Introduction to Entrepreneurship, 8e

Donald F. Kuratko

Chapter 1
The Revolutionary Impact of
Entrepreneurship

The steel tycoon who grew up in a oneroom weavers cottage: Andrew

Carnegie
This American industrialist, the founder of Carnegie Steel a company that

produced more steel than all of Great Britain at one point was born to a poor
handloom weaver in Scotland.
He grew up in poverty, living in a one-room house, often sleeping to forget the
misery of hunger. To fight starvation, his family migrated to the US. His first
job was at age 13 as a bobbin boy, changing spools of thread in a cotton
mill 12 hours a day, 6 days a week in a Pittsburgh cotton factory . In his
spare time, he would read works of Robert Burns and historical Scottish heroes
like Robert the Bruce, William Wallace, and Rob Roy. His next job was as a
telegraph messenger boy. A true entrepreneur, he was a hardworker, and soon
was promoted as an operator. Colonel James Anderson, who opened his personal
library of 400 volumes to working boys each Saturday night, gave a good boost
to Carnegies education and passion for reading. He did a series of railroad jobs.
There, he learnt about the industry and business in general. It was during this
stint that he began making investments in steel and oil companies that earned
him huge returns. By 1889, Carnegie Steel Corporation was the largest of
its kind in the world. He went on to become become the richest man in the
world.
Known as one of builders of America who helped shape the nation, in 1901, he
sold Carnegie Steel to JP Morgan for $480 million and became a philanthropist.
He donated millions to the New York Public Library, established the Carnegie
Institute of Technology in Pittsburgh, which is now known as CarnegieMellon University, created the Carnegie Foundation for the Advancement of
Teaching, and formed the Carnegie Endowment for International Peace.
12

The retail giant who had to milk cows,

deliver newspapers: Samuel Walton
This American entrepreneur who built a small grocery store into

the giant Walmart supermarket chain, amassing a fortune of over

$23 billion, grew up during the Great Depression.
He had numerous chores to help make financial ends meet for his
family as was common at the time. He milked the family cow,
bottled the surplus, and drove it to customers . Afterwards,
he would deliver Columbia Daily Tribune newspapers on a paper
route. In addition, he also sold magazine subscriptions. During his
college, he worked various odd jobs, including waiting tables in
exchange for meals. After graduation, he joined the US Army
during the World War II. After the war, he left the military and
started managing a variety store at the age of 26.
He took a loan to buy his first store, and thanks to simple
innovations in business, he soon bought his second store. Within
3 years, his sales volume grew to $225,000. The first true WalMart opened on July 2, 1962 in Rogers, Arkansas. The rest is
history. Forbes ranked Sam Walton as the richest person in the
United States from 1982 to 1988. At the time of his death in 1992,
he had 1,960 Wal-Mart stores, employed 380,000 people
and clocked annual sales of about $50 billion .
13

The Queen of all media who was raped at

age 9: Oprah Winfrey
Best known for her multi-award-winning talk show The Oprah

Winfrey Show the highest-rated program of its kind in history

Oprah Winfrey is dubbed as the Queen of all media and ranked as
the richest African-American of the 20th century.
She was born into poverty in rural Mississippi to a teenage single
mother. She was later raised in an inner-city Milwaukee
neighborhood. She has often spoken about the hardships she
experienced during childhood, saying she was raped at age
9 and at 13, after suffering years of abuse, she ran away
from home. She became pregnant at 14. Her son, she said, died in
infancy. While in high school, she landed a job in radio and began
co-anchoring the local evening news at the age of 19. She got
transferred to the daytime-talk-show arena because of her
emotional ad-lib delivery.
She became a millionaire at age 32 when her talk show went
national. She is credited with creating a more intimate confessional
form of media communication. Forbes international rich list has
listed her as the worlds only black billionaire from 2004 to 2006 and
as the first black woman billionaire in world history. As of 2014,
she has a net worth in excess of 2.9 billion dollars and has
overtaken former eBay CEO Meg Whitman as the richest self-made
woman in America.
14

The CEO of Oracle who was born to an

unwed Jewish mom: Larry Ellison
Larry Ellison was born in New York City to an unwed Jewish

mother. His father was an Italian American US Air Force pilot.

