ENTREP 1101 Entrepreneurial Behavior

Sherwin B. Celestino
Instructor I
College of Business Administration and Accountancy
Central Luzon State University

Lecture 1. The Context of Entrepreneurship

Overview

The business sector has a critical role to play in contributing to a flourishing society. And
consumers increasingly expect it. How can business respond to these rising expectations? What
role can business play to contribute to strong communities? And how can this be done in a way
that enables business growth and delivers financial value? It is premised on the view that the
business sector has much to contribute to addressing social issues and can provide social leadership
on pressing problems. It can bring financial support and expertise and customize products and
services. It also can harness its core competencies and business assets to create lasting societal and
business benefits.

Entrepreneurship, starting and managing a business for the purpose of growth and profit
can be traced back to ancient Greece, where entrepreneurial activity brought independence and
economic and social reform. The Global Entrepreneurship Monitor (GEM) described
entrepreneurship as a “world-wide phenomenon” that is on the increase. Entrepreneurship is an
important source of employment, economic growth, and innovation, promoting product and
service quality, competition, and economic flexibility. It is also a mechanism by which many
people enter the society’s economic and social mainstream, aiding culture formation, population
integration, and social mobility.

With the rapid expansion of entrepreneurship, academic interest in the topic has also
grown, as evidenced by conferences and publications each year since 1990s. The entrepreneurship
literature is vast, complex, and multifaceted, spanning economics, sociology, business, and
psychology. Entrepreneurship is interdisciplinary, which means combining fields and crossing
boundaries between disciplines or schools of thought. As such, it contains various approaches that
can increase one’s understanding of the field. Therefore, we need to recognize the diversity of
theories as an emergence of entrepreneurial understanding.

What is Entrepreneurship?

The word entrepreneur came from the French word entreprendre, which means to “to
undertake”. In the business context, it is to start a business. Entrepreneurship is the act of being an
entrepreneur, which is the “one who undertakes innovations, finance and business acumen in an
effort to transform innovations into economic goods. It is the process of bearing risk of running a
business. Entrepreneur is a person who takes the risk of converting a new idea into reality, and one
who organizes, manages, and assumes the risks of a business or enterprise.
In the early 20th century, entrepreneurs were not frequently distinguished from managers
and were viewed mostly from an economic perspective With the integration of business,
managerial, and personal terminology, the concept has evolved to include newness, creating,
organizing, risk taking, and wealth. Entrepreneurs are found in all professions: architecture,
business, education, engineering, law, medicine, and psychology.

Entrepreneurship is the process of creating something new with value by devoting the
necessary time and effort, assuming the accompanying financial, psychic, and social risks, and
receiving the resulting rewards (Hisrich, Peters, & Shepherd, 2005, as cited in Hisrich, Fox, &
Grant, 2007).

In the context of entrepreneurship, the usual focus is on an entrepreneur or team of

entrepreneurs launching a new business. However, ongoing firms can also behave
entrepreneurially. Typically, established firms with an entrepreneurial emphasis are proactive,
innovative, and risk-taking.

According to Timmons, Spinelli, & Ensign (2010), it is the ability to create and build a
vision from practically nothing; the ability to build an entrepreneurial or venture team to
complement your own skills and talents; the knack for sensing an opportunity where others see
chaos, contradiction, and compulsion; and possessing the know-how to find, marshal, and control
resources.

According to Barringer and Ireland (2016), it the process by which individuals pursue
opportunities without regard to resources they currently control for the purpose of exploiting future
goods and services.

Example Company in Focus

Google is widely recognized as a firm in which entrepreneurial behaviors are clearly

evident. Larry Page, one of Google’s cofounders, is at the heart of Google’s entrepreneurial
culture. With his ability to persuade and motivate others’ imaginations, Page continues to inspire
Google’s employees as they develop innovative product after innovative product. To consider the
penetration Google has with some of its innovations, think of how often you and people you know
use the Google search engine, Gmail, Google Maps, or Google Earth. Google is currently working
on a bevy of far-reaching innovations, such as Google Glasses and self-driving cars. Similarly,
studying Facebook or Dropbox’s ability to grow and succeed reveals a history of entrepreneurial
behavior at multiple levels within the firms.

From the blog of DeepakNess on February 12, 2019, Google now processes
over 40,000 search queries every second on average, which translates to over 3.5 billion searches
per day and 1.2 trillion searches per year worldwide.

Why is Entrepreneurship Important?

1. Creates employment

When entrepreneurs put up a business, they oftentimes need to hire or employ at least one
or two other people in order to get things done.

