Chapter 1 Understanding Entrepreneurship. Copyright © Houghton Mifflin Company. All rights reserved.1 | 2 Tonight Administration, Comments and Questions.

Chapter 1

Understanding Entrepreneurship

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Tonight

• Administration, Comments and Questions

• Review and Recap Last Class

• Present Homework and Findings

• Chapters 1 and 2

• In Class Group Exercise

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Learning Objectives

• Define entrepreneurship

• Explain the role of entrepreneurship

• Distinguish entrepreneurial ventures from small businesses.

• Describe the evolution of entrepreneurship

• Identify today’s broad trends in the field of entrepreneurship.

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Definition of Entrepreneurship

An Entrepreneur

One who

Organizes, Manages and Assumes Risk of a

Business or Enterprise

Merriam-Webster

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Entrepreneurship

Entrepreneurship is a mindset

– Opportunity-focused– Innovative– Growth-oriented

Can you add additional Characteristics and/or Attributes…

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The Promise of Entrepreneurship

• An integrated input/output model

• The career assessment approach

• The new venture creation process

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Figure 1.1: The Entrepreneurship Process

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Figure 1.2: Entrepreneurship and Technological Change

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Outcomes of Entrepreneurship

• Economic growth• New industry formation• Job creation

> Knowledge, Wealth, Philanthropy <

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New Industry Formation

• New industries are born when technological change produces a new opportunity that an enterprising entrepreneur seizes.

• Disruptive or metamorphic technologies that destroy previous technologies and create new industries and display a different pattern of behavior.

• The pattern of growth, shakeout, stabilization, and decline of industry can be interrupted at any time by the entry of another disruptive technology.

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Figure 1.3: Industry Life Cycles

Source: Adapted from M. R. Darby and L. G. Zucker, “Growing by Leaps and Inches: Creative Destruction, Real Cost Reduction, and Inching Up,” Economic Inquiry, January 2003, pp. 1-19 (January 2003).

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Job Creation

• The most recent data from 2003 indicate that small businesses created 1,990,326 net new jobs as compared to 994,667 for large firms.*

------------------------------------------------UCF Incubation Program

• Almost 1,700 jobs • More than $70,012,000 in earnings • Nearly $200,000,000 in total economic output.

*U.S. Bureau of the Census; Administrative Office of the U.S. Courts; Endogenous Growth and Entrepreneurial Activities.

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The Nature of Entrepreneurial Start-ups

• An entrepreneurial venture brings something to the marketplace.

• Three primary characteristics

1. Innovative2. Value-creating3. Growth-oriented

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New Business Formation

• Entrepreneurs use identifiable milestones to measure their progress:– Deciding to start a business– Researching the concept– Preparing for launch– Securing the first customer– Obtaining the business license

And other activities which signal the business is in operation

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Figure 1.4: Social, Political, and Economic Context of the Entrepreneurial Process

Source: Paul D. Reynolds. (2000) National Panel of U.S. Business Start-ups: Background and Methodology. Databases for the Study of Entrepreneurship, Amsterdam: JAI/Elsevier Inc. Vol. 4, pp. 153-227.

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New Business Failure

• Not all entrepreneurs succeed in growing their start-up into an established business.

• Survival has been attributed to sufficient capital, having employees, and the entrepreneur’s intention in starting the business.

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Table 1.1: Starts and Closures of Employer Firms, 2001-2005

Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; and U.S. Department of Labor, Employment and Training Administration.

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Socially Responsible Entrepreneurship

• Today more than 85 percent of the company’s employees are involved in philanthropy.

• One company uses the following mission: The mission is to “use Salesforce.com’s people, technology and relationships to improve our communities, inspire youth to be more successful, support the world during times of extreme need, and promote compassionate capitalism.”

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The Entrepreneurial Revolution

• Free enterprise as foundation of entrepreneurial motivation

– Marc Andressen, Netscape Communications

– Howard Schultz, Starbucks

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Figure 1.5: The Entrepreneurial Evolution

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Entrepreneurial Trends

• Women and minority-owned businesses • Social responsibility • The Internet• Globalization

Can you think of additional trends…

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Looking Ahead…Launching New Ventures

• Part One: The Opportunity– Chapter 1: Introduction to Entrepreneurship– Chapter 2: The Entrepreneur’s Perspective– Chapter 3: Opportunity Recognition– Chapter 4: The Business Concept and

Model• Part Two: Feasibility Analysis (Ch 5-8)• Part Three: The Business Plan (Ch 9-16)• Part Four: Growth and Change (Ch 17-19)

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Do The Venture Checklist

• Keep as a Journal/Work Papers

• Bring to Every Class

• Your Ideas…Write Them Down On Paper…!!!

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Summary…You should be able to…

• Define entrepreneurship

• Explain the role of entrepreneurship in economic growth

• Distinguish entrepreneurial ventures from small businesses in terms of their purpose and goals.

• Describe the evolution of entrepreneurship as a field of study since the 1960s

• Identify today’s broad trends in the field of entrepreneurship.