1

INTRODUCTION TO
ENTREPRENEURSHIP

According to the 2007 GEM

There is tremendous interest in
study, 9.6% of Americans
entrepreneurship in the U.S.
are actively engaged in
and around the world.
starting a business or are
the owner/manager of a
business that is less than
three years old.

2
 INTRODUCTION TO
ENTREPRENEURSHIP

3
 INDICATIONS OF INCREASED
INTEREST IN ENTREPRENEURSHIP

 Books
 Amazon.com lists over 36,900 books dealing with
entrepreneurship and 89,900 focused on small business.
 College Courses

 In 1985, there were about 250 entrepreneurship courses offered

across all colleges in the United States.

 Today, more than 5,000 entrepreneurship courses are offered in

two-year and four-year colleges and universities in the United

States.

4
WHAT IS ENTREPRENEURSHIP
AND WHY IS IT IMPORTANT

5
 THE NATURE AND DEV OF
ENTREPRENEURSHIP
The word “entrepreneur” stems from French, means “between-taker”
or “go between.”

The word was originally used to describe people who “take on the
risk” between buyers and sellers or who “undertake” a task such
as starting a new venture.

Inventors and entrepreneurs differ from each other.

An inventor creates something new.

An entrepreneur assembles and then integrates all the resources

needed—the money, the people, the business model, the
strategy, and the risk-bearing ability— to transform the invention
6
into a viable business
 DEFINITION OF
ENTREPRENEURSHIP

An Entrepreneur

One who
Organizes, Manages and Assumes Risk of a
Business or Enterprise

Merriam-Webster

7
 WHAT IS ENTREPRENEURSHIP?
 Academic Definition (Stevenson & Jarillo)
 Entrepreneurship is the process by which individuals pursue opportunities
without regard to resources they currently control for the purpose of exploiting
future goods and services.

 Venture Capitalist (Fred Wilson)

 Entrepreneurship is the art of turning an idea into a business.

 Explanation of What Entrepreneurs Do

 Entrepreneurs assemble and then integrate all the resources needed to

transform an invention or an idea into a viable business
 the money,

 the people,

 the business model,

 the strategy
8
Entrepreneurship is the process of
creating something new with value by
devoting the necessary time and effort,
assuming the accompanying financial,
psychic, and social risks, and receiving
the resulting rewards of monetary and
personal satisfaction and independence.
9
To an economist, an entrepreneur is one
who brings resources, labor, materials,
and other assets into combinations that
make their value greater than before, and
one who introduces changes,
innovations, and a new order.

10
ENTREPRENEURSHIP THROUGH
AGES

11
 EARLY AGES

 In this period the money person (forerunner of the

capitalist) entered into a contract with the go-between to

sell his goods. While the capitalist was a passive risk
bearer, the merchant bore all the physical and emotional
risks.

12
 MIDDLE AGES AND
ENTREPRENEURSHIP
 In this age the term entrepreneur was used to describe both an actor

and a person who managed large production projects.

 In such large production projects, this person did not take any risks,

managing the project with the resources provided.

 A typical entrepreneur was the cleric who managed architectural

projects.

13
 17TH CENTURY

 In the 17th century the entrepreneur was a person who entered into

a contract with the government to perform a service

 Richard Cantillon, a noted economist of the 1700s, developed

theories of the entrepreneur and is regarded as the founder of the

term.

 He viewed the entrepreneur as a risk taker who "buy[s] at certain

price and sell[s] at an uncertain price, therefore operating at a risk."

14
 18TH CENTURY
 In the 18th century the person with capital was differentiated from the one who needed
capital.

 In other words, entrepreneur was distinguished from the capital provider.

 Many of the inventions developed during this time as was the case with the inventions
of Eli Whitney and Thomas Edison were unable to finance invention themselves.

 Both were capital users (entrepreneurs), not capital providers (venture capitalists.)
Whitney used expropriated crown property. Edison raised capital from private
sources.

 A venture capitalist is a professional money manager who makes risk investments

from a pool of equity capital to obtain a high rate of return on investments.