According to Wikipedia, Ellison contracted pneumonia when he
was nine months old and his mother gave him to her aunt
and uncle for adoption. His adoptive mother was warm and
loving, while his adoptive father was unsupportive and distant.
He was a bright but inattentive student. He left the University
of Illinois at Urbana-Champaign after his second year
without taking his final exams because his adoptive mother had
just died. Later, he attended the University of Chicago for one
term, where he first encountered computer design. In 1966, aged
22, he moved to northern California.
In 1977, he founded Software Development Laboratories
(SDL) with two partners and an investment of $2,000 . In
1982, the company became Oracle Systems Corporation after its
flagship product, the Oracle database. Currently, Ellison owns
stakes in Salesforce.com, NetSuite, Quark Biotechnology Inc. and
Astex Pharmaceuticals. In September 2011, Ellison was listed on
the Forbes List of Billionaires as the fifth richest man in the world.
Ellison is still the third richest American, with a net worth of about
$36.5 billion.
15

The richest man in Asia who had to

quit school at 15: Li Ka-shing
This Hong Kong business magnate, investor, and philanthropist is the

richest person in Asia, with a net worth of $31.9 billion,

according to the Bloomberg Billionaires Index, as of April
16,2014.
He was born in Guangdong province, China. After his fathers death,
he was forced to leave school to support his family before he
turned 15. He found work at a plastics trading company where he
laboured 16 hours a day. After years of back-breaking work, he was
able to start his own company, Cheung Kong Industries.
According to a Harvard Business School article:
From his humble beginnings in China as a teachers son, a refugee,
and later as a salesman, Li provides a lesson in integrity and
adaptability. Through hard work, and a reputation for remaining true
to his internal moral compass, he was able to build a business empire
that includes: banking, construction, real estate, plastics, cellular
phones, satellite television, cement production, retail outlets
(pharmacies and supermarkets), hotels, domestic transportation (sky
train), airports, electric power, steel production, ports, and shipping.
Today, Lis businesses cover almost every facet of life in Hong Kong,
from electricity to telecommunications, from real estate to retail, from
shipping to the Internet. The Cheung Kong Group operates in 55
countries and employs over 260,000 staff worldwide.
16

The poor Ukrainian immigrant who

became a Silicon Valley mogul: Jan
Koum
When Facebook announced that it was buying mobile messaging
startup WhatsApp for $19 billion in February 2014, that caused
quite a stir. Jan Koum, the startups cofounder became the most
talked about entrepreneur overnight. Media reported that the
WhatsApp floored Mark Zuckerberg so much that the record offer
was made so that the two could become friends.
A true rags to riches hero, Koum was born and raised in a village
on the outskirts of Kiev, Ukraine, as the only child of a housewife
and a construction labourer. Forbes reported that his house has no
hot water, and his parents feared that their phone was tapped by
the State and so rarely talked on it. He immigrated to
California with his mother when he was 16. He used to
sweep the floor of a grocery store and stood in line to
collect food stamps. By 18, he was an expert computer hacker.
In 1997, Koum was hired by Yahoo as an infrastructure engineer,
shortly after he met Brian Acton while working at Ernst & Young as
a security tester. In January 2009, Koum bought an iPhone and
realized that it would spawn a whole new industry of apps. On his
birthday, February 24, 2009, he incorporated WhatsApp Inc. in
California.

17

The polyester prince who sold bhajia

at village fairs: Dhirubhai Ambani
India too has its share of rags to riches heroes. And Dhirubhai Ambani

