Entrepreneurship: Successfully Launching

New Ventures
Sixth Edition, Global Edition

Chapter 1
Introduction to
Entrepreneurship

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Learning Objectives (1 of 2)
1.1 Describe entrepreneurship, corporate entrepreneurship,
and the characteristics of entrepreneurial firms.
1.2 Discuss three main reasons people decide to become
entrepreneurs.
1.3 Identify four main characteristics of successful
entrepreneurs.
1.4 Explain five common myths regarding entrepreneurship.
1.5 Describe three types of start-up firms.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Learning Objectives (2 of 2)
1.6 Discuss the changing demographics of entrepreneurs
in the United States.
1.7 Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
1.8 Explain the entrepreneurial process.
1.9 Learn how understanding entrepreneurship and the
entrepreneurial process can facilitate career success.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Introduction to Entrepreneurship
There is tremendous interest in entrepreneurship in
the U.S. and around the world.
• According to the 2015/2016 GEM study, 11.9% of
Americans are actively engaged in starting a business
or are the owner/manager of a business that is less than
three years old.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Indications of Increased Interest in
Entrepreneurship
• Books
– Amazon.com lists over 58,510 books dealing with
entrepreneurship and 80,686 focused on small
business.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

What Is Entrepreneurship?
• Academic Definition (Stevenson and Jarillo)
– Entrepreneurship is the process by which individuals
pursue opportunities without regard to resources they
currently control.
• Alternative View
– 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 – the money, the people, the business
model, the strategy – to transform an invention or an idea
into a viable business.
Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.
Corporate Entrepreneurship (1 of 2)
• 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.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Corporate Entrepreneurship (2 of 2)
Entrepreneurial Firms Conservative Firms
• Proactive • Take a more “wait and see”
posture
• Innovative
• Less innovative
• Risk taking
• Risk averse

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

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

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Characteristics of Successful
Entrepreneurs (1 of 3)
Figure 1.1 Four Primary Characteristics of Successful Entrepreneurs

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Characteristics of Successful
Entrepreneurs (2 of 3)
• 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.
• 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.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Characteristics of Successful
Entrepreneurs (3 of 3)
• 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.
• Execution Intelligence
– The ability to fashion a solid business idea into a viable
business is a key characteristic of successful
entrepreneurs.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Common Myths About Entrepreneurs (1 of 7)
• 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 studies is that no one is “born”
to be an entrepreneur; everyone has the potential to
become one.
– Whether someone does or doesn’t become an
entrepreneur is a function of their environment, life
experiences, and personal choices.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Common Myths About Entrepreneurs (2 of 7)
Although no one is “born” to be an entrepreneur, there are
common traits and characteristics of successful entrepreneurs

• A moderate risk taker • Optimistic disposition

• Persuasive • A networker
• Promoter • Achievement motivated
• Resource assembler/leverager • Alert to opportunities
• Creative • Self-confident
• Self-starter • Decisive
• Tenacious • Energetic
• Tolerant of ambiguity • A strong work ethic
• Visionary • Lengthy attention span
Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.
Common Myths About Entrepreneurs (3 of 7)
• Myth 2: Entrepreneurs Are Gamblers
– Most entrepreneurs are moderate risk takers.
– 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.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Common Myths About Entrepreneurs (4 of 7)
• 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.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Common Myths About Entrepreneurs (5 of 7)
• Myth 4: Entrepreneurs Should Be Young and Energetic
– Entrepreneurial activity is fairly evenly spread out over
age ranges.
– While it is important to be energetic, investors often
cite the strength of the entrepreneur as their most
important criterion in making investment decisions.
 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.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Common Myths About Entrepreneurs (6 of 7)
Table 1.4 Age Distribution of Business Owners