15
 19TH AND 20TH CENTURIES
 In the late 19th and early 20th centuries, entrepreneurs were viewed

mostly from an economic perspective.

 The entrepreneur "contributes his own initiative, skill and ingenuity in

planning, organizing and administering the enterprise, assuming the

chance of loss and gain."

 Andrew Carnegie is one of the best examples of this definition,

building the American steel industry on of the wonders of industrial

world, primarily through his competitiveness rather than creativity.

 In the middle of the 20th century, the notion of an entrepreneur as an

innovator was established.

16
THE ENTREPRENEURIAL EVOLUTION

17
 CORPORATE
ENTREPRENEURSHIP

 Corporate Entrepreneurship

 Established firms with an orientation toward acting

entrepreneurially practice corporate entrepreneurship
 Is the 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.

Cont’d Page…./ 18
 CORPORATE
ENTREPRENEURSHIP

Entrepreneurial Conservative
Firms Firms

• Proactive • Take a more “wait and

see” posture
• Innovative
• Less innovative
• Risk taking
• Risk adverse

Cont’d Page…./ 19
 CORPORATE
ENTREPRENEURSHIP
 Google is widely recognized as a firm in which entrepreneurial

behaviors are clearly evident.

 Larry Page, one of Google’s cofounders, is at the heart of Google’s

entrepreneurial culture.

 With his ability to persuade and motivate others’ imaginations, Page

continues to inspire Google’s employees as they develop innovative

product after innovative product.

 To consider the penetration Google has with some of its innovations,

think of how often you and people you know use the Google search
20
engine, Gmail, Google Maps, or Google Earth. Cont’d Page…./
 CORPORATE
ENTREPRENEURSHIP
 Google is currently working on a bevy of far-reaching innovations,

such as Google Glasses and self-driving cars.

 Similarly, studying Facebook or Dropbox’s ability to grow and

succeed reveals a history of entrepreneurial behavior at multiple

levels within the firms

 Virgin Group, the large British conglomerate, works hard to keep its

units small and instill in them an entrepreneurial spirit.

 Virgin is one of the most recognized brands in Britain and is involved

in businesses as diverse as airlines and music.

 In the following quote, Sir Richard Branson, the founder and CEO of

Virgin, describes how his company operates in an entrepreneurial 21

Cont’d Page…./
manner:
 CORPORATE
ENTREPRENEURSHIP
 Convention … dictates that “big is beautiful,” but every time one of our
ventures gets too big we divide it up into smaller units. I go to the deputy
managing director, the deputy sales director, and the deputy marketing director
and say, “Congratulations.
 You’re now MD [managing director], sales director and marketing director—of
a new company.”
 Each time we’ve done this, the people involved haven’t had much more work
to do, but necessarily they have a greater incentive to perform and a greater
zeal for their work.

 The results for us have been terrific.

 By the time we sold Virgin Music, we had as many as 50 subsidiary record

companies, and not one of them had more than 60 employees. 22
DEFINITION OF ENTREPRENEUR
TODAY

23
 THE NATURE AND DEV OF
ENTREPRENEURSHIP

In almost all definitions of entrepreneurship, there is

agreement that we are talking about a kind of behavior
that includes:

• Initiative taking

• The organizing and reorganizing or social/economic

mechanisms to turn resources and situations to
practical account.

• The acceptance of risk or failure.

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 THE NATURE AND DEV OF
ENTREPRENEURSHIP

Definition involves four aspects:

• The creation process.

• The devotion of time and effort.

• The assumption of risk.

• Rewards of independence, satisfaction, money.

25
THE ENTREPRENEURIAL
DECISION PROCESS

26
 THE ENTR EPRENEURIAL
DECISION PROCESS
 The entrepreneurial decision process entails a movement from

something to something— a movement from a present life style to

forming a new enterprise.

 To leave a present life-style to create something new comes from a

negative force--disruption.

 Many companies are formed by people who have retired, moved, or

been fired.

 Another cause of disruption is completing an educational degree.