is one of the best knowm among them. This founder of Reliance

Industries was one of the three sons of Hirachandbhai, a school
teacher, and Jamanaben. He also had two sisters. An anecdote from
his childhood is that he once bought a tin of groundnut oil on
credit from a local wholesaler and sold the oil in retail on the
roadside. He earned a few rupees as profit from this transaction.
Apparently, during weekends when his school was closed, he
used to set up bhajia stalls at village fairs to make ends meet
at home.
According to R-ADAG, when he was 17, he went to Aden (now Yemen)
in search of opportunity, and worked as a dispatch clerk for A. Besse.
That was in 1949. A couple of years later, the company became a
distributor for Shell products and Dhirubhai was promoted to manage
the companys oil-filling station at the port of Aden. It was here that
he dreamed of setting up and owning a refinery, which he later
realized with his petrochemicals venture. After returning to India, he
started his first textile mill in Ahmednagar. Though his businesses
were a huge success, there were also issues regarding Ambanis
control over stock exchange. His detractors accused him of
illegal or unethical transactions and acts but an investigation
by the RBI did not find any evidence of it. By 2007, the
combined fortune of the Ambani family stood at $60 billion, making
Ambanis the second richest family in the world.

18

Arianna Huffington got rejected by 36

publishers
Its hard to believe that one of the most

recognizable names in online publications was

once rejected by three dozen major publishers.
Huffingtons second book, which she tried to
publish long before she created the now
ubiquitously recognizable Huffington Post empire,
was rejected 36 times before it was eventually
accepted for publication.
Even Huffington Post itself wasnt a success right
away.In fact, when it launched, there were dozens
of highly negative reviews about its quality and its
potential. Obviously, Huffington overcame those
initial bouts of failure and has cemented her name
as one of the most successful outlets on the web.
19

Bill Gates watched his first company

crumble
Bill Gates is now one of the worlds wealthiest

individuals, but he didnt earn his fortune in a

straight line to success. Gates entered the
entrepreneurial scene with a company called
Traf-O-Data, which aimed to process and
analyze the data from traffic tapes (think of it
like an early version of big data).
He tried to sell the idea alongside his business
partner, Paul Allen, but the product barely
even worked. It was a complete disaster.
However, the failure did not hold Gates back
from exploring new opportunities, and a few
years later, he created his first Microsoft
product, and forged a new path to success.
110

George Steinbrenner bankrupted a

team
Before Steinbrenner made a name for himself

when he acquired ownership of the New York

Yankees, he owned a small basketball team
called the Cleveland Pipers back in 1960. By
1962, as a result of Steinbrenners direction, the
entire franchise went bankrupt.
That stretch of failure seemed to follow
Steinbrenner when he took over the Yankees in
the 1970s, as the team struggled with a number
of setbacks and losses throughout the 1980s and
1990s. However, despite public fear and
criticism of Steinbrenners controversial
decisions, eventually he led the team to an
amazing comeback, with six World Series entries
between 1996 and 2003, and a record as one of
the most profitable teams in Major League
Baseball.

111

Walt Disney was told he lacked

creativity
One of the most creative geniuses of the

20thcentury was once fired from a

newspaper because he was told he lacked
creativity. Trying to persevere, Disney formed
his first animation company, which was called
Laugh-O-Gram Films. He raised $15,000 for
the company but eventually was forced to
close Laugh-O-Gram, following the close of an
important distributor partner.
Desperate and out of money, Disney found his
way to Hollywood and faced even more
criticism and failure until finally, his first few
classic films started to skyrocket in popularity.
112

Steve Jobs was booted from his own

company
Steve Jobs is an impressive entrepreneur

because of his boundless innovations, but

also because of his emphatic comeback from
an almost irrecoverable failure. Jobs found
success in his 20s when Apple became a
massive empire, but when he was 30,
Apples board of directors decided to fire
him.
Undaunted by the failure, Jobs founded a
new company, NeXT, which was eventually
acquired by Apple. Once back at Apple, Jobs
proved his capacity for greatness by
reinventing the companys image and taking
the Apple brand to new heights.

113

Milton Hershey started three candy

companies before Hershey's.
Everyone knows Hersheys chocolate, but when

Milton Hershey first started his candy production

career, he was a nobody. After being fired from
an apprenticeship with a printer, Hershey
started three separate candy-related ventures,
and was forced to watch all of them fail.
In one last attempt, Hershey founded the
Lancaster Caramel Company, and started
seeing enormous results. Believing in his vision
for milk chocolate for the masses, he eventually
founded the Hershey Company and became one
of the most well-known names in the industry.
114

Chapter Objectives
1.
2.
3.
4.
5.
6.
7.

