ENTREPRENEURSHIP

NEU Dr. Jean Dautrey ENT501

INTRODUCTION
to
ENTREPRENEURSHIP
We’ll start with a series of questions…

• What is Business?
• What is an Entrepreneur?
• What is Entrepreneurship?
• Why Do People Become Entrepreneurs?
• What Are the Common Myths about
Entrepreneurs?
• What Are the Demographics of
Entrepreneurs?
What is Business?
A business is…
 A repeatable process that creates
and delivers something of value that
other people want or need at a price
they are willing to pay in a way that
satisfies customers’ needs and
expectations so that the business
brings in enough profit to make it
worthwhile for the owners to continue
operations.
(Kaufman, 2010)
What is an Entrepreneur?
 A person who identifies an
opportunity and pursues it

 This is a good working definition of

an entrepreneur but it needs to be
extended…
What’s missing?
 A person who not only identifies
an opportunity but also creates
an organization to pursue it

 This added part is essential as ….

 An entrepreneur needs to bring
together the human and financial
resources needed to implement his/her
vision.
 However, recognizing an opportunity
and addressing it through an
organization is….
 Still not a complete definition

 A complete definition must also

recognize another factor…
Which factor?
 Risk
Not every entrepreneur succeed in
growing his/her startup into an established
business. Some will make money and some
will lose money.
If the venture goes badly, his/her time and
hard-earned savings are lost but…
 If things go well, he/she can reap a
sizable profit.
 The word “entrepreneur” derives
from the French words “entre”
(between in English) and “prendre”
(to take in English)
 It was originally used to describe
people who…
 “Took on the risk” between
buyers and sellers
The rate of failure is high…

Category 2004 2005 2006 2007 2008

Births
628,917 644,122 670,058 633,100e 627,200e

Closures
541,047 565,745 599,333 571,300e 595,600e

Bankruptcies
34,317 39,201 19,695 28,322 43,546

E
by the U.S. Department of
Estimate using percentage changes in similar data provided
Labor, Employment and Training Administration.
Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; and U.S. Department
of Labor, Employment and Training Administration.
So, an entrepreneur is….

 A person who not only

identifies an (entrepreneurial)
opportunity but also creates an
organization to pursue it and
bears the risks of success or
failure
An entrepreneur can act as…
 A force for creative destruction…
 Sweeping away established
technologies, products, and ways
of doing things and…
 Replacing them with others that
the marketplace as a whole sees
as representing greater value
In other words, entrepreneurs often…
 Invent or commercialize new
technologies that displace the old
and deliver something new
 BUT entrepreneurs, however, do
more than just think of…
 New concepts and recognize
their commercial opportunities
As we just saw…

 They take the next step. They

form enterprises (create
organizations) and marshal
resources to implement them…
 This step separates the
entrepreneur from the inventor
Some scholars differentiate…
 Entrepreneurial firms from lifestyle
enterprises…
 Lifestyle enterprise = a business venture
with modest revenue and growth
expectations….
 The owner is simply looking for a
venture that will satisfy the financial
needs of his/her family (e.g. a retail
store, a law firm…)
 Lifestyle enterprises are often
referred to as small businesses and
associated with self employment,
that is…
 Working your own hours and being
responsible for your decisions (in
other words, being your own boss
and setting your own rules…)
But even with small expectations…
 The founder of a lifestyle business
fits the above definition of an
entrepreneur in that he/she…
 Identifies an opportunity
 Creates an organization
 Marshals resources to pursue it
and…
 Bears the risk
What is Entrepreneurship?
 Entrepreneurship may be defined
as…
 “The process by which
individuals – either on their own
or in organizations – pursue
opportunities without regard to
the resources they currently
control.”
Stevenson
 A simpler definition is to describe
entrepreneurship as….
 The art of turning an idea into
a business