 The decision to start a new company occurs when an individual

perceives that forming a new enterprise is both desirable and

27
possible.
 Entrepreneurial Decision Process

refers to the decision to leave a present career or

lifestyle (to pursue that ‘big idea’) due to:

 Unpleasant work environment

 Disruption

 Completion of educational degree.

How will the completion of your

educational program influence your
entrepreneurial decision process? Got any
‘big ideas’? 28
 CHAPTER OBJECTIVES

• Describe entrepreneurship, corporate entrepreneurship, and the

characteristics of entrepreneurial firms.
• Discuss three main reasons people decide to become
entrepreneurs.
• Identify four main characteristics of successful entrepreneurs.
• Explain five common myths regarding entrepreneurship.
• Describe the three types of start-up firms.
• Discuss the changing demographics of entrepreneurs in the
United States.
• Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
• Explain the entrepreneurial process.
29
 WHY BECOME AN
ENTREPRENEUR?
The 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

30
 WHY BECOME AN ENTREPRENEUR?

Be Own Boss

 Entrepreneurs are not difficult to work with nor that they have trouble

accepting authority.

 Instead, many entrepreneurs want to be their own boss because

either they have had a long-time ambition to own their own firm or

because they have become frustrated working in traditional jobs.

 Some entrepreneurs transition from a traditional job to owning their

own business more gradually, by starting their business part time to

begin with.
Cont’d Page…./ 31
 WHY BECOME AN ENTREPRENEUR?

Be Own Boss

 While this approach isn’t possible in all situations, by starting a

business part time individuals can gain valuable experience, tuck

away the money they earn, and find out if they really like the

business before deciding to leave their job.

 In some businesses, such as catering or financial planning, it takes

time to build a client list. Some entrepreneurs will time their departure

from their job with the point in time where their client list is large
enough and profitable enough to support a full-time business
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 WHY BECOME AN ENTREPRENEUR?

 Pursue Own Ideas

 Some people are naturally alert, and when they recognize ideas for

new products or services, they have a desire to see those ideas

realized.

 Corporate entrepreneurs who innovate within the context of an

existing firm typically have a mechanism for their ideas to become

known.

 Established firms, however, often resist innovation.

 When this happens, employees are left with good ideas that go
Cont’d Page…./ 33
unfulfilled.
 WHY BECOME AN ENTREPRENEUR?

 Pursue Own Ideas

 Because of their passion and commitment, some employees choose

to leave the firm employing them in order to start their own business
as the means to develop their own ideas.

 This chain of events can take place in non-corporate settings, too.

 For example, some people, through a hobby, leisure activity, or just

everyday life, recognize the need for a product or service that is not
available in the marketplace.

 If the idea is viable enough to support a business, they commit

tremendous time and energy to convert the idea into a part-time or

Cont’d Page…./ 34
full-time firm.
 WHY BECOME AN ENTREPRENEUR?

 Melissa Pickering, the founder of iCreate to Educate, a company that

is developing software apps that allows students to build, express,

and share their creativity through animated videos.

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 WHY BECOME AN ENTREPRENEUR?

 Pursue Financial Rewards

 People start their own firms to pursue financial rewards.

 This motivation, however, is typically secondary to the first two

and often fails to live up to its hype.

 The average entrepreneur does not make more money than

someone with a similar amount of responsibility in a traditional

job.

 The financial lure of entrepreneurship is its upside potential.

Cont’d Page…./ 36
 WHY BECOME AN ENTREPRENEUR?

 Jeff Bezos of Amazon.com, Mark Zuckerberg of Facebook, and

Larry Page and Sergey Brin of Google made hundreds of

millions of dollars building their firms.

 Money is also a unifier.

 Making a profit and increasing the value of a company is a

solidifying goal that people can rally around.

37
 CHAPTER OBJECTIVES

• Describe entrepreneurship, corporate entrepreneurship, and the

characteristics of entrepreneurial firms.
• Discuss three main reasons people decide to become
entrepreneurs.
• Identify four main characteristics of successful entrepreneurs.
• Explain five common myths regarding entrepreneurship.
• Describe the three types of start-up firms.
• Discuss the changing demographics of entrepreneurs in the
United States.
• Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
• Explain the entrepreneurial process.
38
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
Four Primary Characteristics

39
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
 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.

