mentors and the ability to add something of value to my resumeto be hon-
est, I never even thought about becoming an entrepreneur or really knew what an
entrepreneur was. My main goal for enrolling in the program was to improve my
chances of landing a job.
Two years later, David is the CEO of a corporation called QuickSnap, named after the
shoe-fastening device he invented, and he runs a successful landscaping company. He
now has clear goals, including becoming a millionaire before the age of 29 and retir-
ing when he is 40. How did David go so quickly from having no future plans to want-
ing to retire at the age of 40? Reynolds recalls, I joined ESP and suddenly Im in love
with the concept of entrepreneurship. I discovered I could be my own boss, work in any
3
4 PART 1 THE ENTREPRENEURIAL PERSPECTIVE
business that I wanted to, and have unlimited earning potential. I went from no direc-
tion in my life to wanting to start 100 businesses at once. Then one day I noticed a
friend struggling to fasten his laces and the idea hits me: Why not eliminate tying laces?
I thought about what such a product would look like, drew a picture of the device, and
then actually made one with materials I found at home.
Sounds like a classic rags-to-riches story, doesnt it? There is, however, one glitch: the
money isnt pouring in just yet. David has discovered that manufacturing and selling a
product doesnt happen overnight and, in fact, doesnt happen in a few short months
either. David admits he made some mistakes early that slowed his progress. In our ESP
sessions we were encouraged to think big, to think that anything was possible, and to
plan, plan and plan. So what did I do? I started with no business plan. I just totally
ignored the advice of my ESP counsellors. I was sure this was a killer product, and every-
body I showed my homemade prototype to was certain I would sell millions. But six
months later, I was nowhere close to manufacturing one.
Rather than give up, David drew upon the counselling and mentorship available
through the ESP program and wrote a detailed business plan, made arrangements to
manufacture the product in China, and made contacts with major retail chains includ-
ing Wal-Mart. David thought he was on his way, I was sure I was set, I had a great prod-
uct with interested retailers all I needed was some initial capital to get going. So he
started to look for some sources of financing and discovered the following obstacles:
Banks did not want to lend to him without signed contracts and significant collateral.
Retailers would not sign a contract without a finished product.
He wasnt eligible for the majority of Canadian government programs because he
was manufacturing overseas. Unfortunately, if he were to manufacture in Canada,
the business would not be viable.
Any potential investors wanted a large equity position in the company
Many people would have given up, but David refused to quit. He has since discovered
government youth loan programs that he is eligible for and he hoped to start manu-
facturing QuickSnap in 2005. In addition, David is investigating some other ideas he has
developed, including a medical device and home exercise equipment.
Will he succeed? Only time will tell, but one thing is certain: David is happy choosing
entrepreneurship as a career choice.
I love being an entrepreneur, it has opened up so many doors for me. If QuickSnap
doesnt work out, than something else will. The biggest thing I learned through study-
ing entrepreneurship is that anything is possible if you work hard enough.
The story of David Reynolds reflects the story of many entrepreneurs in a variety of
industries and various-sized companies. The historical aspect of entrepreneurship, as
well as the decision that David Reynolds and others have made to become entrepre-
neurs, is reflected in the following remarks of two successful entrepreneurs:
Being an entrepreneur and creating a new business venture is analogous to raising
childrenit takes more time and effort than you ever imagine and it is extremely difficult
CHAPTER 1 THE NATURE AND IMPORTANCE OF ENTREPRENEURS 5
and painful to get out of the situation. Thank goodness you cannot easily divorce yourself
from either situation.
When people ask me if I like being in business, I usually respond: On days when there
are more sales than problems, I love it; on days when there are more problems than sales,
I wonder why I do it. Basically, I am in business because it gives me a good feeling about
myself. You learn a lot about your capabilities by putting yourself on the line. Running a
successful business is not only a financial risk, it is an emotional risk as well. I get a lot of
satisfaction from having dared itdone itand been successful.
Does the profile of David Reynolds and these quotes fit your perception of the ca-
reer of an entrepreneur? Entrepreneurship is an exciting field of study. Research indi-
cates that individuals who study entrepreneurship are three to four times more likely
to start a business, and will earn 20 to 30 percent more, than students studying in other
fields. To understand the field better, it is important to learn about the nature and de-
velopment of entrepreneurship, the decision process involved in becoming an entre-
preneur, and the role of entrepreneurship in the economic development of a country.
Do you think that you possess the characteristics of an entrepreneur as displayed in
the Opening Profile and in the quotes above? You may want to take our Entrepre-
neur Assessment Quiz in Table 1.1 before reading further. Note that this quiz has not
been validated statistically and should only be used a discussion tool.
To help evaluate whether you have some of the abilities necessary to be a success-
ful entrepreneur, take the Entrepreneur Assessment Quiz below. Note that this quiz has
not been validated statistically. If you score well, however, you may have the ability to
be a successful entrepreneur. If you dont score well, dont be discouraged as research
indicates that the majority of people can increase their entrepreneurial characteristics
and chances of success by studying entrepreneurship. Furthermore, many entrepre-
neurs believe that both passion for an idea and the desire to succeed are the most im-
portant ingredients for entrepreneurial success.
After you have completed the quiz, count the number of Yes answers. Give yourself
one point for each Yes. If you score above 17 points, you have the drive to be an entre-
preneurthe desire, energy, and adaptability to make a viable business venture a suc-
cess. If you score between 13 and 17 points, your entrepreneurial drive is not as
apparent. While you definitely have the ability to become an entrepreneur, make sure
you are willing to commit to the process prior to starting a new venture. If you scored
less than 13 points, your entrepreneurial drive is even less apparent and you should con-
sider enhancing your drive through the study of entrepreneurship and small business
management. Again, keep in mind that that the quiz is not a scientifically validated in-
dicator of entrepreneurial drive. Such an instrument has not yet been developed.
NATURE AND DEVELOPMENT OF ENTREPRENEURSHIP

Who is an entrepreneur? What is entrepreneurship? What is an entrepreneurial career path?
These frequently asked questions reflect the increased national and international interest in
entrepreneurs by individuals, university professors and students, and government officials.
In spite of all this interest, a concise, universally accepted definition has not yet emerged.
TABLE 1.1 Entrepreneur Assessment Quiz
1. Can you start a project and see it through to completion in spite of a myriad of obstacles?
_____ Yes _____ No
2. Can you make a decision on a matter and then stick to the decision even when challenged?
_____ Yes _____ No
3. Do you like to be in charge and be responsible?
_____ Yes _____ No
4. Do other people you deal with respect and trust you?
_____ Yes _____ No
5. Are you in good physical health?
_____ Yes _____ No
6. Are you willing to work long hours with little immediate compensation?
_____ Yes _____ No
7. Do you like meeting and dealing with people?
_____ Yes _____ No
8. Can you communicate effectively and persuade people to go along with your dream?
_____ Yes _____ No
9. Do others easily understand your concepts and ideas?
_____ Yes _____ No
10. Have you had extensive experience in the type of business you wish to start?
_____ Yes _____ No
11. Do you know the mechanics and forms of running a business (tax records, payroll records,
income statements, balance sheets)?
_____ Yes _____ No
12. Is there a need in your geographic area for the product or service you are intending to
market?
_____ Yes _____ No
13. Do you have skills in marketing and/or finance?
_____ Yes _____ No
14. Are other firms in your industrial classification doing well in your geographic area?
_____ Yes _____ No
15. Do you have a location in mind for your business?
_____ Yes _____ No
16. Do you have enough financial backing for the first year of operation?
_____ Yes _____ No
17. Do you have enough money to fund the start-up of your business or have access to it
through family or friends?
_____ Yes _____ No
18. Do you know the suppliers necessary for your business to succeed?
_____ Yes _____ No
19. Do you know individuals who have the talents and expertise you lack?
_____ Yes _____ No
20. Do you really want to start this business more than anything else?
_____ Yes _____ No
entrepreneur Individual The development of the theory of entrepreneurship parallels to a great extent the develop-
who takes risks and starts ment of the term itself. The word entrepreneur is French and, literally translated, means
something new between-taker or go-between.
Earliest Period
An early example of the earliest definition of an entrepreneur as a go-between is Marco Polo,
who attempted to establish trade routes to the Far East. As a go-between, Marco Polo would
sign a contract with a money person (forerunner of todays venture capitalist) to sell his
goods. A common contract during this time provided a loan to the merchantadventurer at a
22.5 percent rate, including insurance. While the capitalist was a passive risk bearer, the
merchantadventurer took the active role in trading, bearing all the physical and emotional
risks. When the merchantadventurer successfully sold the goods and completed the trip, the
profits were divided with the capitalist taking most of them (up to 75 percent), while the
merchantadventurer settled for the remaining 25 percent.
Middle Ages
In the Middle Ages, the term entrepreneur was used to describe both an actor and a person
who managed large production projects. In such large production projects, this individual
did not take any risks, but merely managed the project using the resources provided, usu-
ally by the government of a country. A typical entrepreneur in the Middle Ages was a
clericthe person in charge of great architectural works, such as castles and fortifications,
public buildings, abbeys, and cathedrals.
17th Century
The reemergent connection of risk with entrepreneurship developed in the 17th century,
with an entrepreneur being a person who entered into a contractual arrangement with the
government to perform a service or to supply stipulated products. Since the contract price
was fixed, any resulting profits or losses were the entrepreneurs. One entrepreneur in this
period was John Law, a Frenchman, who was allowed to establish a royal bank. The bank
eventually evolved into an exclusive franchise to form a trading company in the New
Worldthe Mississippi Company. Unfortunately, this monopoly on French trade led to
Laws downfall when he attempted to push the companys stock price higher than the value
of its assets, leading to the collapse of the company.
Richard Cantillon, a noted economist and author in the 1700s, understood Laws mis-
take. Cantillon developed one of the early theories of the entrepreneur and is regarded by
some as the founder of the term. He viewed the entrepreneur as a risk taker, observing that
merchants, farmers, craftsmen, and other sole proprietors buy at a certain price and sell at
an uncertain price, therefore operating at a risk.1
18th Century
In the 18th century, the person with capital was differentiated from the one who needed cap-
ital. In other words, the entrepreneur was distinguished from the capital provider (the
present-day venture capitalist). One reason for this differentiation was the industrialization
occurring throughout the world. Many of the inventions developed during this time were
reactions to the changing world, as was the case with the inventions of Eli Whitney and
Thomas Edison. Both Whitney and Edison were developing new technologies and were
unable to finance their inventions themselves. Whereas Whitney financed his cotton gin
with expropriated British crown property, Edison raised capital from private sources to
develop and experiment in the fields of electricity and chemistry. Both Edison and Whitney
were capital users (entrepreneurs), not providers (venture capitalists). A venture capitalist
is a professional money manager who makes risk investments from a pool of equity capital
to obtain a high rate of return on the investments.
19th and 20th Centuries

