Chapter 1 Understanding Entrepreneurship We cannot direct the wind but we can adjust the sails Bertha Calloway Founder Great Plains Black Museum Copyright Houghton Mifflin Company All rights reserved 1 2 Definition of Entrepreneurship Entrepreneurship is a mindset that is Opportunity focused Innovative Growth oriented Entrepreneurship is also a set of behaviors Recognizing opportunity Gathering resources to act on an opportunity Driving an opportunity to completion Wildcard PASSION cannot be taught Copyright Houghton Mifflin Company All rights reserved 1 3 The Process of Entrepreneurship Three Models The Integrated Input Output Model which looks at which variables are put into the process The Career Assessment Approach which proposes that the entrepreneur makes judgments based on the stage status of his her career ie are there any acceptable job opportunities The New Venture Creation Process conceived by Gartner and our text most closely follows Copyright Houghton Mifflin Company All rights reserved 1 4 New Venture Creation Process The Entrepreneurial Process which is NOT linear is affected by three major categories of variables The individual entrepreneur and what he she brings to the process The environment which includes all external variables like markets industries and suppliers The organization which is all the strategic aspects of the new venture such as available resources and strategic partnerships Copyright Houghton Mifflin Company All rights reserved 1 5 Figure 1 1 The Entrepreneurship Process Copyright Houghton Mifflin Company All rights reserved 1 6 Figure 1 2 Entrepreneurship and Technological Change Copyright Houghton Mifflin Company All rights reserved 1 7 Outcomes of Entrepreneurship Economic Growth technological innovation is the engine of growth for the U S economy in the current global arena Ex page 7 China Job Creation SBA defines a small business as having less than 500 employees 99 7 percent of all U S employers are small businesses See next slide New Industry Formation see applicable slide Copyright Houghton Mifflin Company All rights reserved 1 8 Job Creation The most recent comprehensive annual data indicates that small businesses created 1 990 326 net new jobs per year as compared to 994 667 for large firms U S Bureau of the Census Administrative Office of the U S Courts Endogenous Growth and Entrepreneurial Activities Copyright Houghton Mifflin Company All rights reserved 1 9 New Industry Formation New industries are born when technological change produces a new opportunity that an enterprising entrepreneur seizes Disruptive or metamorphic technologies destroy previous technologies and create new industries vinyl records 8 track cassette CD digital downloads The pattern of growth shakeout stabilization and decline of an industry can be interrupted at any time by the entry of a disruptive technology Most industries still grow even as the number of involved firms declines as illustrated in the next slide Copyright Houghton Mifflin Company All rights reserved 1 10 Figure 1 3 Industry Life Cycles Source Adapted from M R Darby and L G Zucker Growing by Leaps and Inches Creative Destruction Real Cost Reduction and Inching Up Economic Inquiry January 2003 pp 1 19 January 2003 Copyright Houghton Mifflin Company All rights reserved 1 11 The Nature of Entrepreneurial Start ups An Entrepreneurial Venture brings something NEW to the marketplace versus just another ordinary new small business which is generally started only to produce an income for the owner Three primary characteristics of an Entrepreneurial Venture you ll know them when you see them 1 Innovative 2 Value creating 3 Growth oriented Copyright Houghton Mifflin Company All rights reserved 1 12 Figure 1 4 Social Political and Economic Context of the Entrepreneurial Process Source Paul D Reynolds 2000 National Panel of U S Business Start ups Background and Methodology Databases for the Study of Entrepreneurship Amsterdam JAI Elsevier Inc Vol 4 pp 153 227 Copyright Houghton Mifflin Company All rights reserved 1 13 New Business Failure Not all entrepreneurs succeed in growing their start up into an established business Survival has been attributed to having sufficient capital having employees shows commitment and the entrepreneur s intention in starting the business what s the goal Vital issue for entrepreneurs Minimizing the cost of a possible failure rather than avoiding failure at all costs Copyright Houghton Mifflin Company All rights reserved 1 14 Figure 1 5 The Entrepreneurial Evolution Copyright Houghton Mifflin Company All rights reserved 1 15 Entrepreneurial Trends The number of women and minority owned businesses continues to rise Women owned businesses comprise 1 3 of all entrepreneurship activity globally 15 of all U S businesses are minority owned The Internet certain to be the center of major entrepreneurial trends for a long time to come Globalization brings global competition but also the ability to compete globally Social Responsibility Sustainability Copyright Houghton Mifflin Company All rights reserved 1 16 Looking Ahead Part One The Opportunity LNV Chapter 1 Introduction to Entrepreneurship Lecture on Sustainability LNV Chapter 2 The Entrepreneur s Perspective LNV Chapter 3 Opportunity Recognition LNV Chapter 4 The Business Concept and Model LNV Part Two Feasibility Analysis Ch 5 8 LNV Part Three The Business Plan Ch 9 15 Copyright Houghton Mifflin Company All rights reserved 1 17