Entrepreneurship

From Wikipedia, the free encyclopedia This article may have too long an introduction for its overall length. Please help by moving some material from it into the body of the article. For more information please read the layout guide and Wikipedia's lead section guidelines. (August 2011) Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. The most obvious form of entrepreneurship is that of starting new businesses (referred as Startup Company); however, in recent years, the term has been extended to include social and political forms of entrepreneurial activity. When entrepreneurship is describing activities within a firm or large organization it is referred to as intra-preneurship and may include corporate venturing, when large entities spin-off organizations.[1]s According to Paul Reynolds, entrepreneurship scholar and creator of the Global Entrepreneurship Monitor, "by the time they reach their retirement years, half of all working men in the United States probably have a period of self-employment of one or more years; one in four may have engaged in self-employment for six or more years. Participating in a new business creation is a common activity among U.S. workers over the course of their careers." [2] And in recent years has been documented by scholars such as David Audretsch to be a major driver of economic growth in both the United States and Western Europe. Entrepreneurial activities are substantially different depending on the type of organization and creativity involved. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. Many "high value" entrepreneurial ventures seek venture capital or angel funding (seed money) in order to raise capital to build the business. Angel investors generally seek annualized returns of 20-30% and more, as well as extensive involvement in the business.[3] Many kinds of organizations now exist to support would-be entrepreneurs including specialized government agencies, business incubators, science parks, and some NGOs. In more recent times, the term entrepreneurship has been extended to include elements not related necessarily to business formation activity such as conceptualizations of entrepreneurship as a specific mindset (see also entrepreneurial mindset) resulting in entrepreneurial initiatives e.g. in the form of social entrepreneurship, political entrepreneurship, or knowledge entrepreneurship have emerged. The entrepreneur is a factor in microeconomics, and the study of entrepreneurship reaches back to the work of Richard Cantillon and Adam Smith in the late 17th and early 18th centuries, but was largely ignored theoretically until the late 19th and early 20th centuries and empirically until a profound resurgence in business and economics in the last 40 years. In the 20th century, the understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. In Schumpeter, an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation.[4] Entrepreneurship

employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior innovations across markets and industries, simultaneously creating new products including new business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is hotly debated in academic economics. An alternate description posited by Israel Kirzner suggests that the majority of innovations may be much more incremental improvements such as the replacement of paper with plastic in the construction of a drinking straw. For Schumpeter, entrepreneurship resulted in new industries but also in new combinations of currently existing inputs. Schumpeter's initial example of this was the combination of a steam engine and then current wagon making technologies to produce the horseless carriage. In this case the innovation, the car, was transformational but did not require the development of a new technology, merely the application of existing technologies in a novel manner. It did not immediately replace the horsedrawn carriage, but in time, incremental improvements which reduced the cost and improved the technology led to the complete practical replacement of beast drawn vehicles in modern transportation. Despite Schumpeter's early 20th-century contributions, traditional microeconomic theory did not formally consider the entrepreneur in its theoretical frameworks (instead assuming that resources would find each other through a price system). In this treatment the entrepreneur was an implied but unspecified actor, but it is consistent with the concept of the entrepreneur being the agent of x-efficiency. Different scholars have described entrepreneurs as, among other things, bearing risk. For Schumpeter, the entrepreneur did not bear risk: the capitalist did.

Some notable persons and their works in entrepreneurship history. For Frank H. Knight [5] (1921) and Peter Drucker (1970) entrepreneurship is about taking risk. The behavior of the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as capital on an uncertain venture. Knight classified three types of uncertainty.

Risk, which is measurable statistically (such as the probability of drawing a red color ball from a jar containing 5 red balls and 5 white balls). Ambiguity, which is hard to measure statistically (such as the probability of drawing a red ball from a jar containing 5 red balls but with an unknown number of white balls).

True Uncertainty or Knightian Uncertainty, which is impossible to estimate or predict statistically (such as the probability of drawing a red ball from a jar whose number of red balls is unknown as well as the number of other colored balls).