In the late 19th and early 20th centuries, entrepreneurs were frequently not distinguished
from managers and were viewed mostly from an economic perspective:
Briefly stated, the entrepreneur organizes and operates an enterprise for personal gain. He pays
oservices he employs, and for the capital he requires. He contributes his own initiative, skill, and
ingenuity in planning, organizing, and administering the enterprise. He also assumes the chance
of loss and gain consequent to unforeseen and uncontrollable circumstances. The net residue of
the annual receipts of the enterprise after all costs have been paid, he retains for himself.2
KC Irving is one of the best examples of this definition. Irving invented nothing, but rather
adapted and developed new technology in the creation of products to achieve economic
vitality. Irving emerged as one of the most dominant entrepreneurs of the twentieth century,
primarily through his unremitting competitiveness rather than his inventiveness or creativity.
entrepreneur as an In the middle of the 20th century, the notion of an entrepreneur as an innovator was
innovator An individual established:
developing something
unique
The function of the entrepreneur is to reform or revolutionize the pattern of production by
exploiting an invention or, more generally, an untried technological method of producing a new
commodity or producing an old one in a new way, opening a new source of supply of materials
or a new outlet for products, by organizing a new industry.3
The concept of innovation and newness is an integral part of entrepreneurship in this

definition. Indeed, innovation, the act of introducing something new, is one of the most
difficult tasks for the entrepreneur. It takes not only the ability to create and conceptual-
ize but also the ability to understand all the forces at work in the environment. The new-
ness can consist of anything from a new product to a new distribution system to a method
for developing a new organizational structure. Edward Harriman, who reorganized the
Ontario and Southern railroad through the Northern Pacific Trust, and John Pierpont
Morgan, who developed his large banking house by reorganizing and financing the na-
tions industries, are examples of entrepreneurs fitting this definition. These organiza-
tional innovations are frequently as difficult to develop successfully as the more
traditional technological innovations (transistors, computers, lasers) that are usually as-
sociated with being an entrepreneur.
This ability to innovate can be observed throughout history, from the Egyptians who
designed and built great pyramids out of stone blocks weighing many tons each, to the
Apollo lunar module, to laser surgery, to wireless communication. Although the tools have
changed with advances in science and technology, the ability to innovate has been present
in every civilization.
DEFINITION OF ENTREPRENEUR TODAY

The concept of an entrepreneur is further refined when principles and terms from a busi-
ness, managerial, and personal perspective are considered. In particular, the concept of en-
trepreneurship from a personal perspective has been thoroughly explored in this century.
This exploration is reflected in the following three definitions of an entrepreneur:
In almost all of the definitions of entrepreneurship, there is agreement that we are talking about
a kind of behavior that includes: (1) initiative taking, (2) the organizing and reorganizing of
social and economic mechanisms to turn resources and situations to practical account, (3) the
acceptance of risk or failure.4
To an economist, an entrepreneur is one who brings resources, labor, materials, and other
assets into combinations that make their value greater than before, and also one who introduces
changes, innovations, and a new order. To a psychologist, such a person is typically driven by
certain forcesthe need to obtain or attain something, to experiment, to accomplish, or perhaps
to escape the authority of others. To one businessman, an entrepreneur appears as a threat, an
aggressive competitor, whereas to another businessman the same entrepreneur may be an ally, a
source of supply, a customer, or someone who creates wealth for others, as well as finds better
ways to utilize resources, reduce waste, and produce jobs others are glad to get.5
Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is
created by individuals who assume the major risks in terms of equity, time, and/or career com-
mitment or provide value for some product or service. The product or service may or may not
be new or unique, but value must somehow be infused by the entrepreneur by receiving and
locating the necessary skills and resources.6
Although each of these definitions views entrepreneurs from a slightly different per-
spective, they all contain similar notions, such as newness, organizing, creating, wealth, and
risk taking. Yet each definition is somewhat restrictive, since entrepreneurs are found in all
professionseducation, medicine, research, law, architecture, engineering, social work,
distribution, and the government. To include all types of entrepreneurial behaviour, the
following definition of entrepreneurship will be the foundation of this book:
entrepreneurship Entrepreneurship is the process of creating something new with value by devoting the neces-
Process of creating sary time and effort, assuming the accompanying financial, psychic, and social risks, and
something new and receiving the resulting rewards of monetary and personal satisfaction and independence.7
assuming the risks
and rewards This definition stresses four basic aspects of being an entrepreneur regardless of the
field. First, entrepreneurship involves the creation processcreating something new of
value. The creation has to have value to the entrepreneur and value to the audience for which
it is developed. This audience can be (1) the market of organizational buyers for business
innovation, (2) the hospitals administration for a new admitting procedure and software,
(3) prospective students for a new course or even college of entrepreneurship, or (4) the con-
stituency for a new service provided by a nonprofit agency. Second, entrepreneurship
requires the devotion of the necessary time and effort. Only those going through the entre-
preneurial process appreciate the significant amount of time and effort it takes to create
something new and make it operational. As one new entrepreneur so succinctly stated,
While I may have worked as many hours in the office while I was in industry, as an entre-
preneur I never stop thinking about the business. Assuming the necessary risks is the third
aspect of entrepreneurship. These risks take a variety of forms, depending on the field of
effort of the entrepreneur, but usually centre around financial, psychological, and social
areas. The final part of the definition involves the rewards of being an entrepreneur. The
most important of these rewards is independence, followed by personal satisfaction. For
profit entrepreneurs, the monetary reward also comes into play. For some profit entrepre-
neurs, money becomes the indicator of the degree of success.
For the person who actually starts his or her own business, the experience is filled with
enthusiasm, frustration, anxiety, and hard work. There is a high failure rate due to such
things as poor sales, intense competition, lack of capital, or lack of managerial ability. The
financial and emotional risk can also be very high. What, then, causes a person to make this
difficult decision? The question can be best explored by looking at the decision process
involved in becoming an entrepreneur.
ENTREPRENEURSHIP VERSUS SMALL BUSINESS

MANAGEMENT
The terms entrepreneur and small business management have been used interchangeably
over the past 25 years by educators, researchers, and authors. While this is generally
accepted usage, it is important to note that the two terms are defined quite differently and
refer to vastly different practices. As described above, an entrepreneur or a person who
engages in entrepreneurship is someone who innovates or creates. A small business man-
ager, on the other hand, is a person who is engaged in the actual management of a business.
David Reynolds, described in the Opening Profile, is constantly developing new products
and innovative ways of managing his business, thus he would be described as an entrepre-
neur. A small business owner who starts a small business but never creates new products or
develops new ways to manage his business only engaged in one act of entrepreneurship
when he started the business.
It is worth mentioning that some entrepreneurs never want to become full-time managers
and would prefer to hire professional managers to look after the day-to-day activities asso-
ciated with running a company. These entrepreneurs prefer to create rather than manage
ventures. For example, Craig Dobbin, who founded CHC Helicopter, a Canadian business
that offers a variety of air services to offshore oil and gas companies, grew the company
from a single helicopter into the dominant player in the marketplace. He replaced himself
as CEO when he realized that the company was more of an operating entity rather than an
entrepreneurial company. Dobbin acknowledges that while he was good at growing the
business, he prefers to let professional managers worry about managing operations while
he does what he lovesdeal-making and expanding the company.8
AS SEEN IN PROFIT MAGAZINE
ENTREPRENEURSHIP IN CANADA
If you were to ask business executives to name the Brody makes the case for considering Canada one of
great centres of entrepreneurship, few of them the worlds centres of entrepreneurial excellence.
even the Canadianswould mention Canada. Yet PROFIT: Just how good are Canadians as entrepre-
the reality, contends venture capitalist and technol- neurs? If you look at the Canadians whove gone
ogy entrepreneur Leonard Brody, is that this coun- out and founded world-class technology companies,
try punches far above its weight in breeding very few countries in the world are having as much of
groundbreaking companies, especially in the tech an impact on the technology business on a per-capita
and Web sectors. basis as Canada. Look at the size of the companies
Brody, who was a senior executive at Onvia that have come out of here. Look at every subsector
Canada, Canadas fastest-growing startup in PROFIT of technology and you havent got a Canadian com-
magazines 2000 listing, is now a Vancouver-based pany thats doing well; rather, youve got a Canadian
venture partner at GrowthWorks Capital, one of company thats at the pole position in that sector.
Canadas largest national technology funds. He co- Look at the Internet: Yahoo! [co-founded by a
wrote the recently published Everything I Needed to Canadian], eBay [co-founded by a Canadian], Flickr,
Know About BusinessI Learned From a Canadian, InnerSell, Ice.com, Askmen.com. Look at wireless: Re-
which profiles 16 Canadian entrepreneurs. In an in- search in Motion, Sierra Wireless. Look at software:
terview with PROFIT senior editor Jim McElgunn, Akamai, Red Hat, Crystal Decisions. Theyre not just
names that people say, Oh yeah, Ive heard about So Canadians design companies that are built to last?
them. Theyre real players. Thats exactly right. You can see that in the much
What evidence do you have that Canadians are highly lower rates of bankruptcy here than in the U.S. for
entrepreneurial? Theres a ton of data. We have early-stage companies. In the dot-com era, for in-
twice the percentage of people self-employed as the stance, not as many Canadians were burned because
U.S. does: 20% vs. 10%. That is an important facet for of that view of the long game. And that goes back to
Canadians to accept, that we are double the [relative] how we were raised. We grew up with very sustain-
size of the entrepreneurial community south of the able models of business. Every market had a long-
border. Look at The World Competitiveness Yearbook standing telco, every market had a cable company, a
ranking Canada as the fifth-most-competitive econ- couple of banks; we have The Bay.
omy in the world, and The Economist rating us as the Where do we need to improve? We need to over-
most competitive economy globally between now and come our risk aversion. Canadians are not yet of
2009. We are second in the world in quality of man- the school of thought that failure is a badge of
agement practices, according to The World Competi- honour, not of shame. Entrepreneurs do not become
tiveness Yearbook. Canadian VCs always bellyache great until they fail. Rupert Murdoch went bankrupt
about how were not good managers, but the WCY seven times. Failure is something we need to em-
sees that differently. brace. If we dont start accepting the importance of
Whats driving the creation of these new companies? failure as a lesson rather than a badge of shame, we
One of the factors is that a family of first-generation are going to lose out on opportunities.
entrepreneur success stories are now breeding alumni Second, we need to work on our marketing
who are starting their own companies. Look at whats prowess. We are not good marketers. We need to get
happened in Vancouver with Electronic Arts, the better. The very fact that we need to have a conver-
worlds biggest video-game developer. A huge video- sation about whether Canadians are good entrepre-
game cluster has developed as all these former EA em- neurs says somethingwe wouldnt need to have
ployees have set up great companies. And because of that in the U.S.
RIM, youve got great companies coming out of Finally, we need to become more venturesome.
Waterloo, such as Descartes and Sandvine. Canadians need to get out of this lord of the middle
kingdom mentality. We need to start taking some
What are typical Canadian strengths as entrepre- serious swings for the fences. If we match that with a
neurs? First, we have an innovation fabric. Our ge- greater tolerance for risk and our ability to look at
ography forced us into technology and R&D right that third period and sustainability, well have a great
away. Very few countries have the roots of their na- mix for future growth for this country.
tionhood tied inextricably to technology, innovation
and entrepreneurship. At almost every step in our his-
Discussion
tory, Canadians were early adopters. We were always
After reading the article, are you surprised by some
at the height of the adoption curve for satellite, cable,
of the findings and statements made by Brody? Do
radio, television, broadband. Whenever the nation
you think Canadians see themselves as excellent
needed to use technology to unite itself, we did it.
entrepreneurs? Why or why not? Why do you think
Second, theres respect. One of the big issues in busi-
Brody contends that Canadians are not good mar-
ness is trust. When you walk into a room and say youre
keters? Could this be related to Canadian culture?
a Canadian, that brand means something. It means
While the article contends we are a nation of entre-
youre trustworthy, it means youre reliable, it means
preneurs, many Canadians cannot identify leading
you have sustainability. And those things are critical for
Canadian entrepreneurs. Does the media and edu-
entrepreneurs when theyre building companies.
cation system do enough to promote entrepreneur-
Another factor is the ability to see the third period.
ship in this country?
Americans tend to focus very much on the first period,
whereas Canadians, while understanding the first pe-
riod, are well-trained to understand sustainability. They
Source: Reprinted with permission of Rogers Media, Canadian
want to understand, Wheres this going to be in 15 Entrepreneurs Kick Ass, by Jim McElgunn, August 25, 2005,
years? Whats the road going to look like in 15 years? PROFIT magazine: www.PROFITguide.com.
11
entrepreneurial decision
process Deciding to
THE ENTREPRENEURIAL DECISION PROCESS
become an entrepreneur Though many individuals have creative new ideas, few can bring their ideas to the market
by leaving present and create a new venture. Yet entrepreneurship and the actual entrepreneurial decisions have
activity resulted in several million new businesses being started throughout the world. Although no
one knows the exact number, in Canada, estimates indicate that in recent years around
1 million new companies have been formed each year.
Indeed, millions of ventures are formed despite recession, inflation, high interest rates,
lack of infrastructure, economic uncertainty, and the high probability of failure. Each of
these ventures is formed through a very personal human process that, although unique, has
some characteristics common to all. While some ventures result from specific circum-
stances many entrepreneurs follow the entrepreneurial decision process, which entails a
movement from something to somethinga movement from a present lifestyle to forming
a new enterprise, as indicated in Table 1.2.
Change from Present Lifestyle