To examine the historical development of

entrepreneurship
To explore and debunk the myths of
entrepreneurship
To define and explore the major schools of
entrepreneurial thought
To explain the process approaches to the study of
entrepreneurship
To set forth a comprehensive definition of
entrepreneurship
To examine the Entrepreneurial Revolution taking
place today
To illustrate todays entrepreneurial environment
115

EntrepreneursChallenging the
Unknown
Entrepreneurs

Recognize opportunities where

others see chaos or confusion

Are aggressive catalysts for

change within the marketplace

Challenge the unknown and

continuously create the future

Willing to work on unambiguous

and uncertain issues

116

Entrepreneurs versus
Small Business Owners: A Distinction
Small Businesses Owners
Manage their businesses by expecting stable sales,
profits, and growth
May never grow very large
Less aggressive
No new innovative practices
Entrepreneurs

Focus their efforts on innovation, profitability and

sustainable growth
Seeking growth and are looking to sell business for a
large capital gain
117

Entrepreneurship: A Mindset
Entrepreneurship is more than the mere

creation of business:

Seeking opportunities

Taking risks beyond security

Having the tenacity to push an idea through to reality

Entrepreneurship is an integrated concept that

permeates an individuals business in an

innovative manner.

People in India and China are returning back

home and finding new opportunities back home

118

The Evolution of Entrepreneurship

Entrepreneur is derived from the French

entreprendre, meaning to undertake.

The entrepreneur is one who undertakes to organize,

manage, and assume the risks of a business.

Although no single definition of entrepreneur exists

and no one profile can represent todays
entrepreneur, research is providing an increasingly
sharper focus on the subject.

18th century economist Richard Cantillon associated

entrepreneurship with risk bearing activity and its
impact on economic development.
119

The Evolution of Entrepreneurship

Jean Say and Schumpeter agreed to the

following

Entrepreneurship behavior that includes

(1) initiative taking (2) organizing resources

(3) acceptance of risk of failure.

It consists of doing things that are not

generally done in ordinary course of

business routine

120

A Summary Description
of Entrepreneurship
Entrepreneurship (Robert C. Ronstadt)

The dynamic process of creating incremental wealth.

This wealth is created by individuals who assume

major risks in terms of equity, time, and/or career
commitment of providing value for a product or
service.

The product or service itself may or may not be new

or unique but the entrepreneur must somehow infuse
value by securing and allocating the necessary skills
and resources.
121

An Integrated Definition
Entrepreneurship

A dynamic process of vision, change, and creation.

Requires an application of energy and passion towards the
creation and implementation of new ideas and creative
solutions.

Essential ingredients include:

The willingness to take calculated risksin terms of time,
equity, or career.
The ability to formulate an effective venture team; the
creative skill to marshal needed resources.
The fundamental skills of building a solid business plan.
The vision to recognize opportunity where others see
chaos, contradiction, and confusion.
122

Karsanbhai Patel Man behind NIRMA

Karsanbhai Patel Man behind NIRMA
The Nirma success story of how an Indian Entrepreneur took on the big MNCs

and rewrote the rules of business :

It was in 1969 that Dr. Karsanbhai Patel started Nirma and went on to create a
whole new segment in the Indian domestic detergent market. During that time
the domestic detergent market only had the premium segment and there were
very few companies , mainly the MNCs, which were into this business.
Karsanbhai Patel used to make detergent powder in the backyard of his house in
Ahmedabad and then carry out door to door selling of his hand made product. He
gave a money back guarantee with every pack that was sold. Karsanbhai Patel
managed to offer his detergent powder for Rs. 3 per kg when the cheapest
detergent at that time was Rs.13 per kg and so he was able to successfully
target the middle and lower middle income segment.
Sabki Pasand Nirma!
Nirma became a huge success and all this was a result of Karsanbhai Patels
entrepreneurial skills.
The best case of Give your consumer what he wants, when he wants, where he
wants and at the price he wants, selling will be done quite automatically. This is
the marketing mantra of Nirma.
The company that was started in 1969 with just one man who used to deliver his
product from one house to the other,today employs around 14 thousand people
and has a turnover of more than $ 500 million. In 2004 Nirmas annual sales
were as high as 800000 tonnes.According to Forbes in 2005 Karsanbhai Patels
net worth was $640 million and its going to touch the $1000 million mark soon.
123

