Homework 400 words with 3 references

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Entrepreneurship: Evolutionary Development—Revolutionary Impact

PowerPoint Presentation by Charlie Cook

Part I The Entrepreneurial Mind-Set in the 21st Century

C h a p t e r 1

Learning Objectives

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 and framework approaches to the study of entrepreneurship

To set forth a comprehensive definition of entrepreneurship

To examine the entrepreneurial revolution taking place today

To illustrate today’s entrepreneurial environment

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Entrepreneurs—Breakthrough Innovators

Entrepreneurs

Recognize opportunities where others see chaos, contradiction, or confusion

Are aggressive catalysts for change within the marketplace

Challenge the unknown and continuously create breakthroughs for the future

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Entrepreneurs versus Small Business Owners: A Distinction

Small Businesses Owners

Manage their businesses by expecting stable sales, profits, and growth

Entrepreneurs

Focus their efforts on innovation, profitability and sustainable growth

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Entrepreneurship: A Mind-Set

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 individual’s business in an innovative manner.

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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 today’s entrepreneurs, research is providing an increasingly sharper focus on the subject.

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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.

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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 risks—in 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.

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Avoiding Folklore: The Myths of Entrepreneurship

Myth 1: Entrepreneurs Are Doers, Not Thinkers

Myth 2: Entrepreneurs Are Born, Not Made

Myth 3: Entrepreneurs Are Always Inventors

Myth 4: Entrepreneurs Are Academic and Social Misfits

Myth 5: Entrepreneurs Must Fit the Profile

Myth 6: All Entrepreneurs Need Is Money

Myth 7: All Entrepreneurs Need Is Luck

Myth 8: Entrepreneurship Is Unstructured and Chaotic

Myth 9: Most Entrepreneurial Initiatives Fail

Myth 10: Entrepreneurs Are Extreme Risk Takers

The Entrepreneurial Process

Types of people involved with contemporary small businesses:

The entrepreneur who invents a business that works without him or her.

The manager who produces results through employees by developing and implementing effective systems and, by interacting with employees, enhances their self-esteem and ability to produce good results.

The technician who performs specific tasks according to systems and standards management developed.

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Source: Adapted from Michael E. Gerber, The E-Myth Revisited: Why Most Businesses Don’t Work and What to Do About It (New York: Harper Collins,

1995, 2001) and personal interview.

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1.1 Entrepreneurial Schools-of-Thought Approach

Table

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Macro View: External Locus of Control

The Environmental School of Thought

Considers the external factors that affect a potential entrepreneur’s lifestyle.

The Financial/Capital School of Thought

Based on the capital-seeking process—the search for seed and growth capital.

The Displacement School of Thought

Alienation drives entrepreneurial pursuits

Political displacement (laws, policies, and regulations)

Cultural displacement (preclusion of social groups)

Economic displacement (economic variations)

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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

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Micro View: Internal Locus of Control

The Entrepreneurial Trait School of Thought

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 development—the 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.

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Micro View… (cont’d)

The Strategic Formulation School of Thought

Emphasizes the planning process in successful venture development.

Strategic formulation is a leveraging of unique elements:

Unique Markets—mountain gap strategies

Unique People—great chef strategies

Unique Products—better widget strategies

Unique Resources—water well strategies

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Process Approaches to Entrepreneurship

An Integrative Approach

Built around the concepts of input 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.

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1.2 An Integrative Model of Entrepreneurial Inputs and Outcomes

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): 21–31.

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Process Approaches… (cont’d)

Dynamic States Approach

Stresses dependency of venture on environment and the interaction of:

The dominant logic of the firm

The business model

Value creation

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1.3 Dynamic States Approach

Source: Jonathan Levie & Benjamin B. Lichtenstein, (2010). “A Terminal Assessment of Stages Theory: Introducing a Dynamic States Approach to Entrepreneurship,” Entrepreneurship Theory and Practice, 34, no. 2 (2010): 332. Reproduced with permission of John Wiley & Sons Ltd..

Process Approaches… (cont’d)

A Framework of Frameworks Approach

Offers a more dynamic view of entrepreneurship.

Allows for the profession to move forward.

Identifies the static and dynamic elements of new theories, typologies, or frameworks of importance.

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1.4 A Framework of Frameworks Approach

Source: Donald F. Kuratko, Michael H. Morris, and Minet Schindehutte, “Understanding the Dynamics of Entrepreneurship through Framework Approaches,” Small Business Economics, 45, no. 1 (2015): 9. Berlin, Germany; Springer Publishing.