 Making a difference in people’s lives is also the primary motivator
behind many social enterprises, which are often started by people
who set aside promising careers to pursue a social goal.
 This was the case with John Wood, who founded Room to Read

and is the author of the book Leaving Microsoft to Change the

World. Wood’s deep passion to help children in the developing
40
Cont’d Page…./
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS

 Passion for the Business

 world caused him to start cashing in small amounts of Microsoft

stock to buy books and build schools, even before he left the
company.
 In excerpts from an interview published by Forbes magazine,

Wood said:
 During my travels, I met so many children in the poorest parts

of the world, lacking access to school, books, and libraries,

that I began cashing in small amounts of stocks to help them.
 Two hundred shares of Microsoft stock was enough to build an
Cont’d Page…./ 41
entire school in rural Nepal
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS

 Passion for the Business

 Wood eventually left Microsoft to work on Room to Read full time.

Since its inception in 2000, Room to Read has built 1,450

schools, established 12,522 libraries, distributed over 10 million
children’s books, and funded 13,662 long term girls’ scholar ships
in developing parts of the world.
 Passion is particularly important for both for-profit and not-for-

profit entrepreneurial organizations because although rewarding,

the process of starting a firm or building a social enterprise is
demanding.
Cont’d Page…./ 42
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS

 Passion for the Business

 There are five primary reasons passion is important.

 Each of these reasons reflects a personal attribute that passion

engenders.
 Removing just one of these qualities would make it much more

difficult to launch and sustain a successful entrepreneurial

organization.

Cont’d Page…./ 43
44
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
 Passion for the Business

 While entrepreneurs should have passion, they should not wear

rose-colored glasses.
 It would be a mistake to believe that all one needs is passion and

anything is possible.
 It is important to be enthusiastic about a business idea, but it is

also important to understand its potential flaws and risks.

 In addition, entrepreneurs should understand that the most

effective business ideas take hold when their passion is

consistent with their skills and is in an area that represents a
legitimate business opportunity. 45
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
Four Primary Characteristics

46
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS

 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.
 “The computer is the most remarkable tool we’ve ever built … but

the most important thing is to get them in the hands of as many

people as possible. Steve Jobs

Cont’d Page…./ 47
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS

 Product/Customer Focus

 Two most important elements in any business—products and

customers.
 While it’s important to think about management, marketing, finance,

and the like, none of those functions makes any difference if a firm
does not have good products with the capability to satisfy
customers.

Cont’d Page…./ 48
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS

 Product/Customer Focus

 A product/customer focus also involves the diligence to spot

product opportunities and to see them through to completion.

 The idea for the Apple Macintosh, for example, originated in the

early 1980s when Steven Jobs and several other Apple

employees took a tour of a Xerox research facility.

 They were astounded to see computers that displayed graphical

icons and pulldown menus.

Cont’d Page…./ 49
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS

 Product/Customer Focus

 The computers also allowed users to navigate desktops using a

small, wheeled device called a mouse.

 Jobs decided to use these innovations to create the Macintosh,

the first user-friendly computer.

 Throughout the two and a half years the Macintosh team

developed this new product, it maintained an intense

product/customer focus, creating a high-quality computer that is

easy to learn, fun to use, and meets the needs of a wide audience

of potential users 50
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
Four Primary Characteristics

51
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS

 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.

 Yelp

 Pandora

52
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
Four Primary Characteristics

53
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
 Execution Intelligence

 The ability to fashion a solid business idea into a viable business

is a key characteristic of successful entrepreneurs.

 Execution intelligence is the factor that determines whether a

start-up is successful or fails.

 An ancient Chinese saying warns, “To open a business is very easy; to keep it

open is very difficult.”

 The ability to effectively execute a business idea means

developing a business model, putting together a new venture

team, raising money, establishing partnerships, managing
finances, leading and motivating employees, and so on.
54
Cont’d Page…./
 CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
 Execution Intelligence

 It also demands the ability to translate thought, creativity, and

imagination into action and measurable results.