The Myths of Entrepreneurship

Myth 1: Entrepreneurs Are Doers, Not Thinkers
Methodical people who think and plan
All visionaries start as thinkers and dreamers
Combination of both thinking and doing

Myth 2: Entrepreneurs Are Born, Not Made

Experiments in South India ( Kakinada and Vellore) say entrepreneurs can be a

product of motivational training

Gujarat model of entrepreneurship says this can be taught and developed through

classroom training

Myth 3: Entrepreneurs Are Always Inventors

Ray Kroc didnt invent franchising/fast food but McDonalds is so successful
Number of micro-fianance institution have copied the Grameen bank model but

they are successful

IT companies use products made in US but provide jobs to millions of Indians
124

The Myths of Entrepreneurship

Myth 4: Entrepreneurs Are Academic and Social Misfits
Entrepreneuer is now considered as a professional role model not a misfit
People behind many globally recognized enterprises are role models.

Myth 5: Entrepreneurs Must Fit the Profile

Standard entrepreneurial profile is hard to compile

Myth 6: All Entrepreneurs Need Is Money

Failure due to lack of financing can be due to many reasons
Managerial incompetences
Lack of financial understnading
Poor planning
Poor investments

125

The Myths of Entrepreneurship

Myth 7: All Entrepreneurs Need Is Luck
Right place right time helps
Luck is a byproduct of preparation, determination, knowledge, innovativeness

Myth 8: Ignorance Is Bliss For Entrepreneurs

Myth 9: Entrepreneurs Seek Success But Experience

High Failure Rates

Entrepreneurs keep trying until they succeed.
3M and post it notes

Myth 10:

Entrepreneurs Are Extreme Risk Takers

(Gamblers)
Entrepreneurs usually work on moderate and calculated risks
By planning and prep they minimize risk
Try to control destiny
126

Figure

1.1

Entrepreneurial Schools-of-Thought Approach

127

Macro View: External Locus of Control

The Environmental School of Thought
Considers the external factors that affect a potential entrepreneurs
lifestyle.
Work environment can help support middle managers to pursue an
entrepreneurial activity
Marwaris, Shetty, Pais tend to be entrepreneurial in thinking
The Financial/Capital School of Thought
Based on the capital-seeking processthe search for seed and
growth capital.
This SOT views entrepreneurial venture from Financial management
standpoint
The School of Thought
Alienation drive Displacement entrepreneurial pursuits
Political displacement (laws, policies, and regulations) Punjabi and Sindhi
community during partition
Cultural displacement (preclusion of social groups) minority businesses have
grown in the last 10 years in the US
Economic displacement (economic variations recession and depression)
128

Table

1.1

Financial Analysis Emphasis

Venture Stage

Financial Consideration

Decision

Start-up or
acquisition

Seed capital
Venture capital sources

Proceed or abandon

Ongoing

Cash management
Investments
Financial analysis and
evaluation

Maintain, increase, or
reduce size

Decline or
succession

Profit question
Corporate buyout
Succession question

Sell, retire, or dissolve

operations

129

Micro View: Internal Locus of Control

(contd)
The Entrepreneurial Trait School of Thought
Successful people tend to exhibit similar
characteristics
Focuses on identifying traits common to successful
entrepreneurs.
Achievement, creativity, determination, and technical
knowledge

The Venture Opportunity School of Thought

Focuses on the opportunity aspect of venture
developmentthe search for idea sources, the
development of concepts, and the implementation of
venture opportunities.
Corridor principle: New pathways or opportunities will arise
that lead entrepreneurs in different directions.
Creativity and market awareness is very important

130

Micro View: Internal Locus of Control

(contd)
The Corridor Principle is a concept that was

coined in the late 1980sby entrepreneurship

research, Robert Ronstadt. He used the
Corridor Principle to explain serial
entrepreneurship. He argued that the act of
starting a business set the entrepreneur in motion
down a venture corridor that led him/her to other
corridors (other new ventures) that would not
have been identified unless the original business
was started. The same principle can be applied to
ideas. Once you put the idea in motion, by
simply taking a some real and small steps ,
so many other doors open along the journey that
we could not have predicted. But we must put our
ideas in motion, step into the corridor, and see
what happens.