The acts of entrepreneurship are often associated with true uncertainty, particularly when it involves bringing something really novel to the world, whose market never exists. However, even if a market already exists, there is no guarantee that a market exists for a particular new player in the cola category. The place of the disharmony-creating and idiosyncratic entrepreneur in traditional economic theory (which describes many efficiency-based ratios assuming uniform outputs) presents theoretic quandaries. William Baumol has added greatly to this area of economic theory and was recently honored for it at the 2006 annual meeting of the American Economic Association.[6] The entrepreneur is widely regarded as an integral player in the business culture of American life, and particularly as an engine for job creation and economic growth. Robert Sobel published The Entrepreneurs: Explorations Within the American Business Tradition in 1974. Zoltan Acs and David Audretsch have produced an edited volume surveying Entrepreneurship as an academic field of research,[7] and more than a hundred scholars around the world track entrepreneurial activity, policy and social influences as part of the Global Entrepreneurship Monitor (GEM)[8] and its associated reports. Though Entrepreneurs are thought to have many of the same character traits as leaders,[clarification needed] , involve particular psychological dispositions, or operate in purely business spheres of life, recent European theorising on the subject has suggested that, come the era of neo-liberalism and 'big society' politics that promote conceptualising humans as economic agents per se, normal, everyday people usually marginalised from the term 'entrepreneur' are too involved in the very same kind of processes that 'big business', proper entrepreneurs are involved with. Entrepreneurs, and entrepreneurship, as such, might be enacted by anybody, encountering as they do economic uncertainty on an everyday basis.

Contents
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1 Concept of Entrepreneurship 2 Promotion of Entrepreneurship 3 Financial Bootstrapping 4 Traditional Financing 5 See also 6 References 7 Further reading 8 External links

[edit] Concept of Entrepreneurship

It has assumed super importance for accelerating economic growth both in developed and developing countries. It promotes capital formation and creates wealth in country. It is hope and dreams of millions of individuals around the world. It reduces unemployment and poverty and it is a pathway to prosper. Entrepreneurship is the process of exploring the opportunities in the market place and arranging resources required to exploit these opportunities for long term gain. It is the process of planning, organising, opportunities and assuming. Thus it is a risk of business enterprise. It may be distinguished as an ability to take risk independently to make utmost earnings in the market. It is a creative and innovative skill and adapting response to environment of what is real.

[edit] Promotion of Entrepreneurship

Given entrepreneurship's potential to support economic growth, it is the policy goal of many governments to develop a culture of entrepreneurial thinking. This can be done in a number of ways: by integrating entrepreneurship into education systems, legislating to encourage risktaking, and national campaigns. An example of the latter is the United Kingdom's Enterprise Week, which launched in 2004. Outside of the political world, research has been conducted on the presence of entrepreneurial theories in doctoral economics programs. Dan Johansson, fellow at the Ratio Institute in Sweden, finds such content to be sparse. He fears this will dilute doctoral programs and fail to train young economists to analyze problems in a relevant way.[9] Many of these initiatives have been brought together under the umbrella of Global Entrepreneurship Week, a worldwide celebration and promotion of youth entrepreneurship, which started in 2008.

[edit] Financial Bootstrapping

Financial bootstrapping is a term used to cover different methods for avoiding using the financial resources of external investors. Bootstrapping can be defined as a collection of methods used to minimize the amount of outside debt and equity financing needed from banks and investors.[10] The use of private credit card debt is the most known form of bootstrapping, but a wide variety of methods are available for entrepreneurs. While bootstrapping involves a risk for the founders, the absence of any other stakeholder gives the founders more freedom to develop the company. Many successful companies including Dell Computers and Facebook were founded this way. There are different types of bootstrapping:

Owner financing Sweat equity Minimization of the accounts receivable Joint utilization

Delaying payment Minimizing inventory Subsidy finance Personal Debt

[edit] Traditional Financing

Having outside investors is not necessarily beyond the realm of entrepreneurship. In many cases, leveraging the owners' credit cards and personal assets, such as mortgages, may not be sufficient. Inadequate investment can also kill a start up. And bringing in outsiders can be beneficial. Outsiders can provide financial oversight, accountability for carrying out tasks and meeting milestones, and many can even bring valuable business contacts and experience to the table.

Angel Investors Venture capital investors Crowd funding Hedge Funds Alternative Asset Management

[edit] See also

Book: Entrepreneurship
Wikipedia books are collections of articles that can be downloaded or ordered in print.