The decision to leave a career or lifestyle is not an easy one. It takes a great deal of energy
and courage to change and do something new and different. Although individuals tend to
start businesses in areas that are familiar, two work environments have been particularly
good for spawning new enterprises: research and development and marketing. While work-
ing in technology (research and development), individuals develop new product ideas or
processes and often leave to form their own companies when these new ideas are not
accepted by their present employers. Similarly, individuals in marketing have become
familiar with the market and customers unfilled wants and needs, and they frequently leave
to start new enterprises to fill these needs.
TABLE 1.2 Decisions for a Potential Entrepreneur
Change from present lifestyle Form new enterprise

Work environment Desirable
1. Cultural
Disruption
2. Subcultural
3. Family
4. Teachers
5. Peers
Possible
1. Government
2. Background
3. Marketing
4. Financing
5. Role models
Source: Adapted from Robert D. Hisrich, Entrepreneurship and Intrapreneurship: Methods for Creating New Companies That
Have an Impact on the Economic Renaissance of an Area. In Entrepreneurship, Intrapreneurship, and Venture Capital, ed.
Robert D. Hisrich (Lexington, MA: Lexington Books, 1986), p. 90.
AS SEEN IN ENTREPRENEUR MAGAZINE
CHANGES IN THE ENVIRONMENT

This year promises to be a big one for anniversaries procedures such as verifying identities when
. . . spelling challenges and opportunities for accessing paper files. The same training will go
entrepreneurs: on at insurance companies and their partners,
including software providers like NaviMedix
1. DVD becomes ubiquitous: DVD players crossed a
itself. But doctors offices are a golden
threshold in 2002: Theyre now in 33 percent of
opportunity because turnover is high, and
U.S. homes. Thats caused several movie studios
regulations require existing staff to take
to stop distributing films on VHS tape. But most
refresher courses.
DVD players lack VHS prime benefit: recording.
DVD recordables are still $800-plus products, says 3. Video on demand becomes reality: Video-on-
Tara Dunion, director of the Consumer Electronics demand has been heralded as the next big thing
Association. That means theres a short-term for more than a decade. This time its for real.
opportunity providing a service to convert Really. By midyear, cable companies will be
treasured tapes to DVD format (think wedding running large-scale trials. Still dubious? The
and baby videos). Whenever a new device gains a industry itself was skeptical, says Steve Fredrick
wide following, says Dunion, an aftermarket is of Novak Biddle Venture Partners. There were a
sure to follow. That can mean everything from lot of things that needed to come together, but
DVD carrying cases (say, one with a licensed by all measures, weve met critical mass.
SpongeBob Squarepants design on the cover for (Translation: The cable companies have spent so
the kids minivan movies) to cigarette-lighter much money that it has to succeed.) Other than
chargers for portable DVD players. Already run a the cable, says Fredrick, almost every component
video store? Time to accelerate your DVD in the video food chain is wide open. Among the
transition, and think about renting DVD players areas ripe for activity: technologies to distribute
to accommodate VHS clients who desire DVD- multiple video streams over digital cable, new
only releases. content providers, and new advertising models.
One reason for optimism is the rocket-like takeoff
2. HIPAA regulations take effect: On April 14, the
of video recorders like TiVo. Video-on-demand
federal government institutes new health-care
deploys that functionality, but the hardware is in
privacy regulations based on the Health
the network, says Fredrick. It will do for video
Insurance Portability and Accountability Act of
and movies what the Web did for static text.
1996 (HIPAA). Entrepreneurial firms such as
NaviMedix Inc. will profit from the deadline. 4. Fuel-cell technology takes off: The media have
NaviMedix provides a Web-based repository of fawned over fuel cells for years, but usually for
medical offices information. In addition to cars. (Fuel cells convert fuel to electricity with
making it possible to check patients eligibility minimal pollution.) But the initial consumer
under their health plans, the company also acts application of the technology may come in a
as a vault for records, customizing features to smaller format: handheld computers. MTI
adhere to the privacy procedures of individual MicroFuel Cells Inc. of Albany, New York,
medical practices. Theres non-tech opportunity completed three technology prototypes last year.
as well. A lot of offices are still fairly paper- This year, the company is launching product
based, says Lynne Dunbrack, NaviMedixs prototypes with an eye toward a 2004 rollout.
director of HIPAA compliance. That means each Competitors are trying to beat it to the punch. Fuel
practices gatekeeper needs training in what cells outlast lithium ion batteries, todays portable
information can be given to whom, and power champ. Electronics are going to a 24/7
continued
CHANGES IN THE ENVIRONMENT (continued)

mode of operation, says Bill Acker, MicroFuels 3. Does an analysis of trends like this provide ideas
president and CEO. Fuel cell PDAs and mobile about possible entrepreneurial opportunities or is
phones wont conk out before your day ends. The it like trying to drive a car by looking in the rear-
extra juice is also enabling such combinations as view mirror?
digital cameras that link to mobile phones. 4. What advice would you give an entrepreneur
Applying fuel cells to other devices will also open who says I want to create a company and enter
new opportunities. Think of wireless speakers. the fuel cell industry not because I think there is
Rather than substituting a dangling power cord for a lot of money to be made there, but I want to
dangling speaker wire, build a fuel cell and do some good, I want to help the environment?
wireless connection into the speakersand,
suddenly, they can be anywhere in a living room.
ADVICE TO AN ENTREPRENEUR
1. What is it about these anniversaries that
Source: Reprinted with permission of Entrepreneur Media, Inc.,
provides entrepreneurs opportunities? Remember When: These Are the Milestones Youll Remember
2. Which anniversary above do you believe 2003 By. Hope You Take Advantage, By Chris Sundlund, January
2003, Entrepreneur magazine: www.entrepreneur.com. Please
provides the greatest opportunity for you to form contact Jeremy at Scoop Reprint Source to assist you with your
a management team and enter the industry? reprint needs: (800) 767-3263, ext. 307.
Perhaps an even stronger incentive to overcome the inertia and leave a present lifestyle to
create something new comes from a negative forcedisruption. A significant number of
companies are formed by people who have retired, who are relocated due to a move by the
other member in a dual-career family, or who have been fired. There is probably no greater
force than personal dislocation to galvanize a persons will to act. One study indicates that
the number of new listings in the Yellow Pages increases by 12 percent during a layoff period.
WHEN LIFE GIVES YOU LEMONS . . .

As mentioned in the text, disruption in your life, such successful that she expanded three years later into a
as losing a job or an opportunity, can often lead to 520-square-metre spa and changed the company
someone starting his or her own business. This is name to Bliss. From there, Marcia went into rapid
exactly what happened to Marcia Kilgore, who ven- expansion, opening another location, a mail order
tured from her home in tiny Outlook, Saskatchewan, catalogue, and an online store. The company became
to New York City to pursue her university education so popular that it was not uncommon to wait six
at Columbia University. Upon arrival, the funding she months to book an appointment, causing Julie
had secured for her tuition fell through and she was Roberts to complain to People magazine that even
almost broke, I had $300 plus pocket change and no she couldnt get in. Eventually, one of the largest lux-
return ticket. Rather than return to Canada, Marcia ury product companies in the world, LVMH noticed
became determined to stay in the city and started the success of Bliss and purchased 70 percent of the
working as a personal trainer. During this time she company for $30 million.
became interested in skin care due to her own strug- Source: Leonard Brody and David Raffa, Everything I Needed to
gles with acne and eventually enrolled in a cosmetic Know about BusinessI Learned from a Canadian (Toronto: John
chemistry course. Soon afterward, at the age of 23, Wiley & Sons Canada Ltd., 2005), p. 40; and Karen Blackman,
Fast Talk: Marcia Kilgore, Travel+Leisure, February 2002,
she invested all her savings into Lets Face It, a small http://travelandleisure.com/invoke.cfm?ObjectID=A66C2638-09F3-
spa and skin care company. The company was so 11D6-82A00002B3309983.
Another cause of disruption that can result in company formation is someones completion
of an educational degree. For example, a student who is not promoted after receiving an
MBA degree may become frustrated and decide to leave and start a new company.
What causes this personal disruption to result in a new company being formed? The
decision to start a new company occurs when an individual perceives that forming a new
enterprise is both desirable and possible.
desirability of new Desirability of New Venture Formation

venture formation
Aspects of a situation that The perception that starting a new company is desirable results from an individuals culture,
make it desirable to start subculture, family, teachers, and peers. A culture that values an individual who successfully
a new company creates a new business will spawn more venture formations than one that does not. The Cana-
dian culture places a high value on being ones own boss, having individual opportunities,
being a success, and making moneyall aspects of entrepreneurship. Therefore, it is not sur-
prising to find a high rate of company formation in Canada. On the other hand, in some coun-
tries successfully establishing a new business and making money are not as highly valued,
and failure may be a disgrace. Countries with cultures that more closely emulate this attitude
do not have as high a business formation rate. It will be interesting to watch which of the
once-controlled economies will develop a strong pro-entrepreneur culture.
No culture is totally for or against entrepreneurship. Many subcultures that shape
value systems operate within a cultural framework. There are pockets of entrepreneur-
ial subcultures in Canada. Although the more widely recognized ones include Ottawa
River Valley, Toronto, and Calgary, some less-known but equally important entrepre-
neurial centres include Halifax, Vancouver, Montreal, and Edmonton. These subcultures
support and even promote entrepreneurshipthe forming of a new companyas one of
the best occupations. No wonder more individuals actively plan new enterprises in these
supportive environments.
There are also variations within these subcultures caused by family traits. Studies of
companies in a variety of industries throughout the world indicate that a very high percent-
age of the founders of companies had fathers and/or mothers who valued independence. The
independence achieved by company owners, professionals, artists, professors, or farmers
permeates their entire family life, giving encouragement and value to their childrens
company-formation activities.
Encouragement to form a company is further stimulated by teachers, who can signif-
icantly influence individuals to regard entrepreneurship as a desirable and viable career
path. Schools with exciting courses in entrepreneurship and innovation tend to develop
entrepreneurs and can actually drive the entrepreneurial environment in an economic
area. The number of entrepreneurship courses a person takes increases the probability of
starting a venture. In Ontario, Brock University and Ryerson University facilitate the
entrepreneurial environment; the University of Calgary offers unique entrepreneurial
courses and programs to potential entrepreneurs in Alberta; McGill offers students in
Montreal a wide variety of entrepreneurship courses; and Acadia University, Memorial
University, Saint Marys, Dalhousie, and Mount Saint Vincent University offer students
numerous entrepreneurial courses and extracurricular activities in Atlantic Canada. A
strong university education base is an important factor for entrepreneurial activity and
company formation in an area.
Finally, peers are very important in the decision to form a company. An area with an
entrepreneurial pool and a meeting place where entrepreneurs and potential entrepreneurs
can discuss ideas, problems, and solutions spawns more new companies than an area where
these are not available.
possibility of new venture