 It is thus about identifying ideas and

putting them into useful practice
 Entrepreneurship is a mindset
or way of thinking that is….
 Opportunity-focused
 Innovative
 Growth-oriented
 Itis a human characteristic that mixes…
 Structure with passion
 Planning with vision
 Tools with the wisdom to use them
 Strategy with the energy to execute it
and…
 Judgment with the propensity to take
risks
 Entrepreneurship may also be
defined as…
 A process of value
creation and appropriation
by an entrepreneur in an
uncertain environment.
 Although entrepreneurship is most
commonly thought of in conjunction
with starting a business and a
self-employment….
 The entrepreneurial mindset can
be found in various settings
 It can be found….
 Within large corporations
 In socially responsible nonprofit
organizations and…
 Anywhere individuals and teams
desire to differentiate themselves
from the crowd and apply their passion
and drive to executing a business
opportunity.
 3 Types of start-ups

Salary-Substitute Entrepreneurial
Lifestyle Firms
Firms Firms

Firms that provide Firms that bring new

Firms that basically products and services
their owner or owners
provide their owner or to market by creating
the opportunity to
owners a similar level and seizing
pursue a particular
of income to what opportunities
lifestyle, and make a
they would be able to regardless of the
living at it (personal
earn in a conventional resources they
trainers, tour guides,
job (dry cleaners, currently control
tennis pros…)
retail stores, hair (often partner with
salons, restaurants…) other firms to obtain
the boost they need to
realize their full
potential)
 The Four-Step Entrepreneurial Process

Step 1 Deciding to become an

entrepreneur
Step 2 Developing successful business
ideas
Step 3 Moving from an idea to an
entrepreneurial firm
Step 4 Managing and growing the
entrepreneurial firm
Why Do People Become
Entrepreneurs?
 Rates of Early-Stage Entrepreneurial Activity
(ages 18 to 64)

Country Percent of Population Starting a

New Business
Argentina 15.9%
Brazil 17.3%
Chile 24.3%
China 14.0%
France 4.6%
Germany 5.0%
Nigeria 39.9%
Russia 5.8%
United Kingdom 7.1%
United States 12.7%

Global Entrepreneurship Monitor (GEM)

 The highest rates of entrepreneurial
start-up activities occur in low-income
countries where….
 Jobs are not plentiful
 In the US, 12.7 percent means that
almost 2 out of 8 American adults
engaged in starting a business or is…
 The owner/manager of a business that
is less than 3 years old.
 The Global Entrepreneurship Monitor
(GEM) also identifies whether its
respondents are starting a new
business…
 To take advantage of an
attractive opportunity or…
 Because of necessity to earn an
income
 The majority of people in high-income
countries are drawn to entrepreneurship
to…
 Take advantage of attractive
opportunities…
 The reverse is true of people in low-
income countries, who tend to be drawn
to entrepreneurship…
 Primarily because of necessity
 Three primary reasons that people
become entrepreneurs have been
identified…
1. Be their own boss
2. Pursue their own ideas
3. Realize financial rewards
 Being one’s own boss is given most
commonly because…
 Many entrepreneurs have become
frustrated working in traditional
jobs…
 For example, finding themselves
confined by the corporate structure,
having to sell ideas to multiple people
and attend all kinds of internal
meetings…
 Some entrepreneurs transition from a
traditional job to owning their own business
more gradually by…
 Starting their business part time
 While this approach not always possible,
individuals can…
 Gain valuable experience
 Tuck away the money they earn
 Find out if they really like it before
deciding to leave their job for good
 Pursuing one’s own ideas - Some people are
naturally alert. When they recognize ideas for
new product or service…
 They have a desire to see those ideas
realized
 Established firms, however, often resist
innovation…
 Employees are left with good ideas that go
unfulfilled
 Some choose to leave (e.g. Gore Tex)
 As a motivation, pursuing financial
rewards is typically secondary to
the first two and
 Often fails to live up to its hype

 Money is rarely the primary motivation

behind the launch of an entrepreneurial
firm
What Are the Myths About
Entrepreneurs?
 There are many misconceptions about
who entrepreneurs are and what motivates
them to launch firms to develop their ideas

 They are mostly due to the media

coverage of atypical entrepreneurs
 e.g. a couple of college students who obtain
venture capital to fund a small business and
become multi-million-dollar company)
 These, however, are the
exception rather than the
norm…

