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The Nature & Importance of
     Entrepreneurs


        Chapter One
(American Entrepreneur)




    (English entrepreneur)
Do the profile of these people fit your
 perception of the career of an entrepreneur?

What does it takes to start and operate a
 successful business
    To understand this better, learn about
ENTREPRENEUR
Entrepreneur is derived from the French
 words entre, meaning, between, and
 prendre, meaning “to take”.
 Originally to describe people who “take
 on the risk” between buyers and sellers or
 who undertake a task such as starting a
 new venture.
An entrepreneur assembles and then
 integrates all the resources needed – to
 transform the invention into a viable
 business
WHO IS THE ENTREPRENEUR?
         High



Creativity         Inventor                       Entrepreneur
and
Innovation

                  Promoter                        Manager,
                                                  Administrator
         Low                                                                 High
                General management skills, business know-how, and networks

                                                                                Timmons
ENTREPRENEURSHIP

• Is the process by which individuals pursue
  opportunities without regard to resources they
  currently control.
• The essence of entrepreneurial behavior is
  identifying and putting useful ideas into
  practice.
• The task typically requires creativity, drive and
  willingness to take risks that can be
  accomplished by either an individual or a group
 Historical Evolution Of Entrepreneurship
  Earliest Period
   Middle Ages
   17th Century
   18th Century
   19th & 20th Century
EARLIEST PERIOD
   the earliest definition of entrepreneur may be related to
    the person (merchant – adventurer) who attempted to
    establish trade routes to the far east
   they would sign a contract with money person to sell his
    goods.
    the capitalist was a passive risk bearer.
   merchant adventurer took the active role in trading
    bearing all the physical and emotional risks while the
    capitalist was a passive risk bearer.
   when he completes the trip, the profits divided (capitalist
    – 75% , adventurer – remaining 25%)
MIDDLE AGES
•   the term was used to describe both an actor
    and a person who managed large production
    projects

•   did not take any risks but merely managed
    using the resources provided usually by the
    government of the country

•    a typical entrepreneur in the middle ages was
    cleric – the person in charge of great
    architectural works, such as castles and
    fortifications, public buildings, abbeys and
    cathedrals
17TH CENTURY
– Re emergent connection of risk with entrepreneurship
– entrepreneur being a person who entered into contractual
  agreement with government to perform a service or
  supply stipulated products. since the contract price was
  fixed, any resulting profit or losses were entrepreneur’s
– during this period, one entrepreneur           John Law,–
  established a royal bank then evolved as a trading
  company unfortunately led to downfall when he
  attempted to push the company’s stock price higher than
  the value of assets, leading to collapse.
– this led to the first definition given by Richard Cantillon,
  an economist and author
18TH CENTURY
• Finally , the person with capital was differentiated
  from one who needed capital (in other words the
  entrepreneur was distinguished from the capital
  provider )
• Many inventions developed during this time and
  changed the world
• Inventors like Eli Whitney and Thomas Edison
  developed new technologies, both raise capital
  from private sources to develop and experiment
  (capital users not providers)
• a venture capitalist who makes risk investments
  from a pool of equity capital to obtain a high rate
  of return on investments
19TH CENTURY
 Entrepreneurs not distinguished from managers
  and were viewed from an economical
  perspective.

 an entrepreneur organizes and operates for
  personal gain.

 For eg., Andrew Carniege, descended from
  poor Scottish family made the American steel
  industry one of the wonders– invented nothing
  but adapted new tech in the creation of products
  to achieve economic vitality
20TH CENTURY

• the notion of an entrepreneur as an innovator was
  established

• The concept of innovation and newness is an
  integral part of entrepreneurship.