131

Micro View (contd)

The Strategic Formulation School of Thought
Strategic planning is woven into management its not
separate from management
Emphasizes the planning process in successful venture
development.
Ronstadts View
Strategic formulation is a leveraging of unique elements:
Unique Marketsmountain gap strategies identifying major
market segment and in-between market segments
Unique Peoplegreat chef strategies, around whom the venture
is built
Unique Productsbetter widget strategies importance of
innovation
Unique Resourceswater well strategies-ability to harness
special resources over long term
132

Table

Definitions And Criteria Of One Approach To The

Micro View
1.2

Entrepreneurial
Model

Definition

Measures

Questions

Great Person

Extraordinary Achievers

Personal principles
Personal histories
Experiences

What principles do you have?

What are your
achievements?

Psychological
Characteristics

Founder
Control over the means
of production

Locus of control
Tolerance of ambiguity
Need for achievement

What are your values?

Classical

People who make innovations

bearing risk and uncertainty
Creative destruction

Decision making
Ability to see opportunities
Creativity

What are the opportunities?

What is your vision?
How do you respond?

Management

Creating value through

the recognition of business
opportunity, the management
of risk taking . . . through the
communicative and management
skills to mobilize . . .

Expertise
Technical knowledge
Technical plans

What are your plans?

What are your capabilities?
What are your credentials?

Leadership

Social architect
Promotion and protection
of values

Attitudes, styles
Management of people

How do you manage people?

Intrapreneurship

Those who pull together

to promote innovation

Decision making

How do you change and

adapt?

Source: Adapted from J. Barton Cunningham and Joe Lischeron, Defining

Entrepreneurship, Journal of Small Business Management (January 1991): 56.
133

Process Approaches to Entrepreneurship

Integrative Approach

Built around the concepts of inputs to the

entrepreneurial process and outcomes from the
entrepreneurial process.

Focuses on the entrepreneurial process itself and

identifies five key elements that contribute to the
process.

Provides a comprehensive picture regarding the

nature of entrepreneurship that can be applied at
different levels.

134

Figure

An Integrative Model of Entrepreneurial Inputs

and Outcomes
1.2

Source: Michael H. Morris, P. Lewis, and Donald L. Sexton, Reconceptualizing Entrepreneurship:

An Input-Output Perspective, SAM Advanced Management Journal 59, no.1 (Winter 1994): 2131.
135

Process Approaches (contd)

Entrepreneurial Assessment Approach

Stresses making assessments qualitatively,

quantitatively, strategically, and ethically in regard to
the entrepreneur, the venture, and the environment

The results of these assessments must be compared

to the stage of the career

Multidimensional Approach

Views entrepreneurship as a complex,

multidimensional framework that emphasizes the
individual, the environment, the organization, and the
venture process.
136

Figure

1.3

Entrepreneurial Assessment Approach

Source: Robert C. Ronstadt, Entrepreneurship (Dover, MA: Lord Publishing Co., 1984), 39.
137

Our Entrepreneurial Economy

The Environment for Entrepreneurship
Entrepreneurship is the symbol of business

tenacity and achievement.

Entrepreneurs are the pioneers of todays

business successes.

Two perspectives on entrepreneurship:

Statistical: numbers that emphasize the importance of

entrepreneurs to the economy.

