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Chapter Objectives

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UBTE2013 6. Discuss the changing demographics of


Topic 1 entrepreneurs in the United States.
7. Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
Introduction to 8. Explain the entrepreneurial process.
Entrepreneurship
Bruce R. Barringer
R. Duane Ireland

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Chapter Objectives Introduction to Entrepreneurship


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1. Describe entrepreneurs, corporate entrepreneurship,


and the characteristics of entrepreneurial firms.
2. Discuss three main reasons people decide to There is tremendous According to the 2013 GEM
become entrepreneurs. interest in study, 12.7% of Americans
3. Identify four main characteristics of successful are actively engaged in
entrepreneurship in the
entrepreneurs. starting a business or are
U.S. and around the world. the owner/manager of a
4. Explain five common myths regarding
entrepreneurship. business that is less than
5. Describe three types of start-up firms. three years old.

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Indications of Increased Interest Corporate Entrepreneurship
in Entrepreneurship 1 of 2

• Books • Corporate Entrepreneurship


– Amazon.com lists over 36,900 books dealing with – Is the conceptualization of entrepreneurship at the firm
entrepreneurship and 89,900 focused on small business. level.
• College Courses – All firms fall along a conceptual continuum that ranges
– In 1985, there were about 250 entrepreneurship courses from highly conservative to highly entrepreneurial.
offered across all colleges in the United States.
– The position of a firm on this continuum is referred to as its
– Today, more than 2,000 colleges and universities in the entrepreneurial intensity.
United States (which is about two-thirds of the total) offer at
least one course in entrepreneurship.

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What is Entrepreneurship? Corporate Entrepreneurship


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• Academic Definition (Stevenson & Jarillo) Entrepreneurial Firms Conservative Firms


– Entrepreneurship is the process by which individuals pursue
opportunities without regard to resources they currently • Proactive • Take a more “wait and see”
control. posture
• Venture Capitalist (Fred Wilson) • Innovative
• Less innovative
– Entrepreneurship is the art of turning an idea into a • Risk taking
business. • Risk averse
• Explanation of What Entrepreneurs Do
– Entrepreneurs assemble and then integrate all the resources
needed – the money, the people, the business model, the
strategy – to transform an invention or an idea into a viable
business.
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Why Become an Entrepreneur? Characteristics of Successful Entrepreneurs
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The three primary reasons that people become


entrepreneurs and start their own firms • Passion for the Business
– The number one characteristic shared by successful
entrepreneurs is a passion for the business.
Desire to be their own boss
– This passion typically stems from the entrepreneur’s belief
that the business will positively influence people’s lives.
Desire to pursue their
own ideas • Product/Customer Focus
– A second defining characteristic of successful
entrepreneurs is a product/customer focus.
Financial rewards – An entrepreneur’s keen focus on products and customers
typically stems from the fact that most entrepreneurs are, at
heart, craftspeople.
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Characteristics of Successful Entrepreneurs Characteristics of Successful Entrepreneurs


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Four Primary Characteristics


• Tenacity Despite Failure
– Because entrepreneurs are typically trying something new,
the failure rate is naturally high.
– A defining characteristic for successful entrepreneurs is
their ability to persevere through setbacks and failures.
• Execution Intelligence
– The ability to fashion a solid business idea into a viable
business is a key characteristic of successful entrepreneurs.

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Common Myths About Entrepreneurs Common Myths About Entrepreneurs
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• Myth 1: Entrepreneurs Are Born, Not Made • Myth 2: Entrepreneurs Are Gamblers
– This myth is based on the mistaken belief that some people – Most entrepreneurs are moderate risk takers.
are genetically predisposed to be entrepreneurs. – The idea that entrepreneurs are gamblers originates from
– The consensus of many studies is that no one is “born” to two sources:
be an entrepreneur; everyone has the potential to become • Entrepreneurs typically have jobs that are less structured, and so
one. they face a more uncertain set of possibilities than people in
traditional jobs.
– Whether someone does or doesn’t become an entrepreneur
• Many entrepreneurs have a strong need to achieve and set
is a function of their environment, life experiences, and challenging goals, a behavior that is often equated with risk taking.
personal choices.