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The Entrepreneurial Revolution: A Global Phenomenon

Entrepreneurship is the symbol of business tenacity and achievement.

Entrepreneurs were the pioneers of today’s business successes.

Two perspectives on entrepreneurship:

Statistical: numbers that emphasize the importance of entrepreneurs to the economy.

Academic: trends in entrepreneurial research and education.

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Effects of Entrepreneurship

The Global Entrepreneurship Monitor (GEM)

Provides an annual assessment of the entrepreneurial environment of over 100 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.

Phases of Economic Development

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The factor-driven phase

The efficiency-driven phase

The innovation-driven phase

Lessons from the GEM Study

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Works best when there is a strong set of basic economic requirements in place to reinforce efficiency enhancers

Needs both dynamism and stability for the creation of new businesses and the exit of nonviable ones

Entrepreneurship

Impacts economic measures for growth, innovation, and internationalization.

Requires a variety of business phases and types and different types of entrepreneurs including women and age groups

Flourishes when there is broad societal acceptance of the entrepreneurial mind-set

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Predominance of New Ventures in the U.S. Economy

Entrepreneurial Activity in the United States: Growth in Small Businesses

Entrepreneurs create over 400,000 new businesses each year.

28.2 million small firms provide 49.6 % of private-sector jobs and make up 99.7 % of employing firms.

Over the past five years, the number of minority-owned firms increased 45.6% while women-owned businesses increased 20.1%.

1 of every 150 adults participates in the founding of a new firm each year

Entrepreneurial Ventures 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 Impact 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:

Are responsible for 55% of innovations in 362 different industries and 95% of radical innovations.

Produce twice as many product innovations per employee as do larger firms.

Obtain more patents per sales dollar than do larger firms.

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1.2 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.

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Gazelles And Survival

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 year—in actuality, about half of all start-ups last between 5 and 7 years.

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Legacy of Entrepreneurial Firms

Entrepreneurial components of the U.S. Economy:

Large firms have increased profitability by returning to their “core competencies through restructuring and downsizing.

New entrepreneurial companies have been blossoming in new technologies and new markets.

Thousands of smaller firms established by women, minorities, and immigrants have strengthened the economy.

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Entrepreneurial Firms’ Economic Impact

Entrepreneurial firms make two indispensable contributions to an economy:

They are an integral part of the renewal process that pervades and defines market economies.

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

Social Entrepreneurship

Corporate Entrepreneurship

Trends in Entrepreneurship Research

Entrepreneurial Cognition

Global Entrepreneurial Movement

Family Businesses

Women and Minority Entrepreneurs

Entrepreneurial Education

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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.

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21st Century Trends in Entrepreneurship Research (cont’d)

Major Research Themes (cont’d):

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.

The Entrepreneurial Process

Best Graduate Programs in Entrepreneurship

Indiana University–Bloomington**

Stanford University

Harvard University

Massachusetts Institute of Technology

University of California–Berkeley**

Babson College

Best Undergraduate Programs in Entrepreneurship

Indiana University–Bloomington**

University of Pennsylvania

University of Southern California

University of Arizona**

Babson College

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The Best Business Schools for Entrepreneurship

**denotes public university

Source: Adapted from “Best Colleges for Aspiring Entrepreneurs,” Fortune Small Business (2007); “Venture Education,” Fortune Magazine (2010); and “Best Business School Rankings” U.S. News & World Report (2007 through 2015);

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Key Entrepreneurship Concepts

Entrepreneurship

A process of innovation and new-venture creation through four major dimensions—individual, organizational, environmental, and process—that 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.

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Key Concepts (cont’d)

Entrepreneurial Discipline

It matters not who or what the entrepreneur is—a business or a non-business public service organization, whether a governmental or non-governmental institution.

The rules are much the same and so are the kinds of innovation and where to look for them.

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Key Concepts (cont’d)

Entrepreneurial Leadership

Combining two capacities of the pursuit of innovation.

Capacity to lead

Capacity to risk

Leadership is measured.

Sense of opportunity

Drive to innovate

Capacity for accomplishment

One of the most significant phrases in the twenty-first century.

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Key Terms and Concepts

better widget strategies

corridor principle

displacement school of thought

dynamic states model

entrepreneur

entrepreneurial discipline

entrepreneurial leadership

Entrepreneurial Revolution

entrepreneurial trait school of thought

entrepreneurship

environmental school of thought

external locus of control

financial/capital school of thought

framework of frameworks

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