ENTREPRENEURSHIP The Entrepreneur

Historical Perspective The word “entrepreneur” was defined in the 1700’s as a “go between;” someone who connected the people with money to the people who produced a product or service. They were the deal makers. “Inventors” were the individuals coming up with the new ideas. “What is the difference between innovation and entrepreneurship?”

Definitions of Entrepreneurship “Entrepreneurship involves recognizing an opportunity to create something new.” “Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled.” “The ability to create and build a vision from practically nothing.”

Common Themes The Entrepreneur: addresses the persons involved Economic Organization: the allocation of scarce resources Risk and Uncertainty Innovation: not the same as small business Organization Creation: profit and non-profit Creating Value: they create something worthwhile and useful Growth: developing markets and economies

The Micro View of Entrepreneurship Entrepreneurial ModelDefinitionMeasuresQuestions “Great Person”“Extraordinary Achievers”Personal principles Personal histories Experiences What principles do you have? What are your achievements? Psychological Characteristics Founder Control over the means of production Locus of control Tolerance of ambiguity Need for achievement What are your values? ClassicalPeople who make innovations bearing risk and uncertainty “Creative destruction” Decision making Ability to see opportunities Creativity What are the opportunities? What is your vision? How do you respond? ManagementCreating value through the recognition of business opportunity, the management of risk taking... through the communicative and management skills to mobilize... Expertise Technical knowledge Technical plans What are your plans? What are your capabilities? What are your credentials? Leadership“Social architect” Promotion and protection of values Attitudes, styles Management of people How do you manage people? IntrapreneurshipThose who pull together to promote innovation Decision makingHow do you change and adapt?

Other Types of Entrepreneurship Corporate Entrepreneurship: Entrepreneurial behavior inside established mid-sized and large organizations. Social Entrepreneurship: Social entrepreneurs are individuals with innovative solutions to society's most pressing social problems.

Importance of Entrepreneurship/Small Business to Economy Small businesses represent 99% of all employers, employs 52% of the private workers, provides virtually all new jobs. 37%, 35 million households, includes someone who has had a primary role in a new or small business According to the 2007 GEM study, 9.6% of Americans are actively engaged in starting a business or are the owner/manager of a business that is less than three years old. Which is better for economic development? Growth of small firms or attraction of large firms.

Entrepreneurship Myths Entrepreneurs are born, not made Anyone can start a business Entrepreneurs are gamblers Entrepreneurs want the whole show to themselves and are completely independent Entrepreneurs work longer hours and experience more stress Start a business and fail and you’ll never raise money again

Entrepreneurship Myths Money is the most important start-up ingredient Entrepreneurs should be young and energetic Entrepreneurs are only motivated by money If you have a good idea you can raise the money If you have the money you can’t miss Entrepreneurs cannot work with others

Pro’s and Con’s of Entrepreneurship Advantages Freedom to make decisions Be your own boss (control over time and money) Challenging Potential for financial rewards Disadvantages A lot of decisions Tough economic choices Uncertainty & risk Potential for failure

Why Do Some People Become Entrepreneurs? They don’t “fit in.” They are between things. They are “pushed in.” They see the benefits entrepreneurship.

Types of Start-Up Firms Type of Start-Up is dependent on characteristics and situation of Entrepreneur

Characteristics of Successful Entrepreneurs Four Primary Characteristics Article on Execution Intelligence: is-what-matters.html