 Starbucks- Howard Schultz

 Pandora

55
 CHAPTER OBJECTIVES

• Describe entrepreneurship, corporate entrepreneurship, and the

characteristics of entrepreneurial firms.
• Discuss three main reasons people decide to become
entrepreneurs.
• Identify four main characteristics of successful entrepreneurs.
• Explain five common myths regarding entrepreneurship.
• Describe the three types of start-up firms.
• Discuss the changing demographics of entrepreneurs in the
United States.
• Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
• Explain the entrepreneurial process.
56
 COMMON MYTHS ABOUT
ENTREPRENEURS

 Myth 1: Entrepreneurs Are Born Not Made

 Myth 2: Entrepreneurs Are Gamblers

 Myth 3: Entrepreneurs Are Motivated Primarily by money

 Myth 4: Entrepreneurs should be young and energetic

 Myth 5: Entrepreneurs love the spotlight

57
 COMMON MYTHS ABOUT
ENTREPRENEURS

 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 hundreds of studies on the

psychological and sociological makeup of entrepreneurs is that
entrepreneurs are not genetically different from other people.

 Whether someone does or doesn’t become an entrepreneur, is a

function of the environment, life experiences, and personal

choices.
Cont’d Page…./ 58
 COMMON MYTHS ABOUT
ENTREPRENEURS

 Myth 1: Entrepreneurs Are Born Not Made

 However, there are personality traits and characteristics

commonly associated with entrepreneurs.

 These traits are developed over time and evolve from an

individual’s social context

59
 COMMON MYTHS ABOUT
ENTREPRENEURS
Although no one is “born” to be an entrepreneur, there are common traits
and characteristics of successful entrepreneurs

60
 COMMON MYTHS ABOUT
ENTREPRENEURS

 Myth 1: Entrepreneurs Are Born Not Made

 Myth 2: Entrepreneurs Are Gamblers

 Myth 3: Entrepreneurs Are Motivated Primarily by money

 Myth 4: Entrepreneurs should be young and energetic

 Myth 5: Entrepreneurs love the spotlight

62
 COMMON MYTHS ABOUT
ENTREPRENEURS
 Myth 2: Entrepreneurs Are Gamblers

 Most entrepreneurs are moderate risk takers.

 Hartford’s 2013 Small Business Success Study. The study conducted

a survey of 2,600 business owners. A total of 79 percent of the
participants rated themselves as conservative rather than risky
 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. 63

 COMMON MYTHS ABOUT
ENTREPRENEURS

 Myth 1: Entrepreneurs Are Born Not Made

 Myth 2: Entrepreneurs Are Gamblers

 Myth 3: Entrepreneurs Are Motivated Primarily by money

 Myth 4: Entrepreneurs should be young and energetic

 Myth 5: Entrepreneurs love the spotlight

64
 COMMON MYTHS ABOUT
ENTREPRENEURS

 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.
 In fact, some entrepreneurs warn that the pursuit of money can

be distracting.
 “If you think money is a real big deal … you’ll be too scared of

losing it to get it- Ted Turner

65
 COMMON MYTHS ABOUT
ENTREPRENEURS

 Myth 1: Entrepreneurs Are Born Not Made

 Myth 2: Entrepreneurs Are Gamblers

 Myth 3: Entrepreneurs Are Motivated Primarily by money

 Myth 4: Entrepreneurs should be young and energetic

 Myth 5: Entrepreneurs love the spotlight

66
 COMMON MYTHS ABOUT
ENTREPRENEURS

 Myth 4: Entrepreneurs Should Be Young and Energetic.

