INTRODUCTION TO
ENTREPRENEURSHIP
LEARNING OBJECTIVES
• Understanding the meaning and history of entrepreneurship
• Distinguish between the different types of businesses in the
economy and who starts them
• Learn about the role of Small Business Administration in
promoting entrepreneurship
• Recognize the benefits and common myths about small
business and entrepreneurship
DEFINITION
• No easy straight-forward definition exists
• Entrepreneurs are commonly defined as
– people who own or start a business
• Yet:
– those who start non-business organizations are also seen as entrepreneurs (social
entrepreneur)
– Some see only those who start a business as an entrepreneur (founder)
– Some see only those who run a fast-growing business as an entrepreneur (high-
growth entrepreneur)
– those who undertake new endeavors within existing corporations are also seen as
entrepreneurs (corporate entrepreneurs)
– There are those who use the word ‘entrepreneur’ in other contexts, such as
political entrepreneurs (and so on) 1-3
HISTORY…
• Entrepreneurship is as old as human history…Think the ‘old silk road’ from the East to the
West
• As an academic subject, entrepreneurship may only be about 300 years old, with mostly
economists interested in it (for about the first 250 years of its history)
• Four major economists made major contributions to how we understand entrepreneurship
today: Richard Cantillon (1680-1734), Jean Baptiste Say (1767-1832), Carl Menger (1840-
1921), and Joseph Schumpeter (1883-1950)
– Cantillon: Introduced (coined?) the term entrepreneur from the French verb entreprendre (which
meant ‘to take from between’ – or a middleman). Entrepreneurs take risks, he believed.
– Say viewed entrepreneurs as organizers of business firms (bringing together production factors)
– Menger conceived entrepreneurs as creating value out of nothing or little (endowing new value)
– Schumpeter is famous for his idea of ‘creative destruction’ and making innovation a key
function of entrepreneurs
OTHERS…
• Entrepreneurs are those who invest financial capital (Adam Smith and David Ricardo)
• Entrepreneurs are those with high need for achievement (David McClelland)
• Entrepreneurs are those who are alert to new opportunities for arbitrage (Israel
Kirzner), so entrepreneurs as opportunists.
• Entrepreneurs as creators of new organizations (William Gartner)
• Entrepreneurs as industrial leaders (captains of industry), as speculators, as
negotiators, and many more…
Entrepreneurship came from the word ‘entrepreneur’, perhaps sometimes in the 1920s
or 1930s to explain what entrepreneurs do
THE AMERICAN STORY
• David Birch, an American Economist
– The Job Creation Process:
Of all the net new jobs created in our sample of 5.6 million businesses between 1969 and
1976, two-thirds were created by firms with twenty or fewer employees and about 80
percent were created by firms with 100 or fewer employees. (Birch, 1981)
– Small business as net creator of new jobs
• 1987 book Job creation in America : how our smallest companies put the
most people to work
• Small Business
– involves 1-50 people and has its owner managing the business on a day-to-day
basis
• Also, innovations, career mobility, wealth creation
TYPES OF SMALL
BUSINESSES
Turtles
Goats
Gazelles
Elephants
Whales
SEVEN SINS OF (RAPID)
GROWTH
• Reckless spending or spending money you
don’t have
• Taking on too much debt
• Premature investment in scaling
• Extending too much credit
• Hoarding too much inventory
• Inadequate understanding of the market
and its future trends
WHY DO PEOPLE SAY THEY START A
BUSINESS? (REWARDS)
SMALL BUSINESS
ADMINISTRATION
• Also known as SBA
• Federally funded agency tasked with helping Americans start, build, and
grow businesses
• Provides assistance and loans to small businesses, as well as helps them
with federal contract procurement
Less than 20 employees Very Small
20-99 employees Small
100-499 employees Medium
More than 500 employees Large
MYTHS ABOUT
ENTREPRENEURSHIP
• Most new ventures fail, but what
can be done about it?
• Running a business leaves little
time for family
• Entrepreneurs are a ‘rare breed’, ‘a
genius who is born, not made’
• Not a ‘good time’ to start a business
• Students don’t have the skills to
start a business
BENEFITS OF
ENTREPRENEURSHIP
• New and small firms comprise about 99% of the employers in the country
• They employ about half of all private sector employees and generate a
good proportion of new employment annually
• They are a fertile source of new innovations, with some suggesting that new
and small businesses file more patents per employees than large
businesses
• There is no minimum age for starting a new business
• New and small businesses comprise a healthy part of the American exporter
pool
FORMS OF
ENTREPRENEURSHIP
• Commercial
Entrepreneurship
• Social Entrepreneurship
• Entrepreneurial teams
• Women entrepreneurship
• Minority entrepreneurship
• Student entrepreneurship
• Silver entrepreneurship
WHERE DO WE GO FROM
HERE?