Business opportunity Business plan Corporate Social Entrepreneurship Entrepreneurship Ecosystem Entrepreneurship education Economy and Entrepreneurship Junior enterprise University spin-off

[edit] References
1. ^ Shane, Scott "A General Theory of Entrepreneurship: the Individual-Opportunity Nexus", Edward Elgar 2. ^ Reynolds, Paul D. "Entrepreneurship in the United States", Springer, 2007, ISBN 9780-387-45667-6 3. ^ Angel Investing, Mark Van Osnabrugge and Robert J. Robinson 4. ^ Schumpeter, Joseph A. "Capitalism, Socialism and Democracy", 1942 5. ^ Knight, Francis A. "Risk, Uncertainty and Profit" 6. ^ "Searching for the invisible man". The Economist (The Economist Newspaper Limited): pp. 67. 2006-03-11. Retrieved 2008-03-05.

7. ^ Handbook of Entrepreneurship Research: An Interdisciplinary Survey and Introduction 8. ^ www.gemconsortium.org 9. ^ Johansson, Dan. "Economics Without Entrepreneurship or Institutions: A Vocabulary Analysis of Graduate Textbooks" (December 2004). [1] 10. ^ Ebbena, Jay; Johnson, Alec, "Bootstrapping in small firms: An empirical analysis of change over time", Journal of Business Venturing, Volume 21, Issue 6, November 2006, Pages 851-865

[edit] Further reading

Duening, Thomas N., Hisrich, Robert D., Lechter, Michael A., Technology Entrepreneurship, Academic Press, 2009. ISBN 978-0-12-374502-6 Livingston, Jessica, Founders at work: stories of startups' early days, Berkeley, CA : Apress ; New York : Distributed to the book trade worldwide by Springer-Verlag New York, 2007. ISBN 978-1-59059-714-9

[edit] External links

Starting a Business Stockholm School of Entrepreneurship (SSES) The Ewing Marion Kauffman Foundation Entrepreneurship.gov Enterprise UK

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The Advantages and Disadvantages of Entrepreneurship

The term entrepreneurship in business has advantages and disadvantages. The advantages of being entrepreneur are people can earn a lot of money from their business. It can happen if their business is very interesting to the customers. And that condition can make the business is more famous in society. Beside it, by becomes an entrepreneur, people can determine their future by themselves. It is caused that the people who are entrepreneurs should organize, manage, and calculate the risks of their business by themselves. So thus an entrepreneurship can lead the people to earn a lot of money and as the stock for the future. The important thing is an entrepreneur will take the benefit for him of herself only. On the other hand, an entrepreneurship also gives some disadvantages for the people. For example, the people who are entrepreneurs will not have more time to just relax or refreshing. It is because they have to work for long hours to manage the business. Entrepreneurs organize and manage the business by themselves. Even, if they cannot handle the business, they can fall down and fail. In some cases, that condition was happened to the passive and uncreative people or entrepreneurs. While in the active and creative entrepreneurs, that condition will not happen.

9 Myths About Entrepreneurs - Presentation Transcript

1. in Title 9 Myths about Entrepreneurs and Entrepreneurship Professor Laura L. Hollis, JD Clinical Professor of Business Administration November 4, 2008 2. #1. Entrepreneurship is a young persons game; most first-time entrepreneurs are either in college or right out of it FALSE In fact, the average age of a first-time entrepreneur starting a technology business is 39! And since this is an average, that means that just as many start-up founders are older as are younger. Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008 3. #2. Successful entrepreneurs are those who come up with the most creative, original ideas for their businesses o FALSE o It depends on what you mean by creative and original.

