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Summary Entrepreneurship Theory & Practice
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Entrepreneurship Theory & Practice. Passed the exam: 8.5 Summary of chapters 1-12, excl. chapter 7
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Entrepreneurship Theory & PracticeLecturer: Dr. J.S. Small
Chapter 1: Introduction to Entrepreneurship
P1: Introduction to entrepreneurship.
There is tremendous interest in entrepreneurship around the world.
- Highest rates of entrepreneurial start-up activities occur in low-income countries, where
good jobs are not plentiful.
- The rates are also impressive in high-income countries.
The GEM study identified whether its respondents are starting a new business to take advantage of
an attractive opportunity (high-income countries) or because of necessity to earn income (low-
income countries).
One criticism of entrepreneurship is that the majority of new businesses fail but this simply isn’t true.
P2: What is Entrepreneurship and Why is it Important.
Entrepreneur derives from the French words entre (between) and prendre (to take). This word is used
to describe people who ‘take on the risk’ beween buyers and sellers or who ‘undertake’ a task such as
starting a new venture.
Entrepreneurship is defined as: the process by which individual pursue opportunities without regard
to resources they currently control for the purpose of exploiting future goods and services.
Simply: the art of turning an idea into a business.
An entrepreneur’s behaviour finds him or her trying to identify opportunities and putting useful ideas
into practice. This behaviour typically requires creativity, drive and a willingness to take risks.
Corporate entrepreneurship: established firms with an orientation toward acting entrepreneurially.
All firms fall along in 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.
P2: Why do people become Entrepreneurs (three main reasons)
1. Be their own boss (most commonly)
Many entrepreneurs want to be their own boss because either they have had a long-time ambition to
own their own firm or because they have become frustrated working in traditional jobs.
2. Pursue their own Ideas
Entrepreneurial people are naturally alert, and when they recognize ideas for new products or
services, they have a desire to see those ideas realized. This is also combined with their passion and
commitment for a new idea.
3. Pursue Financial Rewards
This motivation is secondary to the firs two and often fails to live up to its hype. The average
entrepreneur does not make more money than someone with a similar amount of responsibility in a
traditional job. Making a profit and increasing the value of a company is a solidifying goal that people
can rally around, but money is rarely the primary motivation behind the launch of an entrepreneurial
firm.
P3: Characteristics of successful entrepreneurs (the four main characteristics)
, 1. Passion for the business.
This passion typically stems from the entrepreneur’s
belief that the business will positively influence
people’s lives. Making a difference in people’s lives is
also the primary motivator behand many social
enterprises, which are often started by people who
set aside promising careers to pursue a social goal.
Note: While entrepreneurs should have passion, they
should not wear rose-coloured glasses.
The reason passion is Explanation
important
1) The ability to learn and iterate Founders don’t have all the answers. It takes passion and
drive to solicit feedback, make necessary changes, and
move forward. Passion makes the search for the right
answers invigorating and fun.
2) A willingness to work hard for You can only work more hours, on a sustained basis, if
an extended period of time you’re passionate about what you’re doing.
3) Ability to overcome setbacks Entrepreneurs need the energy, resulting from passion, to
and “no’s” continue and overcome the setbacks/no’s.
4) Ability to listen to feedback on You have to be willing to listen to people with good
the limitations of your intentions and make changes if it helps. You have to be
organization and yourself. able to brush aside feedback from people with bad
intentions without letting them get you down. Feedback
is also for the purpose to improve your organisation
5) Perseverance and persistence Perseverance and persistence come from passion.
when going gets tough Building an entrepreneurial organization is fraught with
challenges an passion is the motivation to get through
tough times.
2. Product/Customer Focus
Steve Jobs: ‘The computer is the most remarkable tool we’ve ever built … but the most important
thing is to get them in the hands of as many people as possible’.
A product/customer focus involves the diligence to spot product opportunities and to see them
through completion.
You have to build a good product with the capability to satisfy customers.