When entrepreneurial activities slow down, the country’s unemployment rate goes up.
Figure 1 shows the list of establishments in the Philippines. From the report of Melissa Luz Lopez
of CNN Philippines on September 3, 2020 entitled, 4.6M Filipinos jobless in July as
unemployment worsens in Metro Manila –PSA, the tally is better than the estimated 7.3 million
unemployed adults in April, capturing four months of quarantine rules that included a two-month
shutdown of most establishments in Luzon, the country's main economic hub. As of August 30,
Labor Assistant Secretary Nikki Tutay said 83,654 businesses with 2 million workers reported
temporarily closures while about 9,548 establishments with 180,207 workers have either
retrenched or shut down for good. Meanwhile, some 1.2 million workers are under flexible work
arrangements given existing quarantine rules.

Figure 1. 2017 List of Establishments, Philippine Statistics Authority

2. Improves quality of life

The entrepreneur’s penchant for innovation and development of new products as well as
creation of new markets add to the betterment of products and services, hence the quality of life.

3. Contributes to more equitable distribution of income and therefore eases social unrest

By putting up an enterprise in the locality, entrepreneurs become agents of development to

other parts of the country, especially in the rural areas. On a wide scale, entrepreneurship also
helps prevent the establishment of monopolies.
4. Utilizes and mobilizes resources to make the country productive

Every person that goes into entrepreneurship or puts up his own business means releasing
or mobilizing capital that should fire up the economy. Idle capital kept in vaults of households will
now be mobilized and pumped into the financial system and the economy which means more
business options and more income or returns for the capital owners themselves.

5. Brings social benefits through the government

With the revenues the government collects from taxes, duties and licenses paid by the
entrepreneurs, the government allocates the disbursement of these revenues to different services
and projects for communities.

2019 Global Entrepreneurship Index of the Philippines

How’s the quality of entrepreneurship in a country and the extent and depth of the
supporting entrepreneurial ecosystem?

The GEI measures both the quality of entrepreneurship in a country and the extent and
depth of the supporting entrepreneurial ecosystem. GEI came to existence to provide a solid
theory-based entrepreneurship measure that explains the role of entrepreneurship on economic
development.

The top ten countries for 2019 show a pattern similar to last years’—high-income, mostly
European nations. The top countries are the United States, Switzerland, Canada, Denmark, United
Kingdom, Australia, Iceland, Netherlands, Ireland and Sweden (Figure 2). Among the 137
countries, the Philippines ranked 86, and was lower compared to ranked 84 last year. Over a half
of the world has a better and stronger entrepreneurship system than ours, according to this technical
report of The Global Entrepreneurship and Development Institute, Washington, D.C., USA.

Figure 2. GEI of Top 10 Countries (left), and of the Philippines (right)

The GEI is composed of three building blocks or sub-indices—entrepreneurial attitudes,

entrepreneurial abilities, and entrepreneurial aspirations. Entrepreneurial attitudes are about how a
country thinks about entrepreneurship or societies’ attitudes toward entrepreneurship. In fact, what
does your mother think about it? The second sub index is about abilities or the entrepreneurs’
characteristics and those of their businesses. Can you do it? Do you have the skills? The third sub
index is about aspirations or it reflects the quality aspects of startups and new businesses. Do you
want to build a billion-dollar company? There are fourteen pillars of the Global Entrepreneurial Index.

1. Entrepreneurial Attitudes Pillars: Opportunity Perception, Startup Skills, Risk

Acceptance, Networking, and Cultural Support.

2. Entrepreneurial Abilities Pillars: Opportunity Startup, Technology Absorption, Human

Capital, and Competition.

3. Entrepreneurial Aspirations Pillars: Product Innovation, Process Innovation, High

Growth, Internationalization, and Risk Capital.

Assessing the Philippine Entrepreneurship Ecosystem

Some subnational entrepreneurship ecosystems of the Philippines lead to higher

productivity level, and the National Capital Region contributed the most in 2018. In assessing the
ecosystem, Babson Entrepreneurship Ecosystem Project use the World Bank’s Entrepreneurship
Diagnostic Toolkit with different criteria such as policy, supports, finance, human capital, culture
and markets. See the presentation of Ms. Andrea Garcia on Assessing the Philippine
Entrepreneurship Ecosystem at the Inclusive Innovation Conference 2018.

What is a Startup?

According to Grant (2020), the term startup refers to a company in the first stages of
operations. Startups are founded by one or more entrepreneurs who want to develop a product
or service for which they believe there is demand. These companies generally start with high costs
and limited revenue, which is why they look for capital from a variety of sources such as venture
capitalists. A startup is simply a business in the initial business stage. These are often initially
bankrolled by their entrepreneurial founders as they attempt to capitalize on developing a product
or service for which they believe there is demand. A startup is often financed by the founders until
the business gets off the ground, and the startup attracts outside investment. Due to limited revenue
or high costs, most of these small-scale operations are not sustainable in the long term without
additional funding from venture capitalists.