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According to some studies, anywhere from 70% - 90% of the ideas for a new business come from an entrepreneurs previous employment or existing business contacts. o In other words, the more experience you get working for someone else, the more likely you are to come up with an idea for a new business. o Source: Prof. Ikhlaq Sidhu, Center for Entrepreneurship and Technology, University of California, Berkeley #3. Most entrepreneurs are motivated by money or greed o FALSE o And not just false, but way, way off. o Most entrepreneurs are motivated by a desire to work for themselves, and a passion for solving problems particularly difficult, entrenched human problems. o Even the most successful entrepreneurs will tell you that if youre in it for the money, get out now; its much easier to make money working for someone else! o Sources: o Scott Shane, The Illusions of Entrepreneurship, Yale University Press o Guest lectures, Lectures in Entrepreneurship course, University of Illinois, 2001-2008 #4. Most successful entrepreneurs especially in high-tech companies have Ph.Ds in science o FALSE o 6% of U.S. born tech company founders have a high school diploma or less o 2% have an associates degree, some college, or a certification o 44% have a bachelors degree o 30% have a masters o 4% have an MD o 4% have a JD o Only 10% of high-tech company founders have a Ph.D! o Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008 #5. Entrepreneurs are born different o FALSE o In fact, a good number of people who become entrepreneurs never planned to be. o Although there are correlations between certain types of behavior or psychological traits and entrepreneurship, it seems that as many successful entrepreneurs learn these skills and acquire these attributes as are born with them. o And we know that some of the most significant personality traits associated with entrepreneurship such as self-efficacy - CAN be taught o Source: Bill Lucas, MIT and Sarah Cooper, Cambridge University #6. To be successful, an entrepreneur needs a degree in business o FALSE o Although many self-employed people have business degrees, there is a stronger correlation between a degree in the sciences or engineering o According to a recent study, 34% of U.S. founders of high-tech companies held degrees in business, finance or accounting o 47% held degrees in STEM-related fields ( S cience, T echnology, E ngineering, or M athematics o Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008 #7. Most entrepreneurs are millionaires o FALSE

Most new businesses fail The average self-employed person earns less than they would working for someone else Entrepreneurs work more hours, on average, than those working for someone else Source: Scott Shane, The Illusions of Entrepreneurship, Yale University Press 9. #8. You cant be an entrepreneur without venture capital o FALSE o only .03% of new companies are financed by venture capital o the average amount of money used to start a business is between $15,000 - $20,000 o the most common source of this money is the entrepreneurs savings ; not banks, or even loans from friends and family o 65% of entrepreneurs finance their companies use some form of personal debt o fewer than 1 in 12 start-ups gets investment money (equity financing) from family and friends o Source: Scott Shane, The Illusions of Entrepreneurship, Yale University Press 10. #9: Entrepreneurs are happier than those who work for other people o TRUE o But! It depends upon what measure you are looking at o Remember, entrepreneurs work more hours than those working for someone else o And, they tend to make less money o And, most new businesses fail o That said, self-employed people report HIGHER job satisfaction o dramatically higher 62.5% versus 45.9% o Why? Autonomy, flexibility, greater impact and greater control. o Source: Scott Shane, The Illusions of Entrepreneurship, Yale University Press

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CHAPTER 1 - The Nature and importance of entrepreneurs Learning Objectives

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1 1- The Nature and importance of entrepreneurs 2 Learning Objectives 3 I. NATURE AND DEVELOPMENT OF ENTREPRENEURSHIP 4 II. DEFINITION OF ENTREPRENEUR 5 III. THE ENTREPRENEURIAL DECISION PROCESS 6 IV. TYPES OF START-UPS 7 V. ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT 8 VI. ENTREPRENEURIAL CAREERS AND EDUCATION 9 VII. ETHICS AND SOCIAL RESPONSIBILITY OF ENTREPRENEUR 10 VIII. THE FUTURE OF ENTREPRENEURSHIP 11 IX. IN REVIEW: SUMMARY. 12 learning objectives revisited 13 key terms

The Nature and importance of entrepreneurs Learning Objectives 1- To introduce the concept of entrepreneurship and its historical development. 2- To explain the entrepreneurial decision process. 3- To identify the basic types of start-up ventures. 4- To explain the role of entrepreneurship in economic development. 5- To discuss the ethics and racial responsibility of entrepreneurs. I. NATURE AND DEVELOPMENT OF ENTREPRENEURSHIP A. The term entrepreneur comes from the French and translates betweentaker or go-between.

B. Earliest Period. 1. Marco Polo, who acted as a go-between and attempted to establish trade routes to the far east, was an early example. 2. The capitalist was a passive risk bearer, and the merchant bore all the physical and emotional risks. 3. The profits were divided between the capitalist and the merchant. C. Middle Ages. 1. The term entrepreneur was used to describe both an actor and a person who managed large production projects. 2. This person did not take any risks, but managed the project with the resources provided. 3. A typical entrepreneur was the cleric who managed architectural projects. D. 17th Century. 1. By the 17th century the entrepreneur was a person who entered into a contract with the government to perform a service. 2. Any profits or losses were the entrepreneurs, tying risk to the entrepreneur for the first time. 3. John Law, a Frenchman, established a royal bank which evolved into an exclusive franchise trading