 The most active age for business ownership is 35 to 45 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.
 A sentiment that venture capitalists often express is that they would

rather fund a strong entrepreneur with a mediocre business idea than

fund a strong business idea and a mediocre entrepreneur.
 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 favor older rather than younger entrepreneurs. 67
68
 COMMON MYTHS ABOUT
ENTREPRENEURS

 Myth 1: Entrepreneurs Are Born Not Made

 Myth 2: Entrepreneurs Are Gamblers

 Myth 3: Entrepreneurs Are Motivated Primarily by money

 Myth 4: Entrepreneurs should be young and energetic

 Myth 5: Entrepreneurs love the spotlight

69
 COMMON MYTHS ABOUT
ENTREPRENEURS
 Myth 5: Entrepreneurs Love the Spotlight.

 The vast majority of them do not attract public attention.

 In fact, many entrepreneurs, because they are working on proprietary

products or services, avoid public notice

 the vast majority of entrepreneurs do not attract public attention.

 In fact, many entrepreneurs, because they are working on proprietary

products or services, avoid public notice

70
 CHAPTER OBJECTIVES

• Describe entrepreneurship, corporate entrepreneurship, and the

characteristics of entrepreneurial firms.
• Discuss three main reasons people decide to become
entrepreneurs.
• Identify four main characteristics of successful entrepreneurs.
• Explain five common myths regarding entrepreneurship.
• Describe the three types of start-up firms.
• Discuss the changing demographics of entrepreneurs in the
United States.
• Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
• Explain the entrepreneurial process.
71
 TYPES OF START-UP FIRMS

 Salary – Substitute Firms

 Lifestyle Firms

 Entrepreneurial Firms

72
 TYPES OF START-UP FIRMS

value refers to worth, importance, or utility. Entrepreneurial firms bring new

products and services to market by creating and then seizing opportunities.
Dropbox, Facebook, and LinkedIn are well-known, highly successful
examples of entrepreneurial firms. Having recognized an opportunity, the
entrepreneurs leading companies of this type create products and services
that have worth, are important to their customers, and provide a measure of
73
usefulness to their customers that they wouldn’t have otherwise.
 CHAPTER OBJECTIVES

• Describe entrepreneurship, corporate entrepreneurship, and the

characteristics of entrepreneurial firms.
• Discuss three main reasons people decide to become
entrepreneurs.
• Identify four main characteristics of successful entrepreneurs.
• Explain five common myths regarding entrepreneurship.
• Describe the three types of start-up firms.
• Discuss the changing demographics of entrepreneurs in the
United States.
• Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
• Explain the entrepreneurial process.
74
CHANGING DEMOGRAPHICS OF
ENTREPRENEURS

Women Entrepreneurs

• There were 8.6 million women-

owned businesses in 2013 ,
generating 1.3 trillion revnue and
employing 7.8 million people.
• A total of 33 percent of women-
owned firms are now owned by
minorities, up from 17 percent 16
years ago
75
 CHANGING DEMOGRAPHICS OF
ENTREPRENEURS
Minority Entrepreneurs
• In 2007, there were 5.8 million minority-owned firms.
• Minorities represented 36 percent of the U.S. population in 2010, and will become
the majority of the population by 2042
• In 2007, there were about 1.9 million African American–owned firms in the United
States.
• The African American firms with employees had average receipts of over $911,000
and average employment of 9 workers.
• Similarly, in 2007 there were 1.5 million Asian American–owned firms

76
 CHANGING DEMOGRAPHICS OF
ENTREPRENEURS
Senior Entrepreneurs
• In 2012, 20 percent of new businesses were started by people between 50 and
59 years old while another 12.5 percent were founded by individuals 60 years
old and older
• This increase is attributed to a number of factors, including corporate
downsizing, an increasing desire among older workers for more personal
fulfillment in their lives, and growing worries among seniors that they need to
earn additional income to pay for future health care services and other
expenses.