2–14 Table 2.1 Characteristics Often Attributed to Entrepreneurs Source: John A. Hornaday, “Research about Living Entrepreneurs,” in Encyclopedia of Entrepreneurship, ed. Calvin Kent, Donald Sexton, and Karl Vesper, © 1982, 26–27. Adapted by permission of Prentice-Hall, Englewood Cliffs, NJ. 1.Confidence 2.Perseverance, determination 3.Energy, diligence 4.Resourcefulness 5.Ability to take calculated risks 6.Dynamism, leadership 7.Optimism 8.Need to achieve 9.Versatility; knowledge of product, market, machinery, technology 10.Creativity 11.Ability to influence others 12.Ability to get along well with people 13.Initiative 14.Flexibility 29.Pleasant personality 30.Egotism 31.Courage 32.Imagination 33.Perceptiveness 34.Toleration of ambiguity 35.Aggressiveness 36.Capacity for enjoyment 37.Efficacy 38.Commitment 39.Ability to trust workers 40.Sensitivity to others 41.Honesty, integrity 42.Maturity, balance 15.Intelligence 16.Orientation to clear goals 17.Positive response to challenges 18.Independence 19.Responsiveness to suggestions and criticism 20.Time competence, efficiency 21.Ability to make decisions quickly 22.Responsibility 23.Foresight 24.Accuracy, thoroughness 25.Cooperativeness 26.Profit orientation 27.Ability to learn from mistakes 28.Sense of power

Execution Intelligence “Because twenty people will have the same great idea for a business, the idea is not the key. The idea is not what wins.” – Domain Knowledge – Fast-growth Scar Tissue – Experience in Competitive Markets – Risk Management – Comprehensive Experience – Leadership Know-How is-what-matters.html Ideas are a commodity. Execution is scarce.

Are younger people are more suited to striking it out on their own? They are technically adept They want challenges They think outside the box They are independent 54% of younger employees said they wanted to start a new business, compared to 36% of older employees.

Women and Entrepreneurship

Minority Entrepreneurs Blacks are about 50 percent more likely to engage in start-up activities than whites. Hispanic men are about 20 percent more likely than white men to be involved with a start-up, but the difference isn’t statistically significant. Hispanic men are about equally as likely to attempt to start a business as white women, but they are less likely to be participating in start-up activities than black women. Education significantly predicts nascent entrepreneurship, particularly for blacks and Hispanics. Approximately 26 of every 100 black men and 20 of every 100 Hispanic men with graduate education experience report efforts to start a new business. This compares to 10 of every 100 white men with graduate education experience.

Pathways to Entrepreneurship Start from the beginning Buy an existing business Secure franchise rights Licensing (Do not steal someone else’s creativity; at least don’t get caught)

2–20 The Dark Side of Entrepreneurship The Entrepreneur’s Confrontation with Risk – Financial risk versus profit (return) motive varies in entrepreneurs’ desire for wealth. – Career risk—loss of employment security – Family and social risk—competing commitments of work and family – Psychic risk—psychological impact of failure on the well-being of entrepreneurs

2–21 Figure 2.1 Typology of Entrepreneurial Styles Source: Thomas Monroy and Robert Folger, “A Typology of Entrepreneurial Styles: Beyond Economic Rationality,” Journal of Private Enterprise IX(2) (1993): 71.

2–22 Stress and the Entrepreneur Entrepreneurial Stress – The extent to which entrepreneurs’ work demands and expectations exceed their abilities to perform as venture initiators, they are likely to experience stress. Causes of Entrepreneurial Stress – Loneliness – Immersion in business – People problems – Need to achieve

2–23 Entrepreneurs: Type A Personalities Chronic and severe sense of time urgency. Constant involvement in multiple projects subject to deadlines. Neglect of all aspects of life except work. A tendency to take on excessive responsibility, combined with the feeling that “Only I am capable of taking care of this matter.” Explosiveness of speech and a tendency to speak faster than most people.

2–24 Dealing with Stress Networking Getting away from it all Communicating with employees Finding satisfaction outside the company Delegating Exercising Rigorously

2–25 The Entrepreneurial Ego Self-Destructive Characteristics – Overbearing need for control – Sense of distrust – Overriding desire for success – Unrealistic optimism Entrepreneurial Motivation – The quest for new-venture creation as well as the willingness to sustain that venture. Personal characteristics, personal environment, business environment, personal goal set (expectations), and the existence of a viable business idea.

2–26 Figure 2.2 A Model of Entrepreneurial Motivation Source: Douglas W. Naffziger, Jeffrey S. Hornsby, and Donald F. Kuratko, “A Proposed Research Model of Entrepreneurial Motivation,” Entrepreneurship Theory and Practice (spring 1994): 33.