• The newness can consist of anything from a new
  product to a new distributions system to a method
  for developing a new organizational structures
CONTRIBUTORS TO THE
    ENTREPRENEURSHIP THEORY
• 18th Century:
  – 1725: RICHARD CANTILLION ( person
    bearing risks is different from one supplying
    capital)
• 19th Century:
  – 1803: JEAN BAPTISTE SAY (separated
    profits of entrepreneur from profits of capital)
  – 1876: FRANCIS WALKER (distinguished
    between those who supplied funds and
    received interest and those who received
    profit from managerial capabilities)
CONTRIBUTORS TO THE
   ENTREPRENEURSHIP THEORY
• 20th Century:
  – 1934: JOSEPH SCHUMPETER (entrepreneur
    is an innovator and develops untried
    technology)
  – 1961: DAVID McCLELLAND (entrepreneur is
    an energetic, moderate risk taker)
  – 1964: PETER DRUCKER (maximizes
    opportunities)
CONTRIBUTORS TO THE
ENTREPRENEURSHIP THEORY
– 1975: ALBERT SHAPERO (takes initiative,
  organizes some social and economic
  mechanisms, and accepts risks of failure)
– 1980: KARL VESPER (entrepreneur seen
  differently by economists, psychologists,
  business persons and politicians)
– 1983: GIFFORD PINCHOT (intrapreneur is an
  entrepreneur within an already established
  organization)
1 entreprenuership-chapter-1-the-nature-&-importance-of-entreprenurs
DEFINITIONS

  Richard Cantillon

One of the early theorist, founder of the
term entrepreneurship
He viewed the entrepreneur as a risk taker
by     observing    merchants,     farmers,
craftsmen…
“Buy at a certain price and sell at an
uncertain price , therefore operating at a
risk”
DEFINITIONS
Jean Baptiste Say

  Entrepreneurs shift economic resources out of areas of
  lower and into areas of higher productivity and yield

Joseph Schumpeter

  The function is to reform or revolutionize the pattern of
  production by exploiting an invitation or more generally
  an untried technological method of producing a new
  commodity or producing an old one in a new way ,
  opening a new source of supply or new outlet for
  products, by organizing a anew industry
DEFINITIONS
Peter Drucker

 The entrepreneur always searches for change,
 responds to it, and exploits it as an opportunity


Howard Stevenson

 Entrepreneurship is the pursuit of opportunity
 without regard to resources currently controlled
DEFINITIONS
Robert C. Ronstadt
Entrepreneurship is the dynamic process of
creating incremental wealth. This wealth is
created by individuals who assume the major
risks in terms of equity, time, and/or career
commitment of providing value for some
product or service. The product or service
itself may or may not be new or unique but
value must somehow be infused by the
entrepreneur by securing and allocating the
necessary skills and resources.
Robert Hisrich
Entrepreneurship is the process of
creating something new with value by
devoting their necessary time and effort
assuming the accompanying financial,
psychic and social risks and receiving the
resulting rewards of monetary and personal
satisfaction and independence
AN INTEGRATED DEFINITION
 Entrepreneurship is a dynamic process of
  vision, change, and creation. It requires an
  application of energy and passion towards the
  creation and implementation of new ideas and
  creative solutions.
All definitions of entrepreneurship
                includes
• Newness, organizing, creating, wealth and
                risk taking

• Entrepreneurs are found in all professions
• Individuals have difficulty bringing their
  ideas to the market & creating a new
  venture
• Yet entrepreneurial decisions have resulted
  in several new businesses through out the
  world
• Despite recession- inflation- high interests
  rate, lack of infrastructure-economic
  uncertainty & high probability of failure
Deciding to become an entrepreneur by
            leaving present activity
   Changing from
  present life style

 Work Environment

 Disruption
Types of Start-Ups
• Lifestyle firm-a small venture that supports
  the owners and usually does not grow
• Foundation Company-is created from
  research and development that usually
  does not go public.
• High-potential venture-has high growth
  potential and receives the greatest
  investment interest and publicity.
• Gazelles-very high growth ventures.
ENTREPRENEURSHIP IN
      ECONOMIC DEVELOPMENT
• More than per capita and income, it involves
  change in business and society.         This
  change is accompanied by growth and
  increased output, which allows more wealth
  to be divided among the various participants

• What facilitates   needed     change    and
  development?
• One theory of economic growth depicts
  innovation as the key not only in
  developing new products but also
  stimulating investment interest in the new
  ventures being created. The new capital
  created expands the capacity for growth
• It is the process through which innovation
  develops and commercializes through
  entrepreneurial activity which in turn
  stimulates economic growth
Economic Impact of
           Entrepreneurial Firms
• Innovation
  – Is the process of creating something new, which is central to
    the entrepreneurial process.
  – Small firms are twice as innovative per employee as large
    firms.