formation Factors
POSSIBILITY OF NEW VENTURE FORMATION
making it possible to Although the desire derived from the individuals culture, subculture, family, teachers,
create a new venture and peers needs to be present before forming a new venture is considered, the second
feature necessary centres around this question: What makes it possible to form a new
company? Several factorsgovernment, background, marketing, role models, and
financescontribute to the creation of a new venture (see Table 1.2). The government
contributes by providing the infrastructure to help and support a new venture. It is no
wonder that more companies are formed in Canadagiven the roads, communication and
transportation systems, utilities, and economic stabilitythan in many other countries.
Even the Canadian tax rate for companies and individuals is better than in countries such
as England or Switzerland. Countries that have a repressive tax rate on businesses or in-
dividuals can suppress company formation, since companies will not have the money to
start and grow and monetary gain cannot be achieved. Since the social, psychological, and
financial risks are still present, the entrepreneur must also have the necessary background.
Formal education and previous business experience give a potential entrepreneur the skills
needed to form and manage a new enterprise. Although educational systems are impor-
tant in providing the needed business knowledge, individuals will tend to be more
successful in forming businesses in fields in which they have worked. Entrepreneurs are
not born: They develop.
An understanding of marketing also plays a critical role in forming a new company. In
addition to the presence of a market of sufficient size, there must also be a level of mar-
keting know-how to put together the best total package of product, price, distribution, and
promotion needed for successful product launching. A company is more easily formed
when the driving force is more from market demand than a technology push. An example
of a company that was built to fill a need in the market is Montreal-based coffee company,
Servomax. Company founder Arie Koifman noticed in 1996 that people in Montreal were
starting to embrace the high-quality coffee culture that was sweeping across North Amer-
ica and spending much of their leisure time visiting and purchasing products from nu-
merous high-end coffee stores in the area. While the coffee craze was making inroads in
the city, Koifman found that many businesses still offered its employees and visitors low-
quality coffee made with low-quality equipment. Koifman recalls, The coffee in the
office was horrible 10 years ago. Koifman decided that the market demanded superior
products and he would fill this demand. He ventured to trade shows, purchased the high-
est quality equipment, and started offering his equipment and service to the business com-
munity. Since that time, he has added espresso machines, vending services, and water
coolers to his product line, but premium coffee and brewing equipment has remained the
main product. By 2004, Koifmans business had grown to $2.1 million in revenue and he
was proud to state that this had been accomplished by improving the quality of coffee in
business environments, Your office can have the same quality [coffee] as in Second Cup.
There is no difference.9
A role model can be one of the most powerful influences in making company formation
seem possible. To see someone else succeed makes it easier to picture yourself engaged in
a similar activityof course, more successfully. A frequent comment of entrepreneurs
when queried about their motivations for starting their new venture is, If that person could
do it, so can I!
Finally, financial resources must be readily available. Although most of the start-up
money for any new company comes from personal savings, credit, friends, and relatives,
there is often a need for additional risk capital. Risk-capital availability plays an essential
role in the development and growth of entrepreneurial activity. More new companies form
when risk capital is readily available.
AS SEEN IN ENTREPRENEUR MAGAZINE

PROVIDE ADVICE TO AN ENTREPRENEUR ABOUT FIRM AND
SOCIETAL BENEFITS
If you have ever wondered whether you have an en- And when do business and science not work well
trepreneurial gene in your body, you may soon find together?
out. J. Craig Venter is a scientistand an entrepre- Venter: They collide when people let the pursuit of
neur. He started Celera Genomics Group in 1998 money overrule their ethical decisions. And it
with one main mission: to map the human genome. doesnt just happen with science and business.
Now he is working out of a nonprofit organization Ive seen more greed in the academic community
he founded in Rockville, Maryland: The Center for than in the business community. It depends on
the Advancement of Genomics. His goal is to mass- peoples individual ethics. There have been cases
produce CDs with everybodys personal genetic of [unethical behavior] with clinical trials of
maps, and sell them for $1,000 each. Who cares? drugs, for example, or scientists diverting their
Presumably people who want to see what life- government-funding research lab into private
threatening genes are lurking in their bodies. Ven- companies. And, of course, weve seen
ters organization will work on producing a gene CD businessmen having their companies buy them
for you nowif you have half a million dollars lying airplanes and large homes. Ive seen people in
around. Some critics have sniffed that science business acting with better altruistic motives than
shouldnt be so commercialized. We caught up with many scientists, and Ive seen many in academia
Venter to get his reaction. who pursue things out of financial greed. The
motives dont go with one category or the other.
I read an article stating everybodys personal
genome code should be available for free.
Whats wrong with that thinking?
ADVICE TO AN ENTREPRENEUR
An entrepreneur, who has invented a new drug that
J. Craig Venter: Thats one of the silliest things Ive
substantially eases the pain associated with tuber-
ever heard. I would like everything in life to be
culosis, has read the above article and comes to you
free. I would like gasoline to be free. In fact, Id
for advice.
like people to just deliver it right to my house;
I have spent a lot of my money and seven years of
its a pain to go to the gas station. I dont even
my life into developing this drug. The investors have
understand that [logic]. If somebody can
injected a lot of capital and taken a substantial risk.
determine their own genetic codethat only
They deserve a good return on their money. If I
happens because of scientific breakthroughs.
license the drug exclusively to a drug company then I
All these things cost huge amounts of money.
will receive a big pay day. I think the article sug-
Somebody has to pay for it.
gests that I am entitled to maximize the profit from
OK, so assuming business is good for science, how
my invention. But the article also seems to suggest
can entrepreneurs be more involved?
that I should do the ethical thing and that would
Venter: The reason scientists are able to make
involve a series of nonexclusive licenses which allows
breakthroughs is because of people who have
the drug to be sold at cost in third and fourth world
made money in their businesses and want to
countries. Should I maximize return and use that
use that to help society. And the intentions of
money to start a new research and development pro-
the people involved dont really matter. You can
gram that could lead to another new drug or should
have pure, altruistic intentions in just wanting
I maximize the societal benefit of this drug?
to help society by creating new treatments for
disease, or you can be motivated by pure Source: Reprinted with permission of Entrepreneur Media, Inc.,
financial greed. But the investment cycle in the I Dream of Genes. Meet a Man with the Courage to See Human
U.S. encourages people to participate regardless Genetics as the Business Opportunity It Is, by Geoff Williams,
February 2003, Entrepreneur magazine: www.entrepreneur.com.
of their background or what theyre bringing Please contact Jeremy at Scoop Reprint Source to assist you with
to the table. your reprint needs: (800) 767-3263, ext. 307.
ADVANTAGES AND DISADVANTAGES OF

ENTREPRENEURSHIP
While each start-up offers entrepreneurs different advantages and disadvantages, they all
share common characteristics. Entrepreneurs are usually motivated by some of these
advantages, but they also take into consideration some of the disadvantages prior to engag-
ing in a new venture.
Advantages
Independence Statistics Canada has indicated that the number-one reason entrepre-
neurs start their own business is independence. Entrepreneurship offers people the chance
to be their own boss, make meaningful decisions, and answer to no one but themselves. One
young entrepreneur, Jerome Turner, started HubbaTubba, a hot tub leasing company. He
sums up this sentiment in a few words, I was tired of making others rich, tired of asking
permission, and tired of saying, Yes sir. I started my own business because I have the free-
dom to do what I want, when I want. I am responsible to one personmeand I love it!
Financial Rewards There is an old saying that says, Nobody ever becomes rich
working for somebody else. This sums up one of the most common reasons given by busi-
ness owners when asked why they left traditional employment for entrepreneurship. Entre-
preneurs are often motivated by the possibility of earning a higher salary than the one they
would traditionally earn as an employee.
Enjoyment Entrepreneurs seem to thrive on the enjoyment of being in business for

themselves. In countless interviews with both successful and unsuccessful entrepreneurs,
the vast majority state they love being a business owner. In Canada, over 90 percent of
Canadian entrepreneurs say that they would start their own business again.10
Challenge Many business owners love dealing with the various challenges associated
with entrepreneurship. Entrepreneurs are almost never complacent as they are constantly
pushing their skill set in new and different directions. Sharon Beasley of Mrs. Beasleys
Cookies says that one of the biggest reasons she started her own business was to challenge
herself and see how far her own abilities could take her: I started my company because I
wanted to know that I could. I wanted to push my abilities into areas that my traditional
employer would not allow. Many young entrepreneurs start a business because they are
unsatisfied with the limited responsibility they receive upon graduation due to their age and
lack of experience.
Disadvantages
Risk Entrepreneurship is considered much riskier than traditional employment for good
reason. As an employee, the worst case scenario is losing a job. For many entrepreneurs, the
worst case scenario often involves losing ones life savings. This risk is compounded when
one considers that the majority of new ventures fail within the first three years of operation.
Stress Business owners often experience a high degree of anxiety and stress. Many
entrepreneurs have problems dealing with the self-reliance aspect of owning a business and
have difficulty separating their business from their family life, thus causing stress and
hardship. For example, at a recent entrepreneurship conference, over 55 percent of entre-

preneurs stated that running their own business seriously hurt personal or family relations
at one time or another in the preceding five years.
Working Hours Many entrepreneurs are attracted to business ownership because they
want to set their own schedules and believe they will work fewer hours when compared to
paid employment. This has not proven to be the case, as indicated in a recent study com-
pleted by Industry Canada, which found that entrepreneurs work on average 40.8 hours per
week compared to 35.5 hours for employees, and 33 percent of entrepreneurs worked over
50 hours per week compared to only 5 percent of employees.11
Lack of Skills Many entrepreneurs start a business based on a belief that they have the
skills necessary to run their own business. This is often not the case. Entrepreneurs often
quickly realize that they need to develop different competencies or hire people to comple-
ment their skill set. Sharon Beasley expressed this when recalling problems with starting
her company: I started a cookie company because I loved to bake and felt my cookies were
unique. I assumed that the majority of my time would be spent baking cookies with a small
amount of time allocated to running the company. Was I ever wrong! The majority of my
time was spent making presentations, contacting current and potential customers, and man-
aging my cash flow. I spent less time baking in the first three years of business then I could
ever imagine and had to develop skills I didnt even know I had.
Financial Rewards A vast number of entrepreneurs start their business dreaming

about financial independence. Unfortunately this is not always the case. Most businesses
struggle during the start-up phase. Industry Canada has found that entrepreneurs are paid
91.4 percent of what they would normally earn if they were being employed by others.12
TYPES OF START-UPS
What types of start-ups result from the entrepreneurial decision process? One very useful
classification system divides start-ups into four categories: cottage company, lifestyle firms,
cottage company foundation companies, and high-potential ventures. A cottage company (or micro-
A small venture that enterprise) is a privately held business that generally employs fewer than 10 people and has
generally employs fewer revenues of less than $1 million. This type of firm often supplements traditional employ-
than 10 people and ment or other income, has only one employee (usually the owner), may or may not be
has revenues of less
operated as a home business, and often experiences very little growth. Cottage companies
than $1 million
are growing in popularity as many baby boomers are retiring and starting up small compa-
nies to supplement their retirement income.
It is important to note that while many cottage companies are owner-operated, they still
employ more that 50 percent of working Canadians. In addition, many of Canadas large
businesses started as cottage companies and grew over time. For example, in 2005, 27 of
Canadas 100 fastest-growing companies as reported by PROFIT magazine had fewer than
five employees in 1999. Glacier Ventures International Corp., a Vancouver company that
publishes agricultural newspapers and community weekly papers, has grown from just
three employees in 1999 to 355 in 2005.13
lifestyle firm A small A lifestyle firm is privately held and usually achieves only modest growth due to the nature
venture that supports the of the business, the objectives of the entrepreneur, and the limited money devoted to research
owners and usually does and development. This type of firm may grow after several years to 30 or 40 employees and
not grow have annual revenues of about $2 million. A lifestyle firm exists primarily to support the
owners and usually has little opportunity for significant growth and expansion.
ANGUS REIDATTRACTED TO THE

