1-

Chapter 1
Chapter Objectives 1-
(1 of 2) 2

1. Explain entrepreneurship and discuss its

importance.
2. Describe corporate entrepreneurship and
its use in established firms.
3. Discuss the three main reasons that
people decide to become entrepreneurs.
4. Identify four main characteristics of
successful entrepreneurs.
5. Explain the five common myths
regarding entrepreneurship.
Chapter Objectives 1-
(2 of 2) 3

6. Explain how entrepreneurial firms differ

from salary-substitute and lifestyle firms.
 Discuss the changing demographics of
entrepreneurs in the United States.
 Identify ways in which large firms
benefit from the presence of smaller
entrepreneurial firms.
 Explain the entrepreneurial process.
 1-
Introduction to Entrepreneurship 4

There is tremendous
According to the GEM
interest in
2005 study, about 330
entrepreneurship million people, or 14%
around the world of the adults in the 35
countries surveyed, are
involved in forming
new businesses
What is Entrepreneurship? 1-
(1 of 2) 5

 Origin of the Word “Entrepreneur”

 The word was originally used to describe people who “take
on the risk” between buyers and sellers or “undertake” a
task such as starting a new venture.
 The “undertake” interpretation of the word has been central
to its usage in English.
 Difference Between an Inventor and an Entrepreneur
 An inventor creates something new.
 An entrepreneur puts together all the resources needed—the
money, the people, the strategy, and the risk-bearing ability
to transform the invention into a viable business.
What is Entrepreneurship? 1-
(2 of 2) 6

 Entrepreneurship Defined
 Entrepreneurship is the process by which
individuals pursue opportunities without regard to
the resources they currently control.
 The essence of entrepreneurial behavior is
identifying opportunities and putting useful ideas
into practice.
 The set of tasks called for by this behavior can be
accomplished by either an individual or a group
and typically requires creativity, drive, and a
willingness to take risks.
Corporate Entrepreneurship 1-
(1 of 2) 7

 Corporate Entrepreneurship
 Isthe conceptualization of entrepreneurship at
the firm level.
 All firms fall along a conceptual continuum
that ranges from highly conservative to highly
entrepreneurial.
 The position of a firm on this continuum is
referred to as its entrepreneurial intensity.
Corporate Entrepreneurship 1-
(2 of 2) 8

Entrepreneurial Firms Conservative Firms

• Take a more “wait and see”
• Proactive
• Innovative posture
• Risk taking • Less innovative
• Risk adverse
Why Become an Entrepreneur? 1-
9

There are three primary reasons that people become

entrepreneurs and start their own firms

Desire to be their own boss

Desire to pursue their

own ideas

Financial rewards
Characteristics of Successful Entrepreneurs
1-
(1 of 3) 10
Four Primary Characteristics of Successful Entrepreneurs
Characteristics of Successful Entrepreneurs
(2 of 3) 1-11

 Passion for the Business

 The number one characteristic shared by successful
entrepreneurs is a passion for the business.
 This passion typically stems from the
entrepreneur’s belief that the business will
positively influence people’s lives.
 Product/Customer Focus
 A second defining characteristic of successful
entrepreneurs is a product/customer focus.
 An entrepreneur’s keen focus on products and
customers typically stems from the fact that most
entrepreneurs are, at heart, craftspeople.
Characteristics of Successful Entrepreneurs 1-
(3 of 3)
12

 Tenacity Despite Failure

 Because entrepreneurs are typically trying something
new, the failure rate is naturally high.
 A defining characteristic for successful entrepreneurs is
their ability to persevere through setbacks and failures.
 Execution Intelligence
 The ability to fashion a solid business idea into a viable
business is a key characteristic of successful
entrepreneurs.
 The ability to translate thought, creativity, and imagination
into action and measurable results is the essence of execution
intelligence.
Common Myths About Entrepreneurs 1-
(1 of 5) 13

 Myth 1: Entrepreneurs Are Born Not Made

 This myth is based on the mistaken belief that
some people are genetically predisposed to be
entrepreneurs.
 The consensus of many studies is that no one
is “born” to be an entrepreneur; everyone has
the potential to become one.
 Whether someone does or doesn’t become an
entrepreneur is a function of the environment,
life experiences, and personal choices.
Common Myths About Entrepreneurs 1-
(2 of 5) 14
Although no one is “born” to be an entrepreneur, there are common
personality traits and characteristics of successful entrepreneurs

• Achievement motivated • Optimistic disposition

• Alert to opportunities • Persuasive
• Creative • Promoter
• Decisive • Resource assembler
• Energetic • Self-confident
• Has a strong work ethic • Tenacious
• Is a moderate risk taker • Tolerant of ambiguity
• Lengthy attention span • Visionary
Common Myths About Entrepreneurs 1-
(3 of 5) 15

