CHAPTER 1

THE ENTREPRENEURIAL MINDSET

Learning Objectives

• Define entrepreneurship and entrepreneur

• Identify the types of entrepreneur
• Explain the reasons why people pursue to be an entrepreneur
• Identify the potential drawbacks of entrepreneurship
• Identify forces that are driving the growth of Entrepreneurship
• Discuss the relationship between entrepreneurship and globalization
• Explain the entrepreneurial process.
• Explain how entrepreneurial firms differ from salary-substitute and lifestyle firms.
• Discuss the importance of entrepreneurs.
• Discuss the role of entrepreneurship in a country’s economic development.

Introduction
Around the world, growing numbers of people are realizing their dreams of owning
and operating their own businesses. Entrepreneurship continues to thrive in nearly every
corner of the world. Globally, one in eight adults is actively engaged in launching a
business. This entrepreneurial spirit is the most significant economic development in
recent business history. These heroes of the new economy are reshaping the business
environment and creating a world in which their companies play an important role in the
vitality of the global economy. With amazing vigor, their businesses have introduced
innovative products and services, pushed back technological frontiers, created new
jobs, opened foreign markets, and, in the process, provided their founders with the
opportunity to do what they enjoy most.

What is Entrepreneurship?

 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.

Entrepreneurship is the process by which individuals pursue opportunities without regard

to the resources they currently control.

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The essence of entrepreneurial behavior is identifying opportunities and putting useful
ideas into practice.

Entrepreneurship is the capacity and willingness to develop, organize and manage a

business venture along with any of its risks in order to make a profit. The most obvious
example of entrepreneurship is the starting of new businesses.

The resources that an entrepreneur puts together consist of human resources (workers,
managers, customers and suppliers) and non-human resources (land, building, money,
machines, materials and methods)

Entrepreneurial spirit is characterized by innovation and risk-taking, and is an essential

part of a nation's ability to succeed in an ever changing and increasingly competitive
global marketplace.

To watch:
Video: Pineapple Ice Drop
[Link]

Guide Questions:
 What is the story all about?
 How did the girl learn to do business?
 What important skills did she learn to understand and do her business better?

An entrepreneur is one who:

• perceives business opportunities in the environment

• takes risks to make use of these business opportunities
• invests his own or borrows money to use in business
• introduces innovations or improvements to make the business better, more efficient
and more profitable
• makes plans and decisions for the business
• generates profit for the business

An entrepreneur is NOT any of the following:

• He is not the person who gives or lends money to another (who uses it to set-up a
business) and sits back and relaxes until his money is returned with interest
earnings. This person is a financer or investor and not exactly an entrepreneur.

• He is not the person hired and paid big salaries to manage business full time for
its owners. This person is more of a professional or salaried manager.

• he is not an inventor of a product who stops working after inventing and

developing a product. To be sure, an inventor can be an entrepreneur, but if

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 only he goes on to commercialize his product, that is, to manufacture it on a
commercial volume and then distribute it in the market.

• he is not the person who guides or gives advice to entrepreneur to make his
business more efficient and more profitable. This person is rather the business
management consultant or counselor.

TYPES OF ENTREPRENEURS

Opportunity Entrepreneurs
- entrepreneurs who start businesses because they spot an opportunity in the
marketplace.

Necessity Entrepreneurs
-entrepreneurs who start businesses because they cannot find work any other
way.
Serial Entrepreneurs
-entrepreneurs who repeatedly start businesses and grow them to a suitable size
before striking out again.

Social Entrepreneurs
- entrepreneurs who start businesses that seek innovative solutions to some
society’s most vexing problems.

Why become an entrepreneur?

➢ Opportunity to create your own business
➢ Opportunity to make a difference
➢ Opportunity to reach your full potential
➢ Opportunity to reap impressive profits
➢ Opportunity to contribute to society and be recognized for your efforts
➢ Opportunity to do what you enjoy and have fun at it.

Potential Drawbacks of Entrepreneurship

➢ Uncertainty of income
➢ Risk of losing your entire investment
➢ Long hours and hard work
➢ Lower quality of life until the business gets established
➢ High levels of stress
➢ Complete responsibility
➢ Discouragement

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Forces that are Driving the Growth of Entrepreneurship
➢ Entrepreneurs as heroes
➢ Entrepreneurial education
➢ Demographic and economic factors
➢ Shift to a service economy
➢ Technology advancement
➢ Independent Lifestyle
➢ E-commerce and World Wide Web
➢ International opportunities

Economic Impact of Entrepreneurial Firms

If economic integration and mutual reliance between local or global entities

result from a borderless and relatively free flow of production factors as well as goods
and services, small business practice, innovation and risk ventures will objectively yield
profits.