ADVANTAGES OF ENTREPRENEURSHIP
Almost every Canadian over the past 25 years has abovehe liked the work and craved the challenges
probably heard or read the following words, Angus and independence associated with entrepreneurship.
Reid polling company reports that or According Reid, who knew very little about business manage-
to the latest Angus Reid poll . . ., followed by some ment, turned out to be a great salesman and entre-
statistics on politics, economic development, educa- preneur, expanding the business to more than
tion, or some other matter that is making news head- 80 countries, in 40 languages, and with over 1,200
lines that year. Angus Reid has garnered a lot of media clients. Reid says that he didnt even know basic
attention and has been very accurate in predicting and accounting terms when he started but persevered
forecasting the opinions of Canadians. Most Cana- through hard work and determination: I didnt
dians have probably never thought about Angus Reid know what a balance sheet was . . . but with a lot of
beyond the fact it was the name of a company that hard work, a bit of luck and some fortunate timing, I
seemed to be constantly in the media. But there is was able to grow this business from nearly zilch in
another interesting story about Angus Reidnot the year one to about $50 million in sales 20 years later.
company, but the entrepreneur behind the business. In 2000, Reid decided to sell his company to Ipsos and
Angus Reid founded the company in 1979 when form a new Canadian company called Ipsos-Angus
he left his job as a tenured sociology professor to pur- Reid. Ipsos paid close to $100 million for the business,
sue his dream of owning a market research and and Reid agreed to stay on as head of the company.
polling company. Why would Reid leave a tenured
university job, a rare move among professors, to start Source: Angus Reid Consultants Web site, www.angus-reid.com,
member bios; and Leonard Brody and David Raffa, Everything I
a research company in a fragmented industry? The Needed to Know about BusinessI Learned from a Canadian
answer can be found in many of the reasons cited (Toronto: John Wiley & Sons Canada Ltd., 2005), p. xii.
foundation company A The third type of start-upthe foundation companyis created from research and
type of company formed development and lays the foundation for a new business area. This firm can grow in 5 to
from research and 10 years from 40 to 400 employees and from $10 million to $20 million in yearly revenues.
development that usually Since this type of start-up rarely goes public, it usually draws the interest of private
does not go public
investors only, not the venture-capital community.
high-potential venture The final type of start-upthe high-potential ventureis the one that receives the great-
A venture that has high est investment interest and publicity. While the company may start out like a foundation
growth potential and company, its growth is far more rapid. After 5 to 10 years, the company could employ
therefore receives great around 500 employees, with $20 million to $30 million in revenue. These firms are also
investor interest
called gazelles and are integral to the economic development of an area.
gazelles Very high Given that the results of the decision-making process need to be perceived as desirable
growth ventures
and possible for an individual to change from a present lifestyle to a radically new one, it
is not surprising that the type and number of new business formations vary greatly
throughout the world as well as throughout Canada. Some regions in Canada have more
support infrastructure and a more positive attitude toward new business creation.
ROLE OF ENTREPRENEURSHIP IN ECONOMIC

DEVELOPMENT
The role of entrepreneurship in economic development involves more than just increasing
per capita output and income; it involves initiating and constituting change in the structure
of business and society. This change is accompanied by growth and increased output, which
allows more wealth to be divided by the various participants. What in an area facilitates the
needed change and development? One theory of economic growth depicts innovation as the
key, not only in developing new products (or services) for the market but also in stimulat-
ing investment interest in the new ventures being created. This new investment works on
both the demand and the supply sides of the growth equation; the new capital created
expands the capacity for growth (supply side), and the resultant new spending utilizes the
new capacity and output (demand side).
In spite of the importance of investment and innovation in the economic development of
product-evolution process an area, there is still a lack of understanding of the product-evolution process. This is the
Process for developing process through which innovation develops and commercializes through entrepreneurial
and commercializing an activity, which in turn stimulates economic growth.
innovation The product-evolution process, illustrated in Figure 1.1 as a cornucopia, the tradi-
tional symbol of abundance, begins with knowledge in the base technology and
sciencesuch as thermodynamics, fluid mechanics, or electronicsand ends with
products or services available for purchase in the marketplace.14 The critical point in the
product-evolution process is the intersection of knowledge and a recognized social need,
iterative synthesis The which begins the product development phase. This point, called iterative synthesis, often
intersection of knowledge fails to evolve into a marketable innovation and is where the entrepreneur needs to con-
and social need that starts centrate his or her efforts. The lack of expertise in this areamatching the technology
the product development with the appropriate market and making the needed adjustmentsis an underlying
process
problem in any technology transfer.
The innovation can, of course, be of varying degrees of uniqueness. Most innovations
ordinary innovations introduced to the market are ordinary innovations, that is, with little uniqueness or tech-
New products with little nology. As expected, there are fewer technological innovations and breakthrough innova-
technological change tions, with the number of actual innovations decreasing as the technology involved
technological increases. Regardless of its level of uniqueness or technology, each innovation (particu-
innovations New larly the latter two types) evolves into and develops toward commercialization through one
products with significant of three mechanisms: the government, intrapreneurship, or entrepreneurship.
technological
advancement
breakthrough
Government as an Innovator
innovations New The government is one conduit for commercializing the results of the synthesis of social
products with some need and technology. This is frequently called technology transfer and has been the focus
technological change of a significant amount of research effort. Despite this effort, relatively few inventions
government as an resulting from sound scientific government-sponsored research have reached (been trans-
innovator A ferred to) the commercial market. Most of the by-products of this scientific research have
government active in little application to any commercial need. The few by-products that are applicable require
commercializing significant modification to have market appeal. Though the government has the financial
technology
resources to successfully transfer the technology to the marketplace, it lacks the business
technology transfer skills, particularly marketing and distribution, necessary for successful commercializa-
Commercializing the tion. In addition, government bureaucracy and red tape often inhibit the business from
technology in the
being formed in a timely manner.
laboratories into new
products
Intrapreneurship
intrapreneurship Intrapreneurship (entrepreneurship within an existing business structure) can also bridge
Entrepreneurship within the gap between science and the marketplace. Existing businesses have the financial
an existing organization resources, business skills, and frequently the marketing and distribution systems to com-
mercialize innovation successfully. Yet, too often the bureaucratic structure, the emphasis
FIGURE 1.1 Product Evolution
Science
Technology
Thermodynamics
Fluid mechanics
Electronics
III
II
l ling Industry
de
IV
o
M
i ng
nn
Pl a
g
in
nc
g
in
Fi na
ur
act
I
g
M anuf
M arketi n
Gut feeling
Knowledge
Vision
I Recognition of social need III Iterative synthesis leading to V Industrial phase

invention (pressing toward invention)
II Initiation of technological innovation
IV Development phase
on short-term profits, and a highly structured organization inhibit creativity and prevent
new products and businesses from being developed. Corporations recognizing these
inhibiting factors and the need for creativity and innovation have attempted to establish an
intrapreneurial spirit in their organizations. In the present era of hypercompetition, the need
for new products and the intrapreneurial spirit have become so great that more and more
companies are developing an intrapreneurial environment, often in the form of strategic
business units (SBUs). Intrapreneurship is discussed in Chapter 2.
Entrepreneurship
The third method for bridging the gap between science and the marketplace is via entrepre-
neurship. Many entrepreneurs have a difficult time bridging this gap and creating new ven-
tures. They may lack managerial skills, marketing capability, or financial resources. Their
inventions are often unrealistic, requiring significant modification to be marketable. In addi-
tion, entrepreneurs frequently do not know how to interface with all the necessary entities,
such as banks, suppliers, customers, venture capitalists, distributors, and advertising agencies.
Yet, in spite of all these difficulties, entrepreneurship is presently the most effective method
for bridging the gap between science and the marketplace, creating new enterprises, and bring-
ing new products and services to the market. These entrepreneurial activities significantly
affect the economy of an area by building the economic base and providing jobs. In some
areas, entrepreneurship accounts for the majority of new products and net new employment.
Given its impact on both the overall economy and the employment of an area, it is surprising
that entrepreneurship has not become even more of a focal point in economic development.
ENTREPRENEURIAL CAREERS AND EDUCATION

What causes an individual to take all the social, psychological, and financial risks involved
in starting a new venture? At first there was limited research on this aspect of entrepreneur-
ship, but since 1985 there has been an increased interest in entrepreneurial careers and edu-
cation. This increased interest has been fostered by such factors as the recognition that small
firms play a major role in job creation and innovation; an increase in media coverage of
entrepreneurs; the awareness that there are more entrepreneurs than those heralded in the
media, as thousands upon thousands of small cottage companies are formed; the view that
most large organizational structures do not provide an environment for self-actualization; the
shift in employment, as women become increasingly more active in the workforce and the
number of families earning two incomes grows; and the formation of new ventures by female
entrepreneurs at three times the rate of their male counterparts.
In spite of this increase, many people, still, do not consider entrepreneurship as a career.
A conceptual model for understanding entrepreneurial careers, indicated in Table 1.3, views
the career stages as dynamic ones, with each stage reflecting and interacting with other
stages and events in the individuals lifepast, present, and future. This life-cycle approach
conceptualizes entrepreneurial careers in nine major categories: educational environment,
the individuals personality, childhood family environment, employment history, adult
development history, adult nonwork history, current work situation, the individuals current
perspective, and the current family situation.15
Although there exists a common perception that entrepreneurs are less educated than the
general population, this opinion has proved to be more myth than reality. Studies have
found entrepreneurs overall, and female entrepreneurs in particular, to be far more
educated than the general populace.16 However, the types and quality of the education
received sometimes do not develop the specific skills needed in the venture creation and
management process. For example, some female entrepreneurs are at more of a disadvan-
tage than their male counterparts in this respect, as they frequently do not take significant
business or engineering courses.
Childhood influences have also been explored, particularly in terms of values and the
individuals personality. The most frequently researched personality traits are the need
risk taking Taking for achievement, focus of control, risk taking, and gender identity. Since personality
calculated chances in traits are more thoroughly discussed in Chapter 3, it is sufficient here to indicate that
creating and running a few conclusions can be drawn from all the research regarding any universal personality
venture traits of entrepreneurs.
TABLE 1.3 A Framework for an Entrepreneurs Career Development
Life Space Areas Childhood Early Adulthood Present Adulthood
Work/occupation Education and childhood Employment history Current work situation

work experience IV VII
I
Individual/personal Childhood influences on Adult development Individuals current
personality, values, and history perspective
interests V VIII
II
Nonwork/family Childhood family Adult family/nonwork Current family/nonwork
environment history situation
III VI IX
Source: Adapted from Donald D. Bowen and Robert D. Hisrich, The Female Entrepreneur: A Career Development Perspective, The Academy of Management
Review II (April 1986), pp. 393407.
The research on the childhood family environment of the entrepreneur has had more
definitive results. Entrepreneurs tend to have self-employed fathers, many of whom are also
entrepreneurs. Many also have entrepreneurial mothers. The family, particularly the father
or mother, plays an important role in establishing the desirability and credibility of entre-
preneurship as a career path. As one entrepreneur said: My father and mother always
encouraged me to try new things and do everything very professionally. They wanted me to
be the very best and have the freedom and independence of being my own boss.
Employment history also has an impact on entrepreneurial careers, in both a positive and a
negative sense. On the positive side, entrepreneurs tend to have a higher probability of success
when the venture created is in their field of work experience. This increased success rate makes
the providers of risk capital particularly concerned when this work experience is not present.
Negative displacement (such as dissatisfaction with various aspects of ones job, being fired
or demoted, being transferred to an undesirable location, or having ones spouse take a new
position in a new geographic area) encourages entrepreneurship and new venture formation.
Although no definitive research has been done on the adult development history of
entrepreneurs, it appears to also affect entrepreneurial careers. Development history has
somewhat more of an impact on women, since they tend to start businesses at a later stage
in life than men, usually after having experienced significantly more job frustration.
There is a similar lack of data on adult family/nonwork history. Although there is some
information on entrepreneurs marital and family situations, the available data add little to
our understanding of entrepreneurial career paths.
The impact of the current work situation has received considerably more research and
attention. Entrepreneurs are known for their strong work values and aspirations, their long
workdays, and their dominant management style. Entrepreneurs tend to fall in love with the
organization and will sacrifice almost anything in order to ensure its survival. This desire is
reflected in the individual entrepreneurs current career perspective and family/nonwork
situation. The new venture usually takes the highest priority in the entrepreneurs life and
is the source of the entrepreneurs self-esteem.
While in university, few students, but increasing in number, think they will pursue
entrepreneurship as their major life goal. Even among those that do, relatively few indi-
viduals will start a business immediately after graduation, and even fewer will prepare for
a new venture creation by working in a particular position or industry. This mandates that
entrepreneurs continually supplement their education through books, trade journals,

