The Nature and Importance of Entrepreneurship 1 Chapter The Nature and Importance of Entrepreneurship McGraw-Hill/Irwin Entrepreneurship, 7/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Definition of Entrepreneurs Today 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. Four aspects of being an entrepreneur today: Involves creation process. Requires devotion of time and effort. Involves rewards of being an entrepreneur. Requires assumption of necessary risks.

Entrepreneurs Versus Inventors Inventor: Creates something for the first time; highly driven and motivated by his or her own work and personal ideas. Differentiating characteristics of an inventor: Education. Level of experience. Problem-solving skills. Level of self-confidence. Willingness to take risks. Ability to tolerate ambiguity and uncertainty. View of monetary benefits in measuring success.

The Entrepreneurial Process Four distinct phases: Identify and evaluate the opportunity. Window of opportunity. Develop a business plan. Determine the resource requirement. Manage the resulting enterprise.

Aspects of the Entrepreneurial Process <<Insert Table 1.1>> Table 1.1

Types of Start-Ups Lifestyle firm Foundation company Privately held; usually achieves only modest growth. Foundation company Created from research and development. Lays the foundation for a new business area. High-potential venture Receives the greatest investment interest and publicity. Starts out like a foundation company, but attains rapid growth. Also called gazelles, is integral to the economic development of an area.

Role of Entrepreneurship in Economic Development Innovation is depicted as a key to economic development. Product-evolution process: Process through which innovation is developed and commercialized. Iterative synthesis: Critical point in the product-evolution process. Three types of innovation: Ordinary Technological Breakthrough

Product Evolution Need Recognition Industrial Initiate Innovation Development Press to Invent

Government as an Innovator One channel for commercializing the results of the synthesis of social need and technology. Frequently called technology transfer. Relatively few innovations reach commercial markets. Lacks business skills necessary for successful commercialization. Government bureaucracy and red tape act as inhibitors.

Corporate Entrepreneurship Strengths of an existing business: Financial resources. Business skills. Marketing and distribution systems. Factors that inhibit successful commercialization: Bureaucratic structure. Emphasis on short-term profits. A highly structured organization. In the current era of hypercompetition, strategic business units (SBUs) are emerging.

Independent Entrepreneurship Factors that inhibit commercialization: Managerial skills. Marketing capabilities. Financial resources. Unrealistic inventions. Lack of awareness on interfacing with necessary entities (banks, suppliers, customers, venture capitalists, distributors, and advertising agencies).

Ethics and Social Responsibility Entrepreneurs usually develop an internal ethical code. Personal value systems tend to be influenced by: Peer pressure. General social norms in the community. Pressures from their competitors.

Future Entrepreneurship has gained mileage through a number of ways: Entrepreneurial education. Increase in academic research. Societal support (media coverage). Corporate entrepreneurship.

Entrepreneurial Universities Activities Seminars Consulting Research Case Development Technology Development & Transfer Joint Ventures & Strategic Alliances Structures Business Assistance Centers Incubators Innovation Centers Industrial Parks Enterprise Development Centers Venture Capital Exchanges Inputs Guest Lectures Board of Advisors/Trustees Internships Student Projects Source of Funds