company in the New World, leading eventually to Laws downfall. 4. Richard Cantillon, a noted economist of the 1700s, developed early theories of the entrepreneur and is regarded as the founder of the term. 5. He viewed the entrepreneur as a risk taker who buy[s] at certain price and sell[s] at an uncertain price, therefore operating at a risk. E. 18th Century. 1. In the 18th century the entrepreneur was distinguished from the capital provider. 2. Inventors Eli Whitney and Thomas Edison were unable to finance invention themselves. 3. Both were capital users (entrepreneurs), not capital providers (venture capitalists.) a. Whitney used expropriated British crown property. b. Edison raised capital from private sources. 4. A venture capitalist is a professional money manager who makes risk investments from a pool of equity capital to obtain a high rate of return on investments. F. 19th and 20th Centuries. 1. In the late 19th and early 20th centuries, entrepreneurs were usually not distinguished from

managers. 2. The entrepreneur contributes his own initiative, skill and ingenuity in planning, organizing and administering the enterprise assume[ing] the chance of loss and gain. 3. Andrew Carnegie is one example, building the American steel industry through competitiveness rather than creativity. 4. In the middle of the 20th century, the notion of an entrepreneur as an innovator was established. 5. Innovation, the act of introducing something new, is one of the most difficult tasks for the entrepreneur. 6. Edward Harriman and John Pierpont Morgan are examples of this type of entrepreneur. 7. This ability to innovate is an instinct that can be observed throughout history and has been present in every civilization.

II. DEFINITION OF ENTREPRENEUR A. Almost all definitions of entrepreneurship include: 1. Initiative taking. 2. The organizing and reorganizing or social/economic mechanisms to turn

resources and situations to practical account. 3. The acceptance of risk or failure. B. To an economist, an entrepreneur is one who brings resources, labor, materials, and other assets into combinations that make their value greater than before, and one who introduces changes, innovations, and a new order. C. Entrepreneurship is the dynamic process of creating wealth. D. Our definition of entrepreneurship involves four aspects: 1. Entrepreneurship involves the creation processcreating something new of value to the entrepreneur and to the audience. 2. It requires the devotion of the necessary time and effort. 3. It involves assuming the necessary risks. 4. The rewards of being an entrepreneur are independence, personal satisfaction, and monetary reward. E. The entrepreneurial experience is filled with enthusiasm, frustration, anxiety, and hard work. 1. For many reasons there is a high failure rate among business owners. 2. The financial and emotional risk can be very high.

III. THE ENTREPRENEURIAL DECISION PROCESS A. Entrepreneurship has resulted in several million new businesses being started worldwide. 1. Around 1 million new companies are formed each year in the U.S. 2. Each of these ventures is formed through an entrepreneurial decision process that entails a movement from something to something. B. Change from Present Lifestyle. 1. Two work environments tend to be good for spawning new enterprises: research and development and marketing. 2. A stronger incentive to leave a present live-style comes from a negative forcedisruption. a. Many companies are formed by people who have retired, moved, or been fired. b. Another cause of disruption is completing an educational degree. 3. The decision to start a new company occurs when an individual perceives that forming a new enterprise is both desirable and possible. C. Desirability of New Venture Formation. 1. The perception that starting a new company is desirable results from an individuals culture, family, teachers, and peers.

a. American culture places a high value on being your own boss, being a success, and making money. b. In some cultures making money is not as valued, and failure may be a disgrace; the rate of business formation in these countries is not as high. 2. Many subcultures that shape value systems operate within a cultural framework. a. In the U.S. they include Route 128 (Boston), Silicon Valley (California), and North Carolina Triangle. b. These subcultures support and even promote entrepreneurship. 3. Studies indicate that a high percentage of founders of companies had fathers and/or mothers who valued independence.

4. Encouragement to form a company is also gained from teachers, who can significantly influence individuals toward entrepreneurship. 5. An area with a strong educational base is also required for entrepreneurial activity. 6. Peers are important, also, as is an area with an entrepreneurial pool and peer meeting place. D. Possibility of New Venture Formation.