So, what are the most common

myths and the realities about
entrepreneurs?
Myth 1: Entrepreneurs are born, not
made
Myth 2: Entrepreneurs are gamblers
Myth 3: Entrepreneurs are motivated
mostly by money
Myth 4: Entrepreneurs should be young
and energetic
Myth 5: Entrepreneurs love the spotlight
Myth 1: Entrepreneurs are Born, Not Made

 This is based on the mistaken belief

that some people are genetically
predisposed to be entrepreneurs…
 They are not genetically different
from other people

 It is a function of environment and life

experiences
 There are personality traits commonly
associated with entrepreneurs (e.g.
creativity, tenacity, etc) but..
 These traits are developed over
time and
 Evolve from an individual’s social
context (e.g. self-employed
parents…)
Myth 2: Entrepreneurs are Gamblers
 Most entrepreneurs are moderate risk
takers as are most people
 The idea that entrepreneurs are gamblers
originate from two sources…
 They have jobs that are less structured and
face more uncertainties than rank-and-file
employees
 Many have a strong need to set
challenging goals, a behavior often
equated with risk taking
Myth 3: Entrepreneurs are Motivated Mostly
by Money

 It is naïve to think that entrepreneurs

do not seek financial rewards but…
 Money is rarely the primary
reason they start new firms and
persevere

 The mission may not be only to make

money but for instance to change the
world
Myth 4: Entrepreneurs Should be Young and
Energetic

 The majority of those who start

companies are in their 30s and 40s.
 Many have work experience prior to
launching a new venture.
Age Distribution of US Business Owners
Age Percentage of Business Owners
18-29 17.5
30-39 25.0
40-49 24.0
50-59 21.0
60+ 12.5
 Although it is important to be energetic,
investors often cite the strength of the
entrepreneur as their most important
criterion

 VCs prefer to fund a strong entrepreneur

with a mediocre idea than fund…
 A strong business idea and a mediocre
entrepreneur
Myth 5: Entrepreneurs Love the Spotlight

 While some entrepreneurs are

flamboyant, most do not attract
public attention…

 Many avoid public notice or have

been passed over by the popular
press
What are the Demographics of
Entrepreneurs?
 Demographics are changing.
 Today, an increasingly higher number
of..
 Women
 Minorities
 seniors and…
 young people own entrepreneurial
firms.
 The number of women-owned
businesses is rising, especially those
who are minorities as…
 The number of groups that support
and advocate for women-owned
businesses continue to grow…
 They facilitate their growth and
promote and provide assistance
 The growth of seniors (those 50 and older)
can be attributed to a number of factors…
 Corporate downsizing
 Increasing desire for personal
fulfilment in their lives
 Growing worries among seniors that
they need to earn additional income
to pay for future health care expenses…
 Many people in their 50s have
substantial business experience,
financial resources and excellent vigor
which make them
 Suitable candidates to start
businesses in many industries

 Also rising life expectancy means that they

are likely to remain engaged in either a job or
in a venture longer
 The desire to pursue an
entrepreneurial career is high
among young people….
 It is higher among women

 A number of organizations are involved in

spurring interest in entrepreneurship
among young people and teenagers
 Some universities also offer
entrepreneurship-focused
programs for high-school
students during the summer

 More entrepreneurship courses are

offered outside business programs
What Are the Primary Characteristics
of an Entrepreneurial Venture?
Entrepreneurial ventures are…
 Innovative – bringing something
new to the marketplace…
 Value-creating – serving customer
needs that are not currently being
served…
 Growth-oriented – having a vision
of where the business will go
(national? global?...)
In its fullest form, the entrepreneurial
experience includes…

1. An entrepreneurial intention
2. The discovery of an
entrepreneurial opportunity
3. The development of the
entrepreneurial competence
and…
4. The appropriation of the
entrepreneurial reward
 The Entrepreneurial Process

Opportunity

Entrepreneur Opportunity Recognition

Technical/ Organization Human &

managerial financial
competence capital
How has Entrepreneurship Changed from
the 1960s to the 1990s and Beyond?
The Entrepreneurial Evolution
THANK YOU FOR YOUR ATTENTION