3. Tenacy Despite Failure
Because entrepreneurs are typically trying something new, the possibility of failure exists. Setbacks
and failures inevitably occur during this process. The litmus test for entrepreneurs is their ability to
persevere through setbacks and failures.
4. Execution Intelligence
Execution intelligence: the ability to fashion a solid idea into a viable business is a key characteristic of
successful entrepreneurs. The ability to effectively execute a business idea means developing a
business model, putting together a new venture team etc.
P4: Common Myths about Entrepreneurs
, Myth 1: Entrepreneurs are born, not made.
The evidence of several studies can be interpreted as meaning that no one is born to be an
entrepreneur and that everyone has the potential to become one.
There are some traits/characteristics commonly associated with entrepreneurs (see picture)
These are also consistent with the characteristics by the ‘Shark Tank’ Team.
Myth 2: Entrepreneurs are gamblers
The truth is, entrepreneurs are usually moderate risk takers, as are most people. The idea
that entrepreneurs are gambles originate from two sources. First, entrepreneurs typically
have jobs that are less structured, and so they face a more uncertain set of possibilities than
managers or rank-and-file employees. Secondly, many entrepreneurs have a strong need to
achieve and often set challenging goals, a behaviour that is sometimes equated with risk
taking.
Myth 3: Entrepreneurs are motivated primarily by money
“If you think money is a real big deal … you’ll be too scared of losing it to get it”. Financial
rewards play a role but most of the time the entrepreneurs want to change something in the
world.
Myth 4: Entrepreneurs should be young and energetic
Entrepreneurial activity is fairly evenly spread out over age ranges. The majority of individuals
who start companies are in their thirties and forties. These majority of business owners have
work experience prior to launching a new venture.
Myth 5: Entrepreneurs love the spotlight
Most entrepreneurs do not attract public attention, because they are working on proprietary
products or services. Most of the time they are found by the press and then put in the
spotlight.
P5: Types of start-up firms
Salary-substitute firms: small firms that yield a level of income for their owner(s) that is
similar to what they would earn when working for an employer (convenience stores etc.)
Salary-substitute firms offer common, easily available and not particularly innovative
products or services to customers
Lifestyle firms: provide their owner(s) the opportunity to pursue a particular lifestyle and
earn a living while doing so. Commonly, lifestyle firms promote a particular sport, hobby, or
pastime and may employ only the owner or just a handful of people.
, Entrepreneurial firms: bringing new products and services to market. They create value,
which refers to worth, importance, or utility.
One characteristic of entrepreneurial firms is that they partner with other firms and
organizations, often to obtain the boost they need to realize their full potential.
P6: Changing Demographics of Entrepreneurs
Women Entrepreneurs
The amount of female entrepreneurs is growing. -> also due to the promotion of a number of
organizations.
Minority Entrepreneurs
Growing amount of entrepreneurs in minority countries.
Senior entrepreneurs
(50+) This rise is attributed to a number of factors, including corporate downsizing, an
increasing desire among older workers for more personal fulfilment in their lives, and
growing worries among seniors that they need to earn additional income to pay for future
health care services and other expenses.
Young Entrepreneurs
Increasing, due to organization that are focussed on young entrepreneurs.
P7: The positive effects of entrepreneurship and entrepreneurial firms
Creative destruction: entrepreneurs develop new products and technologies that over time make
current products and technologies obsolete.
Small firms that practice the art, of improving what is currently available, are often called
“innovators” or “agents of change”
Economic impact of entrepreneurial firms.
o Innovation: the process of creating something new, which is central to the entrepreneurial
process. (small firms tend to be more innovative in certain industries)
o Job Creation: small business create a substantial number of net new jobs.
Impact on Soceity
The firms’ innovations have a dramatic impact on a society. Think of all the products and services that
make our lives easier, enhance our productivity at work, improve our health, and entertain us.
Innovations also create moral and ethical issues with which societies are forced to grapple.
Impact on larger firms.
New firms have a positive impact on the effectivity and efficiency of larger firms.
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