 Myth 2: Entrepreneurs Are Gamblers

 A second myth about entrepreneurs is that they are
gamblers and take big risks. The truth is, most
entrepreneurs are moderate risk takers.
 The idea that entrepreneurs are gamblers originates
from two sources:
 Entrepreneurs typically have jobs that are less
structured, and so they face a more uncertain set of
possibilities than people in traditional jobs.
 Many entrepreneurs have a strong need to achieve and
set challenging goals, a behavior that is often equated
with risk taking.
Common Myths About Entrepreneurs 1-
(4 of 5) 16

 Myth 3: Entrepreneurs Are Motivated

Primarily by Money
 While it is naïve to think that entrepreneurs
don’t seek financial rewards, money is rarely
the reason entrepreneurs start new firms.
 Infact, some entrepreneurs warn that the
pursuit of money can be distracting.
Common Myths About Entrepreneurs 1-
(5 of 5) 17

 Myth 4: Entrepreneurs Should Be Young And

Energetic
 The most vibrant age range for early stage
entrepreneurial activity is 25 to 34 years old.
 While it is important to be energetic, investors
often cite the strength of the entrepreneur as their
most important criteria in making investment
decisions.
 What makes an entrepreneur “strong” in the eyes of an
investor is experience, maturity, a solid reputation, and
a track record of success.
 These criteria often favor older rather than younger
entrepreneurs.
Types of Start-Up Firms 1-
18

Types of Start-up Firms

 Changing Demographics of 1-
Entrepreneurial Firms 19
(1 of 3)
 Women Entrepreneurs
 There were 6.5 million women-owned businesses in 2002, the most
recent year the U.S. Census Bureau collected business ownership
data. That number is up 20% from 1997.
 Minority Entrepreneurs
 The number of minority-owned businesses has also risen sharply.
 Therewere 1.2 million African-American owned businesses in 2002, up
45% from 1997.
 There were 1.1 million Asian-owned businesses in 2002, up 24% from
1997.
 There were 206,125 Native American-owned businesses in 2002, up 24%
from 1997.
 Changing Demographics of 1-
Entrepreneurial Firms 20
(2 of 3)
 Senior Entrepreneurs
 Although the Census Bureau does not collect data on senior
entrepreneurs (people 55 years old and older), there is strong
evidence to suggest that the number of older people starting their
own businesses is rapidly growing.
 The dramatic increase in the number of senior entrepreneurs is
attributed to a number of factors, including:
 Corporate downsizing.
 An increasing desire among older workers for more personal fulfillment in
their lives.
 Growing worries among seniors that they need to earn additional income
to pay for future health care services and other expenses.
 Changing Demographics of 1-
Entrepreneurial Firms 21
(3 of 3)
 Young Entrepreneurs
 Interest
in entrepreneurship among young people is also
growing.
 At the high school level, a Gallup study revealed that 7 out of 10 high
school students want to start their own companies.
 Interestin entrepreneurship on college campuses is growing.
According to a recent study, 1,992 two- and four-years colleges and
universities now offer at least one course in entrepreneurship, up from
300 in the 1984-1985 school year.
 Although the bulk of entrepreneurship education takes place within
business schools, many other colleges and departments are offering
entrepreneurship courses as well, including engineering, agriculture,
theater, dance, education, law, and nursing.
 1-
Economic Impact of Entrepreneurial Firms
(1 of 2) 22

 Innovation
 Is the process of creating something new, which is central
to the entrepreneurial process.
 Small entrepreneurial firms are responsible for 55% of all
innovations in the U.S.
 Job Creation
 In the past two decades, economic activity has moved in
the direction of smaller entrepreneurial firms, which may
be due to their unique ability to innovate and focus on
specialized tasks.
 1-
Economic Impact of Entrepreneurial Firms
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 Globalization
 Today, over 97% of all U.S. exporters are small businesses
with fewer than 500 employees.
 Export markets are vital to the U.S. economy and provide
outlets for the sale of U.S. produced products and services.
Entrepreneurial Firms’ Impact on Society and1-
Larger Firms 24

 Impact on Society
 The innovations of entrepreneurial firms have a
dramatic impact on society.
 Think of all the new products and services that
make our lives easier, enhance our productivity at
work, improve our health, and entertain us in new
ways.
 Impact on Larger Firms
 Many entrepreneurial firms have built their entire
business models around producing products and
services that help larger firms become more
efficient and effective.
The Entrepreneurial Process 1-
25

The Entrepreneurial Process Consists of Four Steps

Step 1: Decision 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 an entrepreneurial firm
Steps in the Entrepreneurial Process 1-
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Step 1 Step 2

Developing Successful Business Ideas

Steps in the Entrepreneurial Process 1-
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Step 3 Step 4