Academic: trends in entrepreneurial research and

education.
Identifies importance of entrepreneurship in academia
138

Predominance of New Ventures

in the Economy
Entrepreneurial Activity: Growth in Small

Businesses

New business incorporations average 600,000 per

year over the past decade.
There are over 25 million small businesses; the
number continues to grow 2% annually.
One of every 150 adults participates in the founding of
a new firm each year.
Approximately 600,000 to 800,000 are added each
year.
139

Entrepreneurship: a desirable career choice

In India, adults are generally positive about entrepreneurship. GEM 2014 showed that

58% of Indian adults (18-64 years old) consider entrepreneurship a desirable career
choice; around 66% think that entrepreneurs receive a high level of status and
respect. However, on these measures India ranks below its peers in the factor-driven
(least developed) economies as well as among the BRICS (Brazil - Russia - India China - South Africa) nations.
We see more early-stage entrepreneurs in the 18-44 age groups than any other age
range. In India, about one third (34%) of early-stage entrepreneurs are women.
GEM surveys (including GEM special reports on women) consistently confirm that

early-stage entrepreneurial activity is gender sensitive, for a combination of cultural,

societal and economic reasons. Global findings suggest that early-stage
entrepreneurial activity is dominated by men, and that women are more likely than
their male counterparts to start a business venture out of necessity. India bucks this
trend - in India there are relatively more men who started their businesses out of
necessity.

In India, entrepreneurship motivated by necessity (no other option for work) accounts

for 32% of early-stage activity, while 37% is 'improvement-driven' (in pursuit of a

business opportunity). Compare these rates with China - 33% and 45% respectively.

GEM 2014 found that in India, 4.1% of adults are nascent entrepreneurs (actively

involved in setting up a business) while 2.5% are new business owners (in operation
for more than 3 but less than 42 months). Combining these rates gives us the Total
early-stage Entrepreneurial Activity (TEA) rate, meaning that close to 7% of the Indian
adult population or 1 in every 15 adults are engaged in some form of early-stage
entrepreneurial activity.
140

Entrepreneurship: a desirable career choice

Enablers and Constraints

According to the GEM National Experts Survey, the three major constraints on

entrepreneurship in India are:

Government regulation and policies;
Entrepreneurial education at primary and secondary school level, and;
Transfer and commercialization of R&D new know-how and technologies.
The major enablers are:

Commercial Infrastructure- the presence of property rights and commercial,

accounting, and other legal services and institutions that support or promote
SMEs
Internal market dynamics the extent to which markets change dramatically
from year to year;
Ease of access to available physical infrastructure communication, utilities,
transportation, land or space, at a price that does not discriminate against new,
small or growing firms.
Cultural and social norms- the extent to which social and cultural norms
encourage or allow actions leading to new business methods or activities that
can potentially increase personal wealth and income

141

Entrepreneurship: a desirable career choice

Initiatives Supporting Entrepreneurship
The government has been trying to develop a specific policy on

entrepreneurship for India. This task has been assigned to the

Entrepreneurship Development Institute (EDI) of India, Ahmedabad.
The EDI has prepared a draft report on the Nations
Entrepreneurship Policy and kept it open for debate and discussion.
Several government departments are also developing policies and
programmes aimed at enhancing entrepreneurship development.
Many state governments have been trying to develop state level
programmes to foster entrepreneurship in young people, women,
and those of different tribes and minorities.
Challenges for the Future
While the economy is dynamic and the overall business climate

good, there is a need to develop entrepreneurship on the margins

of society to achieve inclusive growth. Furthermore, to improve
levels of business sustainability, systems of entrepreneurial
education, training and development must be put into place.
142

Predominance of New Ventures

in the Economy
Entrepreneurial Activity: Indian perspective
After 1991 liberalization following trends were seen
Growing middle class with rising disposable income
Abundant supply of talent in IT, management and
R&D

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Effects of Entrepreneurship
The Global Entrepreneurship Monitor (GEM)
Provides an annual assessment of the entrepreneurial
environment of 42 countries.
Latest GEM study: the U.S. outranks the rest of the
world in important entrepreneurial support.
Entrepreneurs lead to growth by:

Entering and expanding existing markets.

Creating entirely new markets by offering innovative
products.
Increasing diversity and fostering minority participation
in the economy.
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Entrepreneurs in the United States

Reasons for the exceptional entrepreneurial

activity in the U.S. include:

A national culture that supports risk taking and

seeking opportunities.

Americans alertness to unexploited economic

opportunity and a low fear of failure.

U.S. leadership in entrepreneurship education at both

the undergraduate and graduate level.