Who is an Entrepreneur?

According to Cantillion, entrepreneur is 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. According to Prof. Robert Nelson of University of Illinois, entrepreneur is a
person who is able to look at the environment, identify opportunities to improve the environment,
marshal resources, and implement action to maximize those opportunities.
 The characteristics of having the entrepreneurial mind are (1) does not reside in a particular
personality, age, race or gender; (2) seeing the world as a set of opportunities, not obstacles; (3)
seeing problems to be solved, not barriers that limit; (4) being driven to create value for a broad
set of stakeholders; and (5) Lifting the human condition

Advantages and Drawbacks of being an Entrepreneur (Orcullo, 2004)

Advantages

1. Opportunity to gain control over one’s own destiny

Managing the business that you own provides independence and opportunity to achieve
one’s personal goals. The business, as an extension of the owner, is often a means by which one
can accomplish what is most important.

2. Opportunity to reach one’s full potential

In managing a business that you own, all of one’s skills are likely to be challenged as never
before and the limits of creativity as well as physical endurance are put on the block. Managing
one’s own business strengthens character and challenges one’s abilities.

3. Opportunity to benefit financially

The entrepreneurial landscape has many success (and failure) stories in money terms. In
most cases, the financial rewards are better/higher and are a result of a lifetime smart business
practices and risk-taking.

4. Opportunity to contribute to society and be recognized for one’s efforts

Recognition for honest dealing as well as service to customers and community is a major
encouragement and inspiration among entrepreneurs. Being part of the business system and
knowing that one’s work has a direct bearing on long-term success of the economy is yet another
reward for the entrepreneur.

Drawbacks

1. Uncertainty of income

Putting up and running a business provides no guarantee that any entrepreneur will earn
enough money to survive. Some small businesses rarely earn enough at early stages to provide the
entrepreneur with an adequate income–or even loss all the hard-earned money.
2. Risk of losing the entire invested capital

Putting a new business exposes the entrepreneur to all forms of risk including losing all the
amounts you have worked for in life.

3. Long hours and hard work

Establishing and managing a self-owned business entails tremendous investments in

energy and time to get the business off the ground. In startup phase in particular, the entrepreneur
frequently does everything alone –from raising the funds, producing the goods, and marketing the
finished product.

4. Lower quality of life until the business gets established

The long hours and hard work needed to launch a company can take the toll on one’s family
and social life. Business owners find that their role as spouse or parent takes a back seat to their
role as entrepreneurs.

5. Complete responsibility

It’s to be the big boss, but many entrepreneurs find that they must make decisions in issues
about which they are not really knowledgeable. Where there is no one to ask, the pressure can
build up quickly. Their decision can lead to success or failure of the business and have devastating
effect. Entrepreneurs quickly realize that they are the business.

Variations of Entrepreneurs (Gartner, 2008)

1. Intrapreneur

Intrapreneur is somebody who takes hands-on responsibility for creating innovation within
any kind of an existing organization; also called a corporate entrepreneur. The major thrust of an
intrapreneur is to create or develop the entrepreneurial spirit within the corporate boundaries,
thereby allowing an atmosphere of innovation to prosper. The intrapreneur takes things apart and
tries to put them back together to make them work better than they did before. The intrapreneur
determines the need, confirms its existence with higher authorities in the company and
demonstrates effectively that his/her innovation can meet or satisfy that need. The intrapreneur
attempts to introduce innovation without necessarily rocking the boat. He/she must be willing to
network with all departments and members of the organization.

2. Ultrapreneur

Ultrapreneur is somebody whose innovation commences within the organization and

whose impacts may extend beyond the organization.
3. Multipreneur

Multipreneur is somebody who has multiple skills and can develop multiple sources of
income and multiple careers, either simultaneously or serially. Multipreneuring appears to be more
of a personal career path that would tend to benefit more the multipreneur than in the organization.

4. Social Entrepreneur

Social entrepreneur is somebody who pursues novel applications that have the potential to
solve community-based problems. These individuals are willing to take on the risk and effort to
create positive changes in society through their initiatives. A social entrepreneur is interested in
starting a business for greater social good and not just the pursuit of profits.