1. What makes it possible to form a new company? 2. The government contributes by providing the infrastructure to help a new venture. a. The U.S. has the necessary roads, communication and transportation systems, utilities, and economic stability. b. The U.S. tax rate for companies and individuals is better than in some European countries. 3. The entrepreneur must have the necessary background. a. A formal education and previous business experience provide needed skills. b. Individuals tend to be more successful in forming businesses in fields in which they have worked. 4. The market must be large enough. 5. The entrepreneur must have the marketing know-how to put together the entire package. 6. A role model can powerfully influence the perception of venture possibility. 7. Financial resources must be available. a. Most start-up money comes from personal savings, credit, and friends; but additional capital may be needed. b. More new companies form when seed capital is readily available.

IV. TYPES OF START-UPS

A. A lifestyle firm is privately held and usually achieves only limited growth. 1. This type of firm may grow after several years to 30 or 40 employees. 2. A lifestyle firm exists primarily to support the owners and usually has little growth opportunity. B. Foundation Companies. 1. A foundation company is a type of company formed from research and development and lays the foundation for a new business area. 2. This firm can grow in five to ten years from 40 to 400 employees. 3. This type of start-up rarely goes public and draws little outside investor interest. C. High-Potential Venture. 1. This type of venture receives the most investor interest. 2. The company may start out like a foundation company, but its growth is far more rapid. 3. After five to ten years the company could employ around 500 employees, with $20-30 million in revenues. 4. These firms are also called gazelles and are most important for the economic development of an area. D. The type and number of new business formations vary throughout the U.S.

V. ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT A. The role of entrepreneurship in economic development involves initiating change in the structure of business and society. 1. One theory of economic growth depicts innovation as the key, not only in developing new products, but also in stimulating investment interest. 2. The new capital created expands the capacity for growth (supply side), and new spending utilizes the new capacity and output (demand side.) B. The product-evolution process is the process through which innovation develops and commercializes through entrepreneurial activity, which in turn stimulates economic growth. 1. It begins with knowledge in the base technology and ends with products or services available in the marketplace. 2. The critical point in the process is the intersection of knowledge and a recognized social need, called the iterative synthesis. 3. This point often fails to evolve into a marketable innovation. 4. Most innovations introduced in the market are ordinary innovations, with little uniqueness.

5. There are fewer technological and breakthrough innovations. 6. Each innovation evolves and develops through one of three mechanisms: the government, intrapreneurship, or entrepreneurship. 7. Entrepreneurship has assisted in revitalizing areas of the inner city. C. Government as an Innovator. 1. Commercializing the results of the interaction between a social need and technology is called technology transfer. 2. However, few inventions resulting from government-sponsored research have reached the commercial market. 3. Most of the by-products from scientific research have little application to any commercial need. 4. The government has financial resources but lacks the business skills needed for successful commercialization. 5. Government bureaucracy and red tape also often inhibit the timely formation of the business. 6. Recently, federal labs have been required to commercialize some of their technology each year, and some are providing entrepreneurial training.

D. Intrapreneurship, entrepreneurship within an existing organization, can also bridge the gap between science and the marketplace. 1. Existing businesses have the financial resources, business skills, and marketing and distribution system to commercialize innovation successfully. 2. However, the bureaucratic structure, emphasis on short-term profits, and structured organization inhibit creativity. 3. Some corporations have tried to establish an intrapreneurial spirit in their organization, some in the form of strategic business units (SBUs.) E. Entrepreneurship is another method for bridging the gap between science and the market place. 1. Entrepreneurs often lack managerial skills, marketing capabilities, or financial resources. 2. They frequently do not know how to interface with banks, suppliers, customers, and distributors. 3. Yet entrepreneurship is the most effective method for bridging the gap and creating new enterprises. 4. These activities affect an areas economy by building the economic base and providing jobs.

VI. ENTREPRENEURIAL CAREERS AND EDUCATION A. Since 1985 there has been an increased interest in entrepreneurial careers fostered by factors such as increased media coverage of entrepreneurs and employment shifts. B. The life-cycle approach for understanding entrepreneurial careers views the career stages as interacting with other stages and events in the individuals life. 1. This approach conceptualizes entrepreneurial careers in nine categories. 2. Educational environment. a. Entrepreneurs overall, and female entrepreneurs in particular, are far more educated than the general population. b. Education sometimes does not develop the specific skills needed in the venture, especially for women entrepreneurs. 3. The individuals personality. a. The traits most frequently researched are the need for achievement, locus of control, risk-taking, and gender identity. b. Few conclusions can be drawn from this research into personality traits. 4. Childhood family environment. a. Entrepreneurs tend to have self-employed fathers, and many also have

