Chapter

The Nature and Importance of Entrepreneurship

McGraw-Hill/Irwin Entrepreneurship, 7/e

Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

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Development of Entrepreneurship (1 of 2)
Earliest Period
Entrepreneurs would sign contracts with a money person. Example: Marco Polo

Middle Ages
Entrepreneurs were actors and people who managed large production projects.

17th Century
Entrepreneurs entered into contractual arrangements with the government. Example: Mississippi Company
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Development of Entrepreneurship (2 of 2)
18th Century
With global industrialization taking place, entrepreneurs were distinguished from capital providers. Inventions developed during this time were reactions to the changing world. Example: Edison & Whitney

19th and 20th Centuries

Entrepreneurs were not distinguished from managers. They were viewed mostly from an economic perspective. Concept of innovation and newness was an integral part. Example: Andrew Carnegie
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Definition of Entrepreneurs Today

Entrepreneurship is the process of creating something new and assuming the risks and rewards.
Four aspects of being an entrepreneur today:
Involves creation process. Requires devotion of time and effort. Involves rewards of being an entrepreneur. Requires assumption of necessary risks.

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Entrepreneurs Versus Inventors

Inventor: Creates something for the first time; highly driven and motivated by his or her own work and personal ideas. Differentiating characteristics of an inventor:
Education. Level of experience. Problem-solving skills. Level of self-confidence. Willingness to take risks. Ability to tolerate ambiguity and uncertainty. View of monetary benefits in measuring success.
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The Entrepreneurial Process

Four distinct phases:
Identify and evaluate the opportunity.
Window of opportunity.

Develop a business plan. Determine the resource requirement. Manage the resulting enterprise.

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Aspects of the Entrepreneurial Process

<<Insert Table 1.1>>

Table 1.1

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Types of Start-Ups
Lifestyle firm
Privately held; usually achieves only modest growth.

Foundation company
Created from research and development. Lays the foundation for a new business area.

High-potential venture
Receives the greatest investment interest and publicity. Starts out like a foundation company, but attains rapid growth. Also called gazelles, is integral to the economic development of an area.
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Role of Entrepreneurship in Economic Development

Innovation is depicted as a key to economic development.
Product-evolution process: Process through which innovation is developed and commercialized. Iterative synthesis: Critical point in the product-evolution process.

Three types of innovation:

Ordinary Technological Breakthrough
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Product Evolution
Need Recognition Industrial

Initiate Innovation

Development

Press to Invent
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Government as an Innovator
One channel for commercializing the results of the synthesis of social need and technology.
Frequently called technology transfer.

Relatively few innovations reach commercial markets.

Lacks business skills necessary for successful commercialization. Government bureaucracy and red tape act as inhibitors.

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Corporate Entrepreneurship
Strengths of an existing business:
Financial resources. Business skills. Marketing and distribution systems.

Factors that inhibit successful commercialization:

Bureaucratic structure. Emphasis on short-term profits. A highly structured organization.

In the current era of hypercompetition, strategic business units (SBUs) are emerging.
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Independent Entrepreneurship
Factors that inhibit commercialization:
Managerial skills. Marketing capabilities. Financial resources. Unrealistic inventions. Lack of awareness on interfacing with necessary entities (banks, suppliers, customers, venture capitalists, distributors, and advertising agencies).

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Ethics and Social Responsibility

Entrepreneurs usually develop an internal ethical code. Personal value systems tend to be influenced by:
Peer pressure. General social norms in the community. Pressures from their competitors.

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Future
Entrepreneurship has gained mileage through a number of ways:
Entrepreneurial education. Increase in academic research. Societal support (media coverage). Corporate entrepreneurship.

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Entrepreneurial Universities
Activities Seminars Consulting Research Case Development Technology Development & Transfer Joint Ventures & Strategic Alliances
Structures
Business Assistance Centers Incubators Innovation Centers Industrial Parks Enterprise Development Centers Venture Capital Exchanges

Inputs
Guest Lectures Board of Advisors/Trustees Internships Student Projects Source of Funds
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