seminars, or taking courses in weak areas. Generally, skills that need to be acquired
through seminars or courses include creativity, financing, control, opportunity identifi-
cation, venture evaluation, and deal making.
Entrepreneurship education is a fast-growing area in colleges and universities in Canada
and throughout the world. Many universities offer at least one course in entrepreneurship
at the graduate or undergraduate level, and a few actually have a major or minor concen-
tration in the area. In Canada, the number of universities that offer undergraduate entrepre-
neurship courses has increased from 53 to 70 in the last five years, while the number of
courses has grown from 253 to 367. This increase in the number of courses has been fuelled
by high student interest. In a recent Gallup poll, 80 percent of high school students
expressed an interest in taking at least one entrepreneurial course while at university. Other
studies indicate that students of all disciplines see entrepreneurship coursework as helpful
to their future goals.
While the courses in entrepreneurship vary by university, there is a great deal of com-
monality, particularly in the initial one or two courses in this field of study. These courses
tend to reflect the overall objectives for a course in entrepreneurship, as indicated in
Table 1.4. These tend to centre around skill identification and assessment; understanding
entrepreneurial decision making and the entrepreneurial process; understanding the
TABLE 1.4 Overall Objectives for a Course in Entrepreneurship
Understand the role of new and smaller firms in the economy.

Understand the relative strengths and weaknesses of different types of enterprises.
Know the general characteristics of an entrepreneurial process.
Assess the students own entrepreneurial skills.
Understand the entrepreneurial process and the product planning and development process.
Know alternative methods for identifying and evaluating business opportunities and the factors that support and
inhibit creativity.
Develop an ability to form, organize, and work in interdisciplinary teams.
Know the general correlates of success and failure in innovation and new venture creation.
Know the generic entry strategies for new venture creation.
Understand the aspects of creating and presenting a new venture business plan.
Know how to identify, evaluate, and obtain resources.
Know the essentials of
Marketing planning
Financial planning
Operations planning
Organization planning
Venture launch planning
Know how to manage and grow a new venture.
Know the managerial challenges and demands of a new venture launch.
Understand the role of entrepreneurship in existing organizations.
Source: Robert D. Hisrich, Toward an Organization Model for Entrepreneurial Education, Proceedings, International Entrepreneurship Conference, Dortmund,
Germany (June 1992), p. 29.
characteristics of entrepreneurs and their role in economic development on a domestic

and, more recently, on an international basis; assessing opportunities and coming up with
an idea for a new venture; writing and presenting a full-scale business plan; knowing how
to obtain resources; managing and growing the enterprise; and understanding the role of
entrepreneurship in an existing organization, that is, intrapreneurship.
The skills required by entrepreneurs can be classified into three main areas: technical
skills, business management skills, and personal entrepreneurial skills (see Table 1.5).
Technical skills involve such things as writing, listening, oral presentations, organizing,
coaching, being a team player, and technical know-how.
Business management skills include those areas involved in starting, developing, and
managing an enterprise. Skills in decision making, marketing, management, financing,
accounting, production, control, and negotiation are essential in launching and growing a
new venture. The final skill area involves personal entrepreneurial skills. Some of these
skills differentiate an entrepreneur from a manager. Skills included in this classification are
inner control (discipline), risk taking, innovativeness, persistence, visionary leadership, and
being change oriented.
These skills and objectives form the basis of the modular approach to an entrepre-
neurship curriculum. By laying out the modules, a course or sequence of courses can be
developed, depending on the needs, interests, and resources of the particular university.
This modular approach helps ensure that the most important areas of the field are cov-
ered in the courses offered, whether on a quarter or semester basis or involving one or a
series of courses.
An interesting trend in entrepreneurial education has evolved in the last five years with
some entrepreneurs finding the need for and having the desire to obtain MBA degrees.
Previously, for generations, entrepreneurs loathed everything about the MBA. But todays
advanced technology sophistication, telecommunication, computer usage, and hyper-
competition have changed that attitude. Entrepreneurs are recognizing the need to learn
some of the science of management in an MBA program to compete and grow their
businesses effectively in todays global environment.
University-Wide Entrepreneurship Education

A new trend emerging in Canada is the concept of university-wide entrepreneurship where
students regardless of their discipline of study have the opportunity to enrol in entrepre-
neurship courses. Prior to this trend, the majority of entrepreneurship and small business
courses were offered in schools of business that limited access. This was done by requiring
students to have a high number of prerequisites to enrol or by requiring students to be
registered in their third or fourth year of a business degree.
University-wide entrepreneurship courses allow non-business students to gain access
to the valuable theory and skills available while earning a degree in the arts or sciences.
University-wide entrepreneurship is offered through either the magnet model, where the
business school offers entrepreneurship courses with no prerequisites, or through the
radiant model, where students are offered entrepreneurship courses in their field of study.
For example, under the magnet model, a student at Brock University may register in a
first-year entrepreneurship course that is taught by a business faculty member but has no
prerequisites. On the other hand, a music student attending Saint Francis Xavier Univer-
sity, which uses the radiant model, will take a course that is team-taught and focuses on
entrepreneurship and music.
Currently, 47 percent of the 70 universities that teach undergraduate entrepreneurship do
so using the university-wide approach. This trend is being driven by a number of different
TABLE 1.5 Types of Skills Required in Entrepreneurship
Technical Skills
Writing
Oral communication
Monitoring environment
Technical business management
Technology
Interpersonal
Listening
Ability to organize
Network building
Management style
Coaching
Being a team player
Business Management Skills
Planning and goal setting

Decision making
Human relations
Marketing
Finance
Accounting
Management
Control
Negotiation
Venture launch
Managing growth
Personal Entrepreneurial Skills
Inner control/disciplined
Risk taker
Innovative
Change oriented
Persistent
Visionary leader
Ability to manage change
Source: Robert D. Hisrich, Toward an Organization Model for Entrepreneurial Education, Proceedings, International
Entrepreneurship 1992 Conference, Dortmund, Germany (June 1992), p. 29.
factors including students and parents who see a link between entrepreneurship and career
options, faculty who have identified that non-business students actually have higher venture
rates than traditional business students and need entrepreneurial training, and university
administration impressed by the high enrolment numbers of university-wide courses.
ETHICS AND SOCIAL RESPONSIBILITY OF

ENTREPRENEURS
The life of the entrepreneur is not easy. An entrepreneur must take risks with his or her own
capital in order to sell and deliver products and services while expending greater energy than
the average businessperson in order to innovate. Faced with daily stressful situations and
other difficulties, the possibility exists that the entrepreneur will establish a balance between
ethical exigencies, economic expediency, and social responsibility, a balance that differs
from the point where the general business manager takes his or her moral stance.17
A managers attitudes concerning corporate responsibility are related to the organizational
climate perceived to be supportive of laws and professional codes of ethics. On the other hand,
entrepreneurs with a relatively new company who have few role models usually develop an
internal ethical code. Entrepreneurs tend to depend on their own personal value systems much
more than other managers when determining ethically appropriate courses of action.
Although drawing more on their own value system, entrepreneurs have been shown to
be particularly sensitive to peer pressure and general social norms in the community, as
well as pressures from their competitors. The differences between entrepreneurs in dif-
ferent types of communities and in different countries reflect, to some extent, the general
norms and values of the communities and countries involved. This is clearly the case for
metropolitan as opposed to nonmetropolitan locations within a single country. Inter-
nationally, there is evidence to this effect about managers in general. North American
managers seem to have more individualistic and less communitarian values than their
German and Austrian counterparts.
The significant increase in the number of internationally oriented businesses has impacted
the increased interest in the similarities and differences in business attitudes and practices in
different countries. This area has been explored to some extent within the context of culture
and is now beginning to be explored within the more individualized concept of ethics. The
concepts of culture and ethics are somewhat related. Whereas ethics refers to the study of
business ethics The whatever is right and good for humans, business ethics concerns itself with the investiga-
study of behaviour and tion of business practices in light of human values. Ethics is the broad field of study explor-
morals in a business ing the general nature of morals and the specific moral choices to be made by the individual
situation in his relationship with others. While business ethics has emerged as an important topic
within popular and academic publications in the past few decades, to date it has been treated
ahistorically and with an orientation dominated by a North American perspective.
Although the English word ethics is generally recognized as stemming from the Greek
thos, meaning custom and usage, it is more properly identified as originating from
swdhthos, in which the concepts of individual morality and behavioural habits are related
and identified as an essential quality of existence.
Most Western authors credit the Greek philosophers Socrates (469399 B.C.), Plato
(427347 B.C.), and Aristotle (384322 B.C.) as providing the earliest writings upon which
currently held ethical conceptions are based. Much earlier writings pertaining to moral codes
and laws, however, can be found within both Judaism (1800 B.C.) and Hinduism (1500 B.C.).
American attitudes on ethics result from three principal influences: the Judeo-Christian
heritage, a belief in individualism, and opportunities based upon ability rather than social
status. The United States was formed by immigrants from other countries, frequently flee-
ing oppression in their homelands, dedicated to creating a society where their future and
fortunes were determined by their abilities and dedication to work.
Research on business ethics can be broken down into four broad classifications:
(1) pedagogically oriented inquiry, including both theory and empirical studies; (2) theory-
building without empirical testing; (3) empirical research, measuring the attitudes and
ETHICS
As noted in the Opening Profile, David Reynolds, ufacturing facilities. Since the opening profile has
owner of QuickSnap, is close to fulfilling his dream been written, Davids parents, relatives and friends
of manufacturing a plastic shoe fastening device. have sunk a great deal of time and money into the
However, he is starting to have second thoughts project and he needs to recoup some of their invest-
about choosing China as a manufacturing centre. ment. David is concerned about what his parents and
Since he would be hiring a manufacturer without investors would think if he used a facility that ex-
ever getting to inspect the facility, he is worried ploited cheap labour, especially since the majority of
about the labour practices in the country and is won- investors to date have given David money because
dering if he is contributing to the problem by re- they believe in him and his ideals. Then again he
warding them for paying low wages and engaging promised them all he would pay them back with in-
in what some would describe as sweatshop practices. terest within three years, and they are starting to ask
David readily admits he dreams about being rich some tough questions about why the manufacturing
some day but he never planned on being successful process has not begun.
based on exploiting others. The questions to David are pretty straightforward
Davids worries are compounded by the fact that whether he should manufacture his shoe clip in China,
the product is only economically viable based on or just abandon the idea and determine at a later date
quotes he has been given from several Chinese man- how to pay back his investors?
ethical beliefs of students and academic faculty; and (4) empirical research within business
environments, measuring the attitudes and ethical views, primarily of managers within
large organizations. Each of these areas offers insight into the ethical dimensions of entre-
preneurs and managers. Some aspects of business ethics are indicated in the Ethics box in
each chapter. Ethics is not only a general topic for conversation but a deep concern of
businesspeople as the survey results indicate.
THE FUTURE OF ENTREPRENEURSHIP