entrepreneurial mothers. b. The family plays an important role in establishing the desirability of entrepreneurship as a career. 5. Employment history. a. Entrepreneurs tend to have a higher probability of success when the venture created is in their field of experience. b. Negative displacement (such as dissatisfaction with various aspects of ones job) also encourages entrepreneurship. 6. Adult development history has somewhat more of an impact on women, since they tend to start businesses at a later stage in life. 7. There is a lack of data on adult family/nonwork history, and the available data adds little understanding. 8. Current work situation. a. Entrepreneurs are known for their strong work values, their long work days, and their dominant management style. b. They tend to fall in love with the organization and will sacrifice almost anything in order for it

to survive. c. The new venture usually takes the highest priority in the entrepreneurs life. 9. The individuals current perspective. 10. The current family situation. C. Entrepreneurial Education. 1. While in college, few pursue entrepreneurship as their major life goal. a. Relatively few individuals will start a business immediately after graduation. b. Entrepreneurs must continually supplement their education through books, trade journals, seminars, and courses. 2. Entrepreneurship education is a fast growing area in colleges and universities. 3. While the courses vary by university, there is a great commonality, especially in the initial few courses. D. Skills required by entrepreneurs can be classified into three categories. 1. Technical skills involve such things as writing, listening, oral presentations, organizing, coaching, and technical know-how. 2. Business management skills include those areas involved in starting, developing, and managing any

enterprise. 3. Personal entrepreneurial skills differentiate an entrepreneur from a manager and include inner control (discipline), risk taking, innovativeness, persistence, visionary leadership, and being change oriented. E. These skills and objectives form the basis of the modular approach to an entrepreneurship curriculum. F. Today entrepreneurs are recognizing the need to learn some of the science of management in an MBA program in order to grow their businesses effectively in the global environment.

VII. ETHICS AND SOCIAL RESPONSIBILITY OF ENTREPRENEUR A. The entrepreneur must establish a balance between ethical exigencies, economic expediency, and social responsibility. 1. A managers attitudes concerning corporate responsibility tend to be supportive of laws and professional codes of ethics. 2. Entrepreneurs have few reference persons, role models, and developed internal ethics codes.

3. Entrepreneurs are particularly sensitive to peer pressure and social norms in the community as well as pressures from their competitors. 4. Internationally, U.S. managers have more individualistic and less communitarian values than managers in European countries. B. While ethics refers to the study of whatever is right and good for humans, business ethics concerns itself with the investigation of business practices in light of human values. 1. Business ethics has emerged as an important topic. 2. The word ethics stems from the Greek thos, meaning custom and usage. C. Development of Our Ethical Concepts. 1. Socrates, Plato, and Aristotle provide the earliest writings dealing with ethical conceptions; earlier writings involving moral codes can be found in both Judaism and Hinduism. 2. American attitudes on ethics result from three principle influences: a. Judeo-Christian heritage. b. Belief in individualism. c. Opportunities based on ability rather than social status. 3. Research on business ethics can be broken down into four broad classifications:

a. Pedagogically-oriented inquiry. b. Theory-building without empirical testing. c. Empirical research, measuring the attitudes and ethical beliefs of students and academic faculty. d. Empirical research within business environments.

VIII. THE FUTURE OF ENTREPRENEURSHIP A. Definitions of entrepreneurship differ, but there are common aspects such as risk taking, creativity, independence, and rewards. 1. Entrepreneurship is currently being embraced by educational institutions, governments, societies, and corporations. 2. Schools are increasing their emphasis on entrepreneurship in terms of courses and academic research. 3. In Europe many universities have started programs in entrepreneurship. 4. There has also been an increase in academic research, endowed chairs, and centers of entrepreneurial activity. B. Governments have also promoted the growth of entrepreneurship. 1. Individuals are encouraged to form new businesses and provided tax

incentives, roads, and a communications system to facilitate this creative process. 2. Some state governments are developing strategies for fostering entrepreneurial activity. 3. The venture capital industry has benefited from lowering of capital gains tax rates and more relaxed rules regarding pension fund investment. C. Societys support of entrepreneurship is critical in providing motivation and public support. 1. The media has played a powerful role in developing public support. 2. Media coverage uplifts the image of the entrepreneur and growth companies. a. Articles have appeared in newspapers such as New York Times, The Wall Street Journal, and the Washington Post. b. Business magazines such as Barrons, Business Week, Forbes, and Fortune have provided coverage. c. Magazines such as Black Enterprise, Entrepreneur, Inc., and Journal of Venturing focus on issues of the entrepreneurial process. d. Television on both a national and local level has highlighted entrepreneurship. D. Large companies will continue to have a special interest in intrapreneurship in the future.