Entrepreneurial Qualities, 10 Ds of Entrepreneurship (Bygrave & Zacharakis, 2004, as cited in

Philips, 2016)

Entrepreneurship is like many other things– you tend to get better at it over time. It’s true
of the saying, practice does make perfect. By identifying and emulating the qualities of other
successful entrepreneurs who have more experience than you, you improve yourself.
Entrepreneurial qualities are as with most human behavior, entrepreneurial traits are shaped by
personal attributes and environment. It does appear that entrepreneurs have a higher locus of
control than non-entrepreneurs, which they have a higher desire to be in control of their own fate.

1. Dream

Entrepreneurs have a vision of what the future could be like for them and their businesses.
And, more important, they have the ability to implement their dreams.

2. Decisiveness

They do not procrastinate. They make decisions swiftly. Their swiftness is a key factor in
their success.

3. Doers

Once they decide on a course of action, they implement it as quickly as possible.

4. Determination

They implement their ventures with total commitment. They seldom give up, even when
confronted by obstacles that seem insurmountable.

5. Dedication

They are totally dedicated to their business, sometimes at considerable cost to their
relationships with their friends and families. They work tirelessly.
6. Devotion

Entrepreneurs love what they do. It is that love that sustains them when the going gets tough.
It is the love of their product or service that makes them so effective at selling it.

7. Details

It is said that the devil resides in the details. That is never more true than when starting and
growing a business. The entrepreneur must stay on top of the critical details.

8. Destiny

They want to be in charge of their destiny rather than depend on an employer.

9. Dollars

Getting rich is not the prime motivator of entrepreneurs. Money is more a measure of their
success. They assume that if they succeed, they will be rewarded.

10. Distribute

Entrepreneurs distribute the ownership of their businesses to key employees who are
critical to the success of the business.

Myths in Entrepreneurship

Successful entrepreneurs have to be born, not made. Many are born with the personality
traits of successful entrepreneurs; wildly successful entrepreneurs can indeed be made.
Entrepreneurs are wild gamblers. Becoming a successful entrepreneur requires taking risks but
certainly aren’t wild gamblers (rational approach). Entrepreneurs are motivated primarily by
money. Entrepreneurs do seek financial rewards, yes; but money is very rarely the primary reason
the most successful started out in a venture. Entrepreneurship is available to everybody.

Why Study Entrepreneurship?

Learn to think like an entrepreneur, even you are an employee. Observe to seek out
opportunities to learn new skills and accept new responsibilities; listen to pay attention to what others
have to say; and think to don’t complain about a problem then analyze it and suggest possible
solutions. Learning about entrepreneurship often inspires people to develop a vision and mission of
your life.
References

Garcia, A. F. (2018, October 2-3). Assessing the Philippine Entrepreneurship Ecosystem. [Paper
Presentation]. Inclusive Innovation Conference 2018, Sofitel Philippine Plaza Manila, Pasay
City, Philippines. http://industry.gov.ph/wp-content/uploads/2018/10/The-Philippine-
Entrepreneurship-Ecosystem_Andres-Garcia.pdf

Gartner, W. (2008). Variations in Entrepreneurship. Small Business Economics, 31, 351-361.

https://www.researchgate.net/publication/23534761_Variations_in_Entrepreneurship

Grant, M. (2020, March 10). Startup. https://www.investopedia.com/terms/s/startup.asp

Hisrich, R., Fox, J. L., & Grant, S. (2007). Entrepreneurship Research and Practice: A Call to
Action for Psychology. The American Psychologist, 62, 575-89.
https://www.researchgate.net/publication/5967914_Entrepreneurship_Research_and_Practi
ce_A_Call_to_Action_for_Psychology

Lopez, M. L. (2020, September 3). 4.6M Filipinos jobless in July as unemployment worsens in
Metro Manila – PSA. CNN Philippines. https://cnnphilippines.com/business/2020/9/3/PSA-
July-unemployment-figures.html?fbclid=IwAR31fdY0J0DJXUNnsGx3NprT9lQmIzFx4n
Wqz6EKLDuf0xObgeKuTtanYrk

Orcullo, N. A. (2004). Contemporary entrepreneurship. Quezon City, Philippines: Academic

Publishing Corporation.

Philips, T. (2016, September 30). The 10 Ds for entrepreneurial success. The Guradian.
https://guardian.ng/features/executive-briefs/the-10-ds-for-entrepreneurial-success/

Spinelli, S., & Adams, R. J. (2016). New venture creation: entrepreneurship for the 21st century
(10th ed.). New York, USA: McGraw-Hill Education.

Szerb, L., Lafuente, E., Márkus, G., & Acs, Z. (2020). Global Entrepreneurship Index 2019.
https://www.researchgate.net/publication/338547954_Global_Entrepreneurship_Index_2019

Timmons, J., Spinelli, S., & Ensign, P. (2010). New venture creation.
https://www.researchgate.net/publication/272682121_New_Venture_Creation