Age Percentage of Business Owners

20-34 24.7
35-44 22.9
45-54 26.6
55-64 25.8

Source: R. W. Fairlie, A. Morelix, E.J. Reedy, and J. Russell, 2015 The Kauffman
Index of Startup Activity: National Trends.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Common Myths About Entrepreneurs (7 of 7)
• Myth 5: Entrepreneurs Love the Spotlight
– While some entrepreneurs are flamboyant, the vast
majority of them do not attract public attention.
– As evidence of this, consider the following question:
“How many entrepreneurs could you name?”
 Most of us could come up with Jeff Bezos of
Amazon.com, Mark Zuckerberg of Facebook, Larry
Page and Sergey Brin of Google or maybe Elon
Musk of Tesla and SpaceX.
 But few could name the founders of Netflix,
YouTube, or DIRECTV, even though we frequently
use those firms’ services.
Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.
Figure 1.2 Types of Start-Up Firms

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Examples of Types of Start-Up Firms
• Salary-substitute firms – Dry cleaners, convenience stores,
restaurants, accounting firms, retail stores, and hairstyling
salons
• Lifestyle firms – Personal trainers, golf and tennis pros, the
owners of bed & breakfasts, and tour guides.
• Entrepreneurial firms – Tit Tok, Dropbox, Facebook, and
LinkedIn

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Changing Demographics
of Entrepreneurs (1 of 5)
• Women Entrepreneurs
– While men are more likely to start businesses than
women, the number of women-owned businesses is
increasing.
– According to a study commissioned by American
Express OPEN, as of 2016, there were 11.3 million
women-owned businesses in the United States.
– Over the past nine years, the number of women-owned
businesses has grown at a rate five times faster than
the national average.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Changing Demographics
of Entrepreneurs (2 of 5)
• Minority Entrepreneurs
– There has been a substantial increase in minority
entrepreneurs in the United States.
– According to recent estimates, there are eight million
minority-owned firms in the United States—a 38 percent
increase since 2007.
– An important factor facilitating the growth of minority
entrepreneurs is the number of organizations that
promote and provide assistance.
 Examples include the Latin Business Association,
the Black Business Association, and The National
Center for American Indian Enterprise Development.
Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.
Changing Demographics
of Entrepreneurs (3 of 5)
• Senior Entrepreneurs
– The numbers of seniors starting businesses is
substantial and growing.
– The percentage of individuals age 62 and older
starting a business increased from 4.2 percent in
1988 to 5.4 percent in 2015.
– Many people in the 60 and older age range have
substantial business experience, financial resources,
and excellent vigor and health.
 This makes them excellent candidates to start
businesses in many industries.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Changing Demographics
of Entrepreneurs (4 of 5)
• Millennial Entrepreneurs
– A desire to pursue an entrepreneurial career is high
among millennials (born between 1980 and 1994).
– Despite this desire, in 2013 only 3.6 percent of all
businesses in the United States were owned by
someone under the age of 30.
– A 2016 study by EY and EIG found that the biggest
obstacles preventing millennials from starting
businesses are lack of finances, lack of desire, fear of
failure, and lack of knowledge of the business start-
up process.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Changing Demographics
of Entrepreneurs (5 of 5)
• Millennial Entrepreneurs (continued)
– There are many factors at work to encourage
millennials to consider entrepreneurship as a career.
– More than 2,300 colleges and universities in the
United States offer at lease one course in
entrepreneurship.
– A number of organizations have been established to
encourage college students to consider becoming
entrepreneurs.
 These include 3-Day Startup, Dorm Room Fund,
CEO (Collegiate Entrepreneurs’ Organization),
Startup Weekend, and VentureWell.
Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.
Economic Impact of Entrepreneurial
Firms
• Innovation
– Is the process of creating something new, which is
central to the entrepreneurial process.
– Small innovative firms are 16 times more productive
than larger innovative firms in terms of patents per
employee.
• Job Creation
– Small businesses create a substantial number of net
new jobs in the United States.
– Firms with 500 or fewer employees created two million
of the roughly three million private sector jobs in 2014.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Entrepreneurial Firms’ Impact on Society
and Larger Firms
• 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.
• 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.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

The Entrepreneurial Process
The Entrepreneurial Process Consists of Four Steps
Step 1: Deciding 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 the entrepreneurial firm.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Steps in the Entrepreneurial Process (1 of 2)
Step 1 Step 2
Developing Successful Business Ideas

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Steps in the Entrepreneurial Process (2 of 2)
Step 3 Step 4

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.