Entrepreneurship

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					              UNDERSTANDING
CHAPTER ONE   ENTREPRENEURSHIP
            Definition of Entrepreneurship

 Entrepreneurship is a mindset or way of thinking

 Pursuit of Opportunity without regards to Resources
  Currently Controlled
      New firm formation
      Growth
      Within the context of a corporation
          Intrapreneurship



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The Entrepreneurship Process




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         Figure 1.2: Industry Life Cycles




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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Table 1.1: Starts and Closures of
  Employer Firms, 1990-2002




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    New Industries Launched by the E-
               Generation
   Healthy living products
   Electronic paging
   Voice mail information technology services
   Cellular phone services
   CD-ROM
   Internet publishing and shopping
   Desktop computing
   Virtual imaging

                                                 6
    New Industries Launched by the E-
               Generation
   Personal computers
   Biotechnology
   Wireless cable TV
   Fast oil changes
   PC software
   Desktop information
   Wireless communications/handheld devices


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Figure 1.3: 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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                              Job Creation

 Entrepreneurial ventures are responsible for significant
  job creation.

 SBA estimates that three-quarter of all net new jobs in
  2000 were created by small business.*
* U.S. Bureau of the Census; Administrative Office of the U.S. Courts; Endogenous
  Growth and Entrepreneurial Activities.




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              New Business Failure

 Not all entrepreneurs succeed in growing their start-up
  into an established business.
 Survival rates of new businesses vary by industry and
  demographics.
 The vital lesson for an entrepreneur is to minimize the
  cost of a possible failure: start with robust business
  mode and test it in the marketplace prior to starting the
  business.

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       The Backbone of American
               Economy
 Research findings by David Birch of MIT
      New firms created 81.5 percent of the net new jobs from
       1969 to 1976
      Small businesses and entrepreneurs created more than 34
       million new jobs since1980
 Research findings by U.S. Small Business
  Administration’s Office of Advocacy
      Small businesses represent 99 percent of all employers
      Small businesses provide about 75 percent of all new net
       jobs


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                   Innovation and R&D
effectiveness of small entrepreneurial firms have resulted in:


 95% of the radical innovations that have occurred since WWII
 2 times as many innovations per R&D dollar vs. the giants
• 50% of all innovations
•   2 times as many innovations per scientist
•   24 times as many innovations per R&D dollar vs. firms with
      > 10,000 employees
• ―It ain’t what you don’t know that hurts you. It’s what you
  know that ain’t true!‖ (Solow)
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                       Moore’s Law &
                   Peter Drucker’s Postulate

 Moore’s Law—the power of the computer chip will double every eighteen months at constant
   price—is actually being exceeded by modern chip technology.



 Peter Drucker’s Postulate states that a tenfold increase in the productivity of any
   technology results in economic discontinuity. (radical innovation)
          These innovations have led to creation of major new inventions and technologies.




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                    Gilder’s & Metcalf’s Law


   Gilder’s Law – the total bandwidth of communication systems triples every twelve months. New
    developments seem to confirm that bandwidth availability will continue to expand at a rate that
    supports Gilder's Law.

   Robert Metcalf's law states that the "value" or "power" of a network increases in proportion to
    the square of the number of nodes on the network. In other words, if you have four nodes, or
    computers, on a network, say, an office intranet, its "value" would be four squared (4^2), or 16.
        If you added on addition node, or PC, then the value would increase to 25 (5^2).




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Mega-Entrepreneurs Who Started
         in Their 20s
 Microsoft—Bill Gates and Paul Allen
 Dell Computers—Michael Dell
 Apple Computers—Steve Jobs and Steve
  Wozniak
 Federal Express—Fred Smith
 Polaroid—Edward Land
 Nike—Phil Knight


                                         15
 How the Entrepreneurial Revolution has led
 to the Demise of ―Brontosaurus Capitalism‖

 Nobel-Prize winning economist ―proved‖
  any enterprise < 100 employees was irrelevant to the
  study of economics and policy making
 New ventures have created value:
Source: Forbes 500s Annual Directory 2002
                                               Sales      Employees     Mkt.Capitalization(B)
                                            in 2000 (B)   in 2000 (K)    in Mid-March 2001

GM, Ford, Chrysler
Total                                         498.8        1219.6              122.2
Intel, Microsoft, Cisco Sys.
Total                                         66.0          119.8              662.9
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     Entrepreneurship as an
     Equalizer and Mobilizer

 Indifferent to race, religion, sex, or
  geography
 Rewards performance and punishes
  shabbiness and ineptness
 Greatest chance for self-sufficiency, self-
  determination, and economic improvement



                                                17
            The Nature of Entrepreneurs

 Entrepreneurial Characteristics:

      Risk-taking
      Need for achievement
      A sense of independence
      Internal locus of control
      Tolerance for ambiguity



                                          18
        America’s Self-Made
           Millionaires
 The Millionaire Next Door by Thomas J.
  Stanley and William D. Danko
     Millionaire—a person with a net worth of $1
      million or more
     Made their fortune in LOW technology
      industries




                                                    19
                  Moving On Up
Income quintile
   in 1975               Percent in each quintile in 1991
                   1st       2nd      3rd       4th         5th

5th (highest)       .9       2.8     10.2     23.6     62.5

4th                1.9       9.3     18.8     32.6     37.4

3rd (middle)       3.3      19.3     28.3     30.1     19.0

2ND                4.2      23.5     20.3     25.2     26.8

1ST (lowest)       5.1      14.6     21.0     30.3     29.0


                                                                  20
  The Global Economic Weapon

 Global Entrepreneurship
  Monitor 2000 Report
     High levels of entrepreneurial activity equals
      above average economic growth
         Top three of twenty-one countries surveyed
            Brazil
            Korea
            United States




                                                       21
        Global Entrepreneurship Monitor


ENTREPRENEURIAL ACTIVITY IN 2007 ACROSS THE GLOBE 12
 Entrepreneurial Activity and the Link with Economic Development
 Entrepreneurial Activity in Country Groups
 Development of Early-Stage Entrepreneurial Activity 2002–2007
 Entrepreneurial Motivations




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         Global Entrepreneurship Monitor

CHARACTERISTICS OF ENTREPRENEURIAL ACTIVITY 2
 Age and Gender Structure
 High-Growth Expectation Entrepreneurial Activity
 Innovation-Oriented Entrepreneurial Activity
 Discontinuing a Business: How Many Entrepreneurs Do It and Why




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        Global Entrepreneurship Monitor

GLOBAL ECONOMIC INSTITUTIONS, NATIONAL REGULATIONS, AND
  ENTREPRENEURSHIP
 What’s At Stake
 Domestic Entrepreneurial Framework Conditions and Global Institutions
 EFC Focus: Regulations for New and Growing Businesses
 Entrepreneurial Activity and Global Aid Institutions
 Entrepreneurs as Agents of Change in the Global Economy




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