According to Joseph A. Schumpeter:

The carrying out of new combinations of means of production, resulting in
creative destruction at the individual level and disequilibrium in the economic process.

Entrepreneurship and Globalization

Globalization refers to a multidimensional set of social process that create, multiply,

stretch, and intensify worldwide social interdependencies and exchanges while at the
same time fostering in people a growing awareness of deepening connections between
local and the distant.
-Manfred B. Steger, 2003

Entrepreneurship is an essential driver of societal health and wealth, and a formidable

engine of economic growth. It promotes the innovation required not just to exploit new
opportunities, promote productivity and create employment, but also to help address
some of society’s toughest challenges.

Many of the world’s governments, think tanks, non-governmental and international

organizations now look towards entrepreneurship as a key part of the solution to ending
poverty and social inequity, promoting women’s empowerment, and implementing
business solutions to the world’s environmental challenges, including climate change.

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 NATURE AND IMPORTANCE OF ENTREPRENEURSHIP

“Entrepreneurs throughout modern economic history…have been disproportionately

responsible for truly radical innovations – the airplane, the railroad, the automobile,
electric service, the telegraph and telephone, the computer, air conditioning, and so on
– that not only fundamentally transformed consumers’ lives, but also became platforms
for many other industries that, in combination, have fundamentally changed entire
economies.”
~ Robert Litan and Carl Schramm
Productivity isn’t everything, but in the long run it’s almost everything. A country’s ability
to improve its standard of living over time depends almost entirely on its ability to raise
its output per worker.

THE ENTREPRENEURIAL PROCESS

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

TYPES OF START-UP FIRMS

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IMPORTANCE OF ENTREPRENEURS
 Entrepreneurs Create New Businesses
Path breaking offerings by entrepreneurs, in the form of new goods & services, result in
new employment, which can produce a cascading effect or virtuous circle in the
economy. The stimulation of related businesses or sectors that support the new venture
add to further economic development.

 Entrepreneurs Add to National Income

Entrepreneurial ventures literally generate new wealth. Existing businesses may
remain confined to the scope of existing markets and may hit the glass ceiling in terms of
income. New and improved offerings, products or technologies from entrepreneurs
enable new markets to be developed and new wealth created.

 Entrepreneurs Also Create Social Change

Through their unique offerings of new goods and services, entrepreneurs break
away from tradition and indirectly support freedom by reducing dependence on
obsolete systems and technologies. Overall, this results in an improved quality of life,
greater morale and economic freedom.

 Community Development
Entrepreneurs regularly nurture entrepreneurial ventures by other like-minded
individuals. They also invest in community projects and provide financial support to local
charities. This enables further development beyond their own ventures.

Role of Entrepreneurship in a Country’s Economic Development

 Creates jobs

 Drives economic growth

 Frees up state’s resources

 Fosters competition

 Fosters innovation

 Increases productivity

 Provides a tax base for government

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Questions:
1. What is entrepreneurship? How can you differentiate an entrepreneurial firm from any
other type of firm?
2. Of all the forces that foster entrepreneurship, which are the most relevant ones in the
world today?
3. What did Joseph Schumpeter mean by the term "creative destruction"?
4. In general, what effects does entrepreneurship have on economies around the
world?
5. Describe several examples of the impact that entrepreneurial firms have on a society.

References
1. Scarborough, Norman M. (2013) Essentials of Entrepreneurship and Small Business
Management.6th [Link] [Link]:UK
2. Fajardo, Feliciano R. (2010) Entrepreneurship. Reprint, Cacho Hermanos, Inc.,
Mandaluyong City, Philippines
3. U.P. Institute for Small-Scale Industries (UPISSI). (2007) Introduction to Entrepreneurship,
Revised Edition, Small Enterprises Research and Development Foundation Inc., Diliman,
Quezon City, Philippines
4. Barringer, Bruce and R. Duane Ireland (2013) Entrepreneurship: Successfully Launching
New Ventures. 4th Edition, Pearsons Horizon Editions, England

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