77
 CHANGING DEMOGRAPHICS OF
ENTREPRENEURS

Young Entrepreneurs

• About 4 in 10 kids in grades 5–12 say they plan to start their

own business.
•Interestingly, the percentage is higher among girls (46 percent)
than boys (40 percent).
•About 59 percent of students in grades 5–12 say their school
offers classes in how to start a business.
•This percentage represents a 9 percent jump from 2011 to 2012.
•About one-third (32 percent) of young people say their parents
or guardians have started a business, which provides them a
first hand look at the entrepreneurial lifestyle 78
 CHAPTER OBJECTIVES

• Describe entrepreneurship, corporate entrepreneurship, and the

characteristics of entrepreneurial firms.
• Discuss three main reasons people decide to become
entrepreneurs.
• Identify four main characteristics of successful entrepreneurs.
• Explain five common myths regarding entrepreneurship.
• Describe the three types of start-up firms.
• Discuss the changing demographics of entrepreneurs in the
United States.
• Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
• Explain the entrepreneurial process.
79
 The positive effects of entrepreneurship
and entrepreneurial firms

 Creative Destruction
 In his book The Theory of Economic Development, Schumpeter argued that
entrepreneurs develop new products and technologies that over time make
current products and technologies obsolete.
 Schumpeter called this process creative destruction.

 Because new products and technologies are typically better than those they
replace and the availability of improved products and technologies increases
consumer demand, creative destruction stimulates economic activity. The new
products and technologies may also increase the productivity of all elements of
a society

Cont’d Page…./ 80
 The positive effects of entrepreneurship
and entrepreneurial firms

 The creative destruction process is initiated most effectively by start-up

ventures that improve on what is currently available.

 Small firms that practice this art are often called “innovators” or “agents of

change.”

 The process of creative destruction is not limited to new products and

technologies; it can include:-

 New pricing strategies (e.g., Netflix in DVDs),

 New distribution channels (such as e-books for books), or

 New retail formats (such as IKEA in furniture and Whole Foods Market in

groceries). 81
 ECONOMIC IMPACT OF
ENTREPRENEURIAL FIRMS

 Innovation

 Is the process of creating something new, which is central to the

entrepreneurial process.
 Small firms are twice as innovative per employee as large firms.

 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.

82
 ENTREPRENEURIAL FIRMS’ IMPACT
ON SOCIETY
 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.
 However, innovations do create moral and ethical issues

with which societies are forced to grapple.

83
Cont’d Page…./
 ENTREPRENEURIAL FIRMS’ IMPACT
ON SOCIETY

 Impact on Society

 For example, bar-code scanner technology and the Internet

have made it easier for companies to track the purchasing

behavior of
 their customers, a fact that raises privacy concerns.

 Similarly, bioengineering has made it easier to extend the

shelf life of many food products, but some researchers and

consumers question the long-term health implications of
bioengineered foods
84
 ENTREPRENEURIAL FIRMS’ IMPACT
LARGER FIRMS

 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.

85
 CHAPTER OBJECTIVES

• Describe entrepreneurship, corporate entrepreneurship, and the

characteristics of entrepreneurial firms.
• Discuss three main reasons people decide to become
entrepreneurs.
• Identify four main characteristics of successful entrepreneurs.
• Explain five common myths regarding entrepreneurship.
• Describe the three types of start-up firms.
• Discuss the changing demographics of entrepreneurs in the
United States.
• Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
• Explain the entrepreneurial process.
86
 THE ENTREPRENEURIAL PROCESS

The Entrepreneurial Process Consists of Four Steps

Step 1: Deciding to become an entrepreneur (Ch 1)

Step 2: Developing successful business ideas (Ch 2-6)

Step 3: Moving from an idea to an entrepreneurial firm (Ch 7-10)

Step 4: Managing and growing the entrepreneurial firm (Ch 11-15)

87
 STEPS IN THE ENTREPRENEURIAL
PROCESS

Step 1 Step 2 Step 3 Step 4

Developing Successful Business Ideas

88
 KEY TERMS
 Breakthrough innovations - A new product with some

technological change

 Business ethics - The study of behavior and morals in a

business situation

 Desirability of new venture formation - Aspects of a situation

that make it desirable to start a new company.

 Entrepreneur - Individual who takes risks and starts

something new

Cont’d Page…./ 89
 KEY TERMS
 Entrepreneur as an innovator - An individual developing

something unique

 Entrepreneurial decision process- Deciding to become an

entrepreneur by leaving present activity

 Entrepreneurship - Process of creating something new and

assuming the risks and rewards

90
THANK YOU

91