Chapter 1 Understanding Entrepreneurship 02 17 2014 Define entrepreneurship The process by which individuals either on their own or inside organizations pursue opportunities without regard to the resources they currently control Entrepreneurship is mindset that is o Opportunity focused o Risk taking o Innovative o Growth oriented to life Entrepreneurs above all must have a passion to bring a new idea The behaviors that entrepreneurship undertake include recognizing opportunity gathering the resources required to act on that opportunity and driving the opportunity to completion Entrepreneurship is about a novel entry into new or established markets and about exploiting new or existing products and services The Role of Entrepreneurship in the Economy Affected by three categories of variables Gartner o The entrepreneur and what he she brings to the process What does the entrepreneur undertake in order to create and exploit an idea o The environment external variables Such as industry suppliers and markets involved o The organization strategic aspects of the new venture Such as focus resources and strategic partnerships New Venture Creation Process o Consists of a fluid group of variables hat interact at different times with the entrepreneur and his or her team o The successful execution of the process results in a new venture however that venture continues to conduct its business in a dynamic environment that includes all the variables external to the business that have an important impact on the business s strategy for growth o As the leader the entrepreneur essentially plays two roles that of the catalyst initiating and driving the process and that of a ringmaster in a three ring or more circus managing the process through all its changes o The entrepreneurial process provides many benefits to society such as economic growth new industry formation and job creation o The new venture creation process is not linear you can start at any one point throughout the process and work through it o Consists of a fluid group of variables that interact at different times with the entrepreneur o The successful execution of the process results in a new venture Economic Growth Economic growth benefits entrepreneurs and entrepreneurial activity encourages economic growth The 1980s was the decade of the entrepreneur Technological innovation o Technology innovation has facilitated technology which is a primary force behind rising standard of living o Innovation such as windshield wipers light bulbs etc o Romer asserted that technological change happens when an entrepreneur identifies new customer segments that appear to be emerging new customer needs existing customer needs that have not been satisfied or new ways of manufacturing or distributing products and services Globalization o Also termed creative destruction globalization has moved low skilled jobs offshore o Although globalization has produced huge economic benefits it as also resulted in lower costs of information and transportation allowing for a broader range of goods and services to be traded over greater distances o Today very few markets enjoy freedom from competition in the global arena For example where local markets in Florida and California once dominated the market for fresh fruits today consumers are frequently unaware that much of their fresh produce comes from Chile New Zealand and other parts of the world o Even service companies can t escape the impact of the global economy India and Pakistan for example have become dominant players in the software programming industry by transmitting their services electronically and economically to anywhere in the world Shift of lower skilled jobs outside of the U S o We are using other countries to help our economic growth making us very dependent see above examples China and India o These governments strongly support entrepreneurial ventures so they re growing very rapidly o China is growing faster than any modern economy In 2009 the Chinese economy grew 11 90 percent over the previous year and is on track to overtake the U S economy due to its significant investment in entrepreneurial business that produce goods and create value for customers o India has also seen a huge surge in interest for entrepreneurship For example just three weeks after the terrorist attacks on a hotel in Mumbai in December of 2008 more than 1 7000 aspiring Indian entrepreneurs gathered in Bangalore for an entrepreneurship conference New Industry Formation o Illustration of new industry formation o New industries are formed when technological change produces a novel opportunity that an entrepreneur seizes upon o Industries have life cycles birth growth and decline o An industry is simply the people and companies that engage in category of business activity such as semiconductors or food services o This figure depicts the generic life cycle of an industry relative to gross domestic product GDP and the number of firms entering and remaining in the industry at any point in time The industry as a whole does not decline when the number of firms declines o Formation Phase the earliest stage of an industry is a time of rapid innovation and change as young firms struggle to become the industry standard bearers with their technology o As these entrepreneurial firms achieve noticeable levels of success more and more firms desiring to capitalize on the potential for success enter the industry o As the industry grows it generally becomes more fragmented as a result of so many firms competing for position o At some point consolidation begins to occur as the stronger firms begin to acquire smaller firms Eventually the number of firms in the industry stabilizes and if innovation ceases to occur the industry output may actually begin to decline o Remaining firms usually achieve economies of scale and purchase other companies and become more productive and efficient so that the industry can continue to grow o If innovation ceases the industry output may decline Job Creation Job creation is a very important outcome of entrepreneurial ventures Businesses classified as small by the U S SBA definition represent 99 7 of all employers They also pay more than 45 of total U S private payroll In the U S small businesses are defined as having fewer than 500 employees o In the United Kingdom it s 250 employees They have also generated 65 of net new jobs over the past 15 years o Most new jobs were created by gazelles Gazelles rapidly