As evidenced by the many different definitions, the term entrepreneurship means different
things to different people and can be viewed from different conceptual perspectives. How-
ever, in spite of the differences, there are some common aspects: risk taking, creativity,
independence, and rewards. These commonalities will continue to be the driving force
behind the notion of entrepreneurship in the future. One thing is clear: The future for
entrepreneurship appears to be very bright. We are living in the age of the entrepreneur,
with entrepreneurship endorsed by educational institutions, governmental units, society,
and corporations. Entrepreneurial education has never been so important in terms of
courses and academic research. The number of universities and colleges offering at least
one course in entrepreneurship increases each year. The number of faculty teaching entre-
preneurship as well as the number of endowed chairs increases regularly. There are some
unique entrepreneurial programs as well, such as the MBA in entrepreneurship from the
University of Calgary, and the multi-disciplinary entrepreneurial skills programs offered at
the Cape Breton University, Dalhousie, and Mount Saint Vincent University.
Entrepreneurship education throughout the world is also growing. Many universities in
Europe have recently started a program in entrepreneurship. Most universities and associ-
ations do research on entrepreneurship, followed by training courses, and then education
29
coursescourses for which degree credit is given. Very few universities are yet involved in
the actual enterprise creation process where the university, faculty, and/or students share in
the sales and profits of the new venture.
This increase in course offerings has been accompanied by an increase in academic
research, endowed chairs in the area, entrepreneurship concentrations and majors, and cen-
tres of entrepreneurial activity. This trend will continue, supported by an increase in Ph.D.
activity, which will in turn provide the needed faculty and research effort to support the
future increases in course offerings, endowed positions, centres, and other research efforts.
Various governments are taking an increased interest in promoting the growth of entrepre-
neurship. Individuals are encouraged to form new businesses and are provided such govern-
ment support as tax incentives, buildings, roads, and a communication system to facilitate this
creation process. Encouragement by the federal and provincial governments should continue
in the future as more lawmakers understand that new enterprises create jobs and increase eco-
nomic output in the area. Some provincial governments in Canada are developing their own
innovative industrial strategies for fostering entrepreneurial activity and the timely develop-
ment of the technology of the area. The impact of this strategy is seen in the venture-capital
industry, which is always sensitive to government regulations and policies.
Societys support of entrepreneurship will also continue. This support is critical in pro-
viding both motivation and public support. Never before have entrepreneurs been so
revered by the general populace. Entrepreneurial endeavours in Canada are considered
honourable and even, in many cases, prestigious pursuits. A major factor in the develop-
ment of this societal approval is the media. The media has played, and will continue to play,
a powerful and constructive role by reporting on the general entrepreneurial spirit in
Canada and highlighting specific success cases of this spirit in operation. Major articles in
such newspapers as The Globe and Mail, the National Post, and the Toronto Star have
focused on the pioneer spirit of todays entrepreneurs, describing how this spirit benefits
society. General business magazines such as PROFIT, Canadian Business, Forbes, and
Fortune have provided similar coverage by adding special columns on entrepreneurship
and venturing. Magazines such as Black Enterprise, Entrepreneur, INC., and Journal of
Business Venturingwhich focus on specific issues of the entrepreneurial process, start-
ing new ventures, and small, growing businesseshave built solid and increasing circula-
tion rates. Television on both a national and a local level has highlighted entrepreneurship
by featuring specific individuals and issues involved in the entrepreneurial process. Not
only have local stations covered regional occurrences, but national shows such as
Venture, MoneyTalk, and Squeeze Play have had special segments devoted to this
phenomenon, and Report on Business Television (ROBTV) is a channel dedicated to
business and entrepreneurship issues. This media coverage uplifts the image of the entre-
preneur and growth companies and focuses on their contributions to society.
Finally, large companies will continue to have an interest in their special form of
entrepreneurshipintrapreneurshipin the future. These companies will be increasingly
interested in capitalizing on their research and development (R&D) in todays hyper-
competitive business environment. Other companies will want to create more new busi-
nesses through intrapreneurship in the future, particularly in light of the hypercompetition
and the need for globalization.
IN REVIEW
SUMMARY
The definition of an entrepreneur has evolved over time as the worlds economic
structure has changed and become more complex. Since its beginnings in the Middle
Ages, when it was used in relation to specific occupations, the notion of the entre-
preneur has been refined and broadened to include concepts that are related to the
person rather than the occupation. Risk taking, innovation, and creation of wealth
are examples of the criteria that have been developed as the study of new business
creations has evolved. In this text, entrepreneurship is defined as the process of
creating something new with value by devoting the necessary time and effort;
assuming the accompanying financial, psychological, and social risks; and receiving
the resultant rewards of monetary and personal satisfaction and independence.
The decision to start an entrepreneurial venture consists of several sequential steps:
(1) the decision to leave a present career or lifestyle, (2) the decision that an entrepre-
neurial venture is desirable, and (3) the decision that both external and internal factors
make new venture creation possible. Although the decision-making process is applica-
ble to each of the three types of start-up companies, the emphasis in each one is cer-
tainly different. Because of their differing natures, foundation companies and
high-potential ventures require a more conscious effort to reach a defensible decision
on these points than cottage companies and lifestyle firms.
There are both pushing and pulling influences active in the decision to leave a
present career: the push of job dissatisfaction or even a layoff, and the pull
toward entrepreneurship of seeing an unfilled need in the marketplace. The desir-
ability of starting ones own company is strongly influenced by culture, subculture,
family, teachers, and peers. Any of these influences can function as a source of
encouragement for entrepreneurship, with support ranging from government poli-
cies that favour business to strong personal role models of family or friends. Beyond
the stage of seeing entrepreneurship as a good idea, the potential entrepreneur
must possess or acquire the necessary education, management skills, and financial
resources for launching the venture.
The study of entrepreneurship has relevance today, not only because it helps entre-
preneurs better fulfill their personal needs but because of the economic contribution
of the new ventures. More than increasing national income by creating new jobs, en-
trepreneurship acts as a positive force in economic growth by serving as the bridge be-
tween innovation and the marketplace. Although the government gives great support
to basic and applied research, it has not had great success in translating the techno-
logical innovations to products or services. Although intrapreneurship offers the prom-
ise of a marriage of those research capabilities and business skills that one expects from
a large corporation, the results so far in many companies have not been spectacular.
This leaves the entrepreneur, who frequently lacks both technical and business skills, to
serve as the major link in the process of innovation development, and economic growth
and revitalization. The study of entrepreneurship and the education of potential
entrepreneurs are essential parts of any attempt to strengthen this link so essential to
a countrys economic well-being.
HANDS-ON ACTIVITY
Students should form groups of two to three and start a small business or a mini-
venture that will run for a period of four to six hours. The only rules to follow are:
a. The business has to be legal
b. No lotteries
c. Maximum investment of $1
d. Business must cease operations at days end
After the students complete the project, they can write a reflection stating what they
did, whether they made a profit, and what they learned. An alternate assignment
could be to have the students present the results of the assignment to the class.
R E S E A R C H TA S K S
1. Ask five entrepreneurs what the term entrepreneurship means to them. Be
prepared to present the commonalities and differences of these definitions to the
class. Can differences in the definitions be explained by the type of
entrepreneur interviewed?
2. Find five individuals who considered becoming entrepreneurs but did not do so.
Ask them why they first considered becoming entrepreneurs, what steps they took
toward becoming entrepreneurs, and what obstacles they felt stood in their way.
3. What impact does entrepreneurship have on your local, state (or province), and
national economies? Use data to back up your arguments.
4. Research the policy statements of your local, state (or province), and national
governments for their goals and objectives regarding the importance of
entrepreneurship and means of encouraging it.
5. Speak to people from five different countries and ask them about how their
national culture helps and/or hinders entrepreneurship.
CLASS DISCUSSION
1. List the content that you believe is necessary for an entrepreneurship course. Be
prepared to justify your answer.
2. Do you believe that ethics and social responsibility should be part of an
entrepreneurship course or did the textbook authors just include a section on it to
be politically correct?
3. What is the role of government in entrepreneurship? To what extent should it
help protect people from entrepreneurship or should it simply get out of the way
and leave the market to reward or punish inappropriate behaviour? Given your
answer to the above question, what specific steps should the government take or
what steps have they taken that should be reversed?
4. What excites you about being an entrepreneur? What are your major concerns?
SELECTED READINGS
Aldrich, Howard E.; and Martha Argelia Martinez. (Summer 2001). Many Are Called,
but Few Are Chosen: An Evolutionary Perspective for the Study of Entrepreneurship.
Entrepreneurial Theory and Practice, pp. 4156.
More than a decade ago, three elements indispensable to an understanding of
entrepreneurial success were identified: process, context, and outcomes. Although
the knowledge of entrepreneurial activities has increased dramatically, we still have
much to learn about how process and context interact to shape the outcome of
entrepreneurial efforts.
Armstrong, Peter. (2001). Science, Enterprise and Profit: Ideology in the Knowledge-
Driven Economy. Economy and Society, vol. 30, no. 4, pp. 52452.
The article argues that despite ideological pressure to demonstrate a link between
entrepreneurship and risk, none of the relevant research has succeeded in doing so.
Nor has risk been a prevalent feature of new venture creation in either general or
science-based start-ups.
Brouwer, Maria T. (2002). Weber, Schumpeter and Knight on Entrepreneurship and
Economic Development. Journal of Evolutionary Economics, vol. 12, pp. 83105.
This paper interprets the discussion on entrepreneurship and economic development
that was started by Weber, Schumpeter, and Knight. The paper demonstrates how
these three authors influenced each other on the topics of importance of innovation
and entrepreneurship, uncertainty, and perceptiveness and hidden qualities of people.
Douglas, Evan J.; and Dean A. Shepherd. (Spring 2002). Self-Employment as a Career
Choice: Attitudes, Entrepreneurial Intentions, and Utility Maximization. Entrepreneurial
Theory and Practice, pp. 8190.
This paper investigates the relationship between career choices and peoples
attitudes toward income, independence, risk, and work effort and the effect these
attitudes have on the intent to start ones own business. Significant relationships
were found between the utility expected from a job and the independence, risk, and
income it offered. Similarly, intention to become self-employed was related to
tolerance for risk and independence.
Drayton, William. (2002). The Citizen Sector: Becoming as Entrepreneurial and Com-
petitive as Business. California Management Review, vol. 44, no. 3, pp. 12032.
This article explores the aspects that drive entrepreneurial transformation of the
social half of society that took place over the last two and a half decades, identifies
three management challenges made urgent by this shift, and describes its impact on
the rest of the society.
Formaini, Robert L. (Fourth Quarter 2001). The Engine of Capitalist Process: Entrepre-
neurs in Economic Theory. Economic and Financial Review, pp. 211.
Questions about the existence of profits, causes of economic growth, and coordina-
tion of resource use by market economy have introduced a concept of the
entrepreneur. The concept became relevant with the Internets evolution and small-
business growth and remains relevant because how entrepreneurs are treated de-
pends on overall national economic performance and direction of economic activity.
Gifford, Sharon. (1998). Limited Entrepreneurial Attention and Economic Development.
Small Business Economics, vol. 10, no. 1, pp. 1730.
Economic development depends on the allocation of entrepreneurial resources to ef-
forts to discover new profit opportunities. Limited entrepreneurial attention is allo-
cated between maintaining current activities and starting new activities. The problem
of allocating limited entrepreneurial attention in a variety of contexts is addressed.
Hansen, Morten T.; Henry W. Chesbrough; Nitin Nohria; and Donald N. Sull.
(SeptemberOctober 2000). Networked Incubators. Harvard Business Review, pp. 7484.
The article argues that organizational models that exploit entrepreneurial drive and
network access while preserving the benefits of scale and scope will be the most
potent models for long-term success in the new economy. Networked incubators are
one such emerging form that, in addition to office space, funding, and basic services,
offers powerful business connections, enabling start-ups to beat their competitors
to market.
Hayton, James C.; Gerard George; and Shaker A. Zahra (Summer 2002). National
Culture and Entrepreneurship: A Review of Behavioral Research. Entrepreneurial
Theory and Practice, pp. 3352.
The article reviews and synthesizes the findings of 21 empirical studies that exam-
ine the association between national cultural characteristics and aggregate meas-
ures of entrepreneurship, individual characteristics of entrepreneurs, and aspects of
corporate entrepreneurship.
Laukkanen, Mauri. (2000). Exploring Alternative Approaches in High-Level Entrepre-
neurship Education: Creating Micro-Mechanisms for Endogenous Regional Growth.
Entrepreneurship & Regional Development, vol. 12, pp. 2547.
The paper argues that there is a downside related to conceptual and efficacy notions
of entrepreneurship and education, breeding unreasonable and unpredictable
expectations. This paper explores alternative strategies in university-based entre-
preneurial education describing the dominant pattern of education, based on an
individual-centered mind-set.
Lee, Sang N.; and Suzanne J. Peterson. (2000). Culture, Entrepreneurial Orientation,
and Global Competitiveness. Journal of World Business, vol. 35, no. 4, pp. 40116.
This paper presents a cultural model of entrepreneurship. It proposes that a societys
propensity to generate autonomous, risk-taking, innovative, aggressive, and proactive
entrepreneurs and firms will depend on its cultural foundation. It also proposes that
only countries with specific cultural tendencies will engender a strong entrepreneurial
orientation, hence experiencing more entrepreneurship and global competitiveness.
Mitchel, Ronald K.; Brock Smith; Kristie W. Seawright; and Eric A. Morse. (2000). Cross-
Cultural Cognitions and the Venture Creation Decision. Academy of Management
Journal, vol. 43, no. 5, pp. 97493.
Theories of social cognition, information processing, and expertise provide the
foundation for a cross-cultural model of venture capital. The paper describes the
findings of the research conducted in seven countries that support and extend the
cognitive model and provide preliminary evidence of consistency of cognitive scripts
across cultures.
Office of Advocacy, U.S. Small Business Administration. (2000). The Third Millennium
Small Business and Entrepreneurship in the 21st Century.
This report is an update of the report published for the 1995 White House Conference
on Small Business. The new edition discusses rapid changes in the small-business sector;
the heterogeneity, diversity, and complexity of the small-business environment;
barriers to entry and inhibitors to growth that small-business will continue to face; and
the overall small-business and entrepreneurial sectors future growth.
Osborne, Stephen W.; Thomas W. Falcone; and Prashanth B. Nagendra. (2000). From
Unemployed to Entrepreneur: A Case Study in Intervention. Journal of Developmental
Entrepreneurship, vol. 5, no. 2, pp. 11536.
A summary of the entrepreneurial potential, training, and success of a group of recently
unemployed workers from a wide spectrum of previous occupations and industries.
Wennekers, Sander; and Roy Thurik. (1999). Linking Entrepreneurship and Economic
Growth. Small Business Economics, vol. 13, no. 1, pp. 2755.
The concept of entrepreneurship is discussed, with the aim of explaining the entre-
preneurship role in the process of the economic growth. By considering three levels
on which entrepreneurship can be analyzed (individual, firm, and aggregate level)
the relationship between entrepeneurship and economic growth is examined.
APPENDIX A: SHOULD YOU START YOUR OWN BUSINESS?