A high percentage of individuals with professional,

technological or business degrees who are likely to
become entrepreneurs.
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The Age of Gazelles

A Gazelle
A business establishment with at least 20% sales
growth in each year for five years, starting with a base
of at least $100,000 in annual sales.
Gazelles as leaders in innovation:
Produce twice as many product innovations per
employee as do larger firms.
Have been responsible for 55% of the innovations in
362 different industries and 95% of all radical
innovations.
Obtain more patents per sales dollar than do larger
firms.
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Table

1.3

Mythology Associated with Gazelles

Gazelles are the goal of all entrepreneurs.

Gazelles receive venture capital.
Gazelles were never mice.
Gazelles are high-tech.
Gazelles are global.

Source: NFIB Small Business Policy Guide (Washington, D.C., November 2000), 31.
147

Survival of Gazelles
How many gazelles survive?

The simple answer is none. Sooner or later, all

companies wither and die.

The Common Myth of Failure:

85% of all firms fail in the first yearin actuality, about

half of all start-ups last between 5 and 7 years.

148

Entrepreneurial Firms Impact

Entrepreneurial components of the U.S.

Economy:
1.

Large firms have increased profitability by returning to

their core competencies through restructuring and
downsizing.

2.

New entrepreneurial companies have been

blossoming in new technologies and new markets.

3.

Thousands of smaller firms established by women,

minorities, and immigrants have strengthened the
economy.

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Entrepreneurial Firms Impact Contd)

Entrepreneurial firms make two

indispensable contributions to an economy:

1.

They are an integral part of the renewal process that

pervades and defines market economies.

2.

They are the essential mechanism by which millions

enter the economic and social mainstream of society.

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21st Century Trends in Entrepreneurship

Research
Venture
Financing
Corporate
Entrepreneurship

Entrepreneurial
Cognition

Global
Entrepreneurial
Movement

Social
Entrepreneurship

Trends in
Entrepreneurship
Research

Women
and Minority
Entrepreneurs

Entrepreneurial
Education
Family
Businesses

151

21st Century Trends in Entrepreneurship

Research
Major Research Themes:

Venture Financing: venture capital and angel capital financing

and other financing techniques strengthened in the 1990s.

Corporate Entrepreneurship and the need for entrepreneurial

cultures has drawn increased attention.

Social Entrepreneurship has unprecedented strength within the

new generation of entrepreneurs.

Entrepreneurial Cognition is providing new insights into the

psychological aspects of the entrepreneurial process.

Women and Minority Entrepreneurs appear to face obstacles and

difficulties different from those that other entrepreneurs face.

The Global Entrepreneurial Movement is increasing.

152

21st Century Trends (contd)

Major Research Themes (contd):

Family Businesses have become a stronger focus of research.

Entrepreneurial Education has become one of the hottest topics

in business and engineering schools throughout the world.

153

Key Concepts
Entrepreneurship

A process of innovation and new-venture creation

through four major dimensionsindividual,
organizational, environmental, processthat is aided
by collaborative networks in government, education,
and institutions.

Entrepreneur

A catalyst for economic change who uses purposeful

searching, careful planning, and sound judgment
when carrying out the entrepreneurial process.

154

Key Concepts
Entrepreneurial Management

The discipline of entrepreneurial management:

Entrepreneurship is based upon the same principles.
It matters not who or what that the entrepreneur is an
existing large institution or an individual, for-profit business or
a public-service organization, a governmental or nongovernmental institution.
The rules are much the same: things that work and those that
dont are much the same, and so are innovations and where
to look for them.

155

Key Terms and Concepts

better widget strategies

financial/capital school of

corridor principle
displacement school of

thought
entrepreneur
entrepreneurial assessment
approach
entrepreneurial management
Entrepreneurial Revolution
entrepreneurial trait school of
thought
entrepreneurship
environmental school of
thought
external locus of control

thought
gazelle
great chef strategies
internal locus of control
macro view of
entrepreneurship
micro view of
entrepreneurship
mountain gap strategies
strategic formulation school
of thought
venture opportunity school
of thought
water well strategies
156