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Common Myths About Entrepreneurs Common Myths About Entrepreneurs


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Although no one is “born” to be an entrepreneur, there are common traits and
characteristics of successful entrepreneurs • Myth 3: Entrepreneurs Are Motivated Primarily by
• A moderate risk taker • Optimistic disposition Money
• Persuasive • A networker – While it is naïve to think that entrepreneurs don’t seek
• Promoter • Achievement motivated financial rewards, money is rarely the reason entrepreneurs
start new firms.
• Resource assembler/leverager • Alert to opportunities
– In fact, some entrepreneurs warn that the pursuit of money
• Creative • Self-confident
can be distracting.
• Self-starter • Decisive
• Tenacious • Energetic
• Tolerant of ambiguity • A strong work ethic
• Visionary • Lengthy attention span
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Common Myths About Entrepreneurs Common Myths About Entrepreneurs
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• Myth 4: Entrepreneurs Should Be Young and • Myth 5: Entrepreneurs Love the Spotlight
Energetic – While some entrepreneurs are flamboyant, the vast majority
– Entrepreneurial activity is fairly easily spread out over age of them do not attract public attention.
ranges. – As evidence of this, consider the following question: “How
– While it is important to be energetic, investors often cite many entrepreneurs could you name?”
the strength of the entrepreneur as their most important • Most of us could come up with Jeff Bezos of Amazon.com, Mark
criteria in making investment decisions. Zuckerberg of Facebook, Steve Jobs of Apple, and maybe Larry
Page and Sergey Brin of Google.
• What makes an entrepreneur “strong” in the eyes of an investor is
experience, maturity, a solid reputation, and a track record of • But few could name the founders of Twitter, YouTube, Netflix, or
success. DIRECTV, even though we frequently use those firms’ services.
• These criteria favor older rather than younger entrepreneurs.

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Common Myths About Entrepreneurs Types of Start-Up Firms


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Changing Demographics of Entrepreneurs Changing Demographics of Entrepreneurs
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• Women Entrepreneurs • Senior Entrepreneurs


– While men are more likely to start businesses than women, – The numbers of seniors (those 50 years old and older)
the number of women-owned businesses is increasing. starting businesses is substantial and growing.
– There were 8.6 women-owned businesses in the United – In 2012, 20% of new businesses were started by people
States in 2013, generating over $1.3 trillion in revenue and between 50 and 59 years old, while another 12.5 percent
employing nearly 7.8 million people. were founded by individuals 60 years old and older.
– In some industries, women control a significant share of the – This increase is attributed to corporate downsizing, an
business. increasing desire among older people for more personal
• Women-owned businesses account for 52% of all businesses in fulfillment in their lives, growing worries about the cost of
health care. health care, and similar factors.

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Changing Demographics of Entrepreneurs Changing Demographics of Entrepreneurs


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• Minority Entrepreneurs • Young Entrepreneurs


– There has been a substantial increase in minority – A desire to pursue an entrepreneurial career is high among
entrepreneurs in the United States. young people.
– Between 2002 and 2007 (the most recent statistics – According to a recent Gallop survey, about 4 in 10 kids in
available), minority-owned firms outpaced the growth of grades 5-12 say they plan to start their own business.
non-minority firms in gross receipts, employment, and – About 59% of students in grades 5-12 say their school offers
number of firms. classes in how to start a business.
– In 2007, there were about 1.9 million African American- – About one-third of young people say their parents or
owned firms in the United States, 1.5 million Asian guardians have started a business, which provides them a
American-owned firms, and 2.3 million Hispanic-owned firsthand look at the entrepreneurial lifestyle.
firms.

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Economic Impact of Entrepreneurial Firms The Entrepreneurial Process

• Innovation
The Entrepreneurial Process Consists of Four Steps
– Is the process of creating something new, which is central to
the entrepreneurial process. Step 1: Deciding to become an entrepreneur.
– Small innovative firms are 16 times more productive than Step 2: Developing successful business ideas.
larger innovative firms in terms of patents per employee.
Step 3: Moving from an idea to an entrepreneurial firm.
• Job Creation
Step 4: Managing and growing the entrepreneurial firm.
– Small businesses create a substantial number of net new jobs
in the United States.
– Firms with 500 or fewer employees create 65% of new jobs
on an annual basis.

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Entrepreneurial Firms’ Impact on Society Steps in the Entrepreneurial Process


and Larger Firms 1 of 2

Step 1 Step 2
• Impact on Society
Developing Successful Business Ideas
– The innovations of entrepreneurial firms have a dramatic
impact on society.
– Think of all the new products and services that make our
lives easier, enhance our productivity at work, improve our
health, and entertain us in new ways.
• Impact on Larger Firms
– Many entrepreneurial firms have built their entire business
models around producing products and services that help
larger firms become more efficient and effective.

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Steps in the Entrepreneurial Process
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Step 3 Step 4

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