Each day, thousands of individuals ask the difficult question, Should I start my own
business? When queried, 85 percent of the populace said they would like to be in busi-
ness for themselves. The driving force behind this desire to start a new venture is the
desire to be ones own boss, to be independent. Since there is no definitive measure-
ment developed that allows an individual to determine if he or she can be a successful
entrepreneur, each individual needs to carefully appraise his or her situation through
several different methods and self-assessment models. One way to determine whether
you have what it takes to be an entrepreneur is to fill out the questionnaire in Table A.1
and check the answers at the end of this appendix. Keep in mind that the answers
develop an average profile of an entrepreneur. There are many exceptions, and there
is no such person as a typical entrepreneur.
TABLE A.1 Characteristics of an Entrepreneur
1. An entrepreneur is most commonly the _____ child in the family.

a. oldest c. youngest
b. middle d. doesnt matter
2. An entrepreneur is most commonly:
a. married c. widowed
b. single d. divorced
3. An entrepreneur is most typically a:
a. man c. either
b. woman
4. An individual usually begins his or her first significant entrepreneurial business enterprise
at what age?
a. teens d. forties
b. twenties e. fifties
c. thirties
5. Usually an individuals entrepreneurial tendency first appears evident in his or her:
a. teens d. forties
b. twenties e. fifties
c. thirties
6. Typically, an entrepreneur has achieved the following educational attainment by the time
the first significant business venture begins:
a. less than high school d. masters degree
b. high school diploma e. doctors degree
c. bachelors degree
7. An entrepreneurs primary motivation for starting a business is:
a. to make money d. to create job security
b. to be independent e. to be powerful
c. to be famous
continued
Characteristics of an Entrepreneur (continued)
8. The primary motivation for the entrepreneurs high ego and need for achievement is
based upon a relationship with:
a. spouse c. father
b. mother d. children
9. To be successful in an entrepreneurial venture, you need:
a. money d. a good idea
b. luck e. all of the above
c. hard work
10. Entrepreneurs and venture capitalists:
a. get along well c. are cordial friends
b. are the best of friends d. are in conflict
11. A successful entrepreneur relies on which of the following for critical management
advice?
a. internal management team c. financial sources
b. external management professionals d. no one
12. Entrepreneurs are best as:
a. managers c. planners
b. venture capitalists d. doers
13. Entrepreneurs are:
a. high risk takers (big gamblers) c. small risk takers (take few chances)
b. moderate risk takers (realistic gamblers) d. doesnt matter
14. Entrepreneurs:
a. are the life of the party c. will never go to parties
b. are bores at a cocktail party d. just fit into the crowd at a party
15. Entrepreneurs tend to fall in love with:
a. new ideas d. new financial plans
b. new employees e. all of the above
c. new manufacturing ideas
16. Entrepreneurs typically form:
a. service businesses d. construction companies
b. manufacturing companies e. a variety of ventures
c. financial companies
Source: From Robert D. Hisrich and Candida Brush, The Woman Entrepreneur, 1985. Reprinted with permission of Lexington
Books, a member of the Rowman & Littlefield Publishing Group.
Answers to Characteristics of an Entrepreneur Quiz (Table A.1)

1. Oldest. Although, indeed, entrepreneurs come from many different birth orders,
there is a slight tendency for an entrepreneur to be the oldest child in the family,
thereby having had time alone with parents without other siblings.
2. Married. While there has never been any statistical validation, most entrepre-
neurs are married when they start their first significant venture. The spouse plays
an important support role.
3. Man. Although men still outnumber women entrepreneurs in terms of actual
numbers, women entrepreneurs are presently forming new ventures at two to
three times the rate of men.
4. Thirties. Although ventures may be started at any age, the first significant
venture is usually started in the early thirties for men and late thirties for women.
5. Teens. An individuals ability to handle ambiguity, the drive for independence, and
creativity (important characteristics for an entrepreneur) are evident early in life.
6. Bachelors degree. While the Horatio Alger story is indeed still possible, most
entrepreneurs are university educated. Women entrepreneurs are even more ed-
ucated, with many having a masters degree. This education is particularly impor-
tant in securing financing and starting technology-based ventures. Although not
as highly educated as those in North America, entrepreneurs in foreign countries
are at least as educated as the general populace.
7. To be independent. The need for independence (the inability to work for anyone
else) is what drives the entrepreneur to take the risks to work all the hours
necessary to create a new venture.
8. Father. Regardless of whether it is a love or hate relationship, entrepreneurs
report a strong parental relationship, particularly with the father. This strong
father relationship is particularly important for women entrepreneurs.
9. Luck. Hard work, money, and a good idea are necessary but not sufficient for a
successful venture. The venture formation by the entrepreneur is characterized
also as being luckybeing in the right place at the right time.
10. Are in conflict. Venture capitalists and entrepreneurs have two different goals.
The venture capitalists goal is to make money and exit from the business
within five years. The entrepreneurs goal is independence through survival of
the organization.
11. External management professionals. This use of an external professional for
advice often takes the form of a mentor or at least a good network system. The
use of this individual(s) helps reduce the loneliness of being an entrepreneur.
12. Doers. Entrepreneurs take pride in creating and doing. They are definitely not
managers and plannersthe appropriate side of the entrepreneurial continuum.
Rarely are they also good venture capitalists.
13. Moderate risk takers. The myth that entrepreneurs are high risk takers is nothing
more than just a myth. The calculating decision to risk everything and perhaps
fail reflects moderate risk taking.
14. Just fit into a crowd. Unless you knew that an individual was an entrepreneur,
there would be no way to distinguish an entrepreneur from a manager based on
external physical appearance.
15. All of the above. New is an entrepreneurial magnet, as it implies creativity and
venture creation, the drive of every entrepreneur.
16. Variety of ventures. Entrepreneurs create a wide variety of ventures, depending
on their field of experience and backgrounds. Women entrepreneurs, however,
do tend to be concentrated in the service sector.

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1

CASES FOR PART 1

NATURE AND DEVELOPMENT OF ENTREPRENEURSHIP

TABLE 1.1 Entrepreneur Assessment Quiz

19th and 20th Centuries

The concept of innovation and newness is an integral part of entrepreneurship in this

DEFINITION OF ENTREPRENEUR TODAY

ENTREPRENEURSHIP VERSUS SMALL BUSINESS

AS SEEN IN PROFIT MAGAZINE

Change from Present Lifestyle

TABLE 1.2 Decisions for a Potential Entrepreneur

Change from present lifestyle Form new enterprise

AS SEEN IN ENTREPRENEUR MAGAZINE

CHANGES IN THE ENVIRONMENT

CHANGES IN THE ENVIRONMENT (continued)

WHEN LIFE GIVES YOU LEMONS . . .

desirability of new Desirability of New Venture Formation

possibility of new venture

AS SEEN IN ENTREPRENEUR MAGAZINE

ADVANTAGES AND DISADVANTAGES OF

Enjoyment Entrepreneurs seem to thrive on the enjoyment of being in business for

hardship. For example, at a recent entrepreneurship conference, over 55 percent of entre-

Financial Rewards A vast number of entrepreneurs start their business dreaming

ANGUS REIDATTRACTED TO THE

ROLE OF ENTREPRENEURSHIP IN ECONOMIC

FIGURE 1.1 Product Evolution

I Recognition of social need III Iterative synthesis leading to V Industrial phase

ENTREPRENEURIAL CAREERS AND EDUCATION

TABLE 1.3 A Framework for an Entrepreneurs Career Development

Life Space Areas Childhood Early Adulthood Present Adulthood

Work/occupation Education and childhood Employment history Current work situation

entrepreneurs continually supplement their education through books, trade journals,

TABLE 1.4 Overall Objectives for a Course in Entrepreneurship

Understand the role of new and smaller firms in the economy.

characteristics of entrepreneurs and their role in economic development on a domestic

University-Wide Entrepreneurship Education

TABLE 1.5 Types of Skills Required in Entrepreneurship

Business Management Skills

Planning and goal setting

Personal Entrepreneurial Skills

ETHICS AND SOCIAL RESPONSIBILITY OF

THE FUTURE OF ENTREPRENEURSHIP

APPENDIX A: SHOULD YOU START YOUR OWN BUSINESS?

TABLE A.1 Characteristics of an Entrepreneur

1. An entrepreneur is most commonly the _____ child in the family.

Characteristics of an Entrepreneur (continued)

Answers to Characteristics of an Entrepreneur Quiz (Table A.1)

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