1. The largest 15 companies account for over 20 percent of the total U.S. research and development. 2. Other companies will create more new businesses through intrapreneurship. IX. IN REVIEW: SUMMARY. See Learning Objectives Revisited below. learning objectives revisited Learning Objective 1. To introduce the concept of entrepreneurship and its historical development. o The term entrepreneur comes from the French and translates betweentaker or go-between. o In the Middle Ages the term entrepreneur was used to describe both an actor and a person who managed large production projects, not a risk taker. o The concept of risk was tied to entrepreneurship by the 17th century. o By the 18th century the entrepreneur was distinguished from the capital provider. o In the late 19th and early 20th centuries, entrepreneurs were usually not distinguished from managers. o At the middle of the 20th century, the notion of an entrepreneur as an innovator was established.

Learning Objective 2. To explain the entrepreneurial decision process.

o Two work environments tend to be good for spawning new enterprises: research and development and marketing. o The decision to start a new business occurs when an individual perceives that forming the venture is both desirable and possible. + American culture places a high value on being your own boss, being a success, and making money. + Influences include mothers and fathers, teachers, and peers. o Several factors determine the possibility of forming a new company. + The government provides the infrastructure to help a new venture. + The entrepreneur must have the necessary background. + The market must be large enough and the entrepreneur must have the marketing know-how to put it all together. + Financial resources must be available.

Learning Objective 3. To identify the basic types of start-up ventures. o A life-style firm exists primarily to support the owners and usually has little growth opportunity. o Foundation companies are firms created from research and development that lay the foundation for a

new industry. o High-potential ventures are new companies that receive the greatest investment interest and publicity.

Learning Objective 4. To explain the role of entrepreneurship in economic development. o The role of entrepreneurship in economic development involves initiating change in the structure of business and society. o The product-evolution process is the process through which innovation develops and commercializes through entrepreneurial activity, which in turn stimulates economic growth. + The government can assist by encouraging technology transfer. + Intrapreneurship, entrepreneurship within an existing business, in another way of encouraging innovation. + Entrepreneurship is the most effective way to create new enterprises.

Learning Objective 5. To discuss the ethics and racial responsibility of entrepreneurship. o The entrepreneur must establish a balance between ethical exigencies, economic expediency, and social responsibility.

o Business ethics concerns itself with the investigation of business practices in light of human values. o American attitudes on ethics result from: + Judeo-Christian heritage. + Belief in individualism. + Opportunities based on ability rather than social status. key terms 1. Breakthrough innovations. A new product with some technological change. 2. Business ethics. The study of behavior and morals in a business situation. 3. Desirability of new venture formation. Aspects of a situation that make it desirable to start a new company. 4. Entrepreneur. Individual who takes risks and starts something new. 5. Entrepreneur as an innovator. An individual developing something unique. 6. Entrepreneurial decision process. Deciding to become an entrepreneur by leaving present activity. 7. Entrepreneurship. Process of creating something new and assuming the risks and rewards. 8. Foundation companies. A type of company formed from research and development that usually

does not go public. 9. Gazelles. Very high growth ventures. 10. Government as an innovator. A government active in commercializing technology. 11. High-potential ventures. A venture that has high growth potential and therefore receives great investor interest. 12. Intrapreneurship. Entrepreneurship within an existing organization. 13. Iterative synthesis. The intersection of knowledge and social need that starts the product development process. 14. Lifestyle firm. A small venture that supports the owners and usually does not grow. 15. Ordinary innovations. A new product with little technological change. 16. Possibility of new venture formation. Factors making it possible to create a new venture. 17. Product-evolution process. Process for developing and commercializing an innovation. 18. Risk taking. Taking calculated chances in creating and running a venture. 19. Technological innovations. New products with significant technological advancement. 20. Technology transfer. Commercializing the technology in the laboratories into new products.

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