• Job Creation
  – In the past two decades, economic activity has moved in the
    direction of smaller entrepreneurial firms, which may be due
    to their unique ability to innovate and focus on specialized
    tasks.
                                                            1-30
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 in new ways.
• 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.

                                                          1-31
Role of Entrepreneurship in
    Economic Development
• Product evolution process-process for
  developing and commercializing an
  innovation
• Iterative Synthesis-the intersection of
  knowledge and social need that starts the
  product development process
• Ordinary innovations-new products with
  little technological change
• Technological innovations- new products
  with significant technological innovation
• Breakthrough innovation- extremely
  unique innovations that sets the basis for
  further innovation.
The future of Entrepreneurship
• In spite of the difference conceptual
  perspectives, there are common aspects:
  risk taking, creativity, independence &
  rewards
• The future– we are living in the age of
  entrepreneurship!

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1 entreprenuership-chapter-1-the-nature-&-importance-of-entreprenurs

  • 1. The Nature & Importance of Entrepreneurs Chapter One
  • 2. (American Entrepreneur) (English entrepreneur)
  • 3. Do the profile of these people fit your perception of the career of an entrepreneur? What does it takes to start and operate a successful business To understand this better, learn about
  • 4. ENTREPRENEUR Entrepreneur is derived from the French words entre, meaning, between, and prendre, meaning “to take”.  Originally to describe people who “take on the risk” between buyers and sellers or who undertake a task such as starting a new venture. An entrepreneur assembles and then integrates all the resources needed – to transform the invention into a viable business
  • 5. WHO IS THE ENTREPRENEUR? High Creativity Inventor Entrepreneur and Innovation Promoter Manager, Administrator Low High General management skills, business know-how, and networks Timmons
  • 6. ENTREPRENEURSHIP • Is the process by which individuals pursue opportunities without regard to resources they currently control. • The essence of entrepreneurial behavior is identifying and putting useful ideas into practice. • The task typically requires creativity, drive and willingness to take risks that can be accomplished by either an individual or a group
  • 7.  Historical Evolution Of Entrepreneurship Earliest Period  Middle Ages  17th Century  18th Century  19th & 20th Century
  • 8. EARLIEST PERIOD  the earliest definition of entrepreneur may be related to the person (merchant – adventurer) who attempted to establish trade routes to the far east  they would sign a contract with money person to sell his goods.  the capitalist was a passive risk bearer.  merchant adventurer took the active role in trading bearing all the physical and emotional risks while the capitalist was a passive risk bearer.  when he completes the trip, the profits divided (capitalist – 75% , adventurer – remaining 25%)
  • 9. MIDDLE AGES • the term was used to describe both an actor and a person who managed large production projects • did not take any risks but merely managed using the resources provided usually by the government of the country • a typical entrepreneur in the middle ages was cleric – the person in charge of great architectural works, such as castles and fortifications, public buildings, abbeys and cathedrals
  • 10. 17TH CENTURY – Re emergent connection of risk with entrepreneurship – entrepreneur being a person who entered into contractual agreement with government to perform a service or supply stipulated products. since the contract price was fixed, any resulting profit or losses were entrepreneur’s – during this period, one entrepreneur John Law,– established a royal bank then evolved as a trading company unfortunately led to downfall when he attempted to push the company’s stock price higher than the value of assets, leading to collapse. – this led to the first definition given by Richard Cantillon, an economist and author
  • 11. 18TH CENTURY • Finally , the person with capital was differentiated from one who needed capital (in other words the entrepreneur was distinguished from the capital provider ) • Many inventions developed during this time and changed the world • Inventors like Eli Whitney and Thomas Edison developed new technologies, both raise capital from private sources to develop and experiment (capital users not providers) • a venture capitalist who makes risk investments from a pool of equity capital to obtain a high rate of return on investments
  • 12. 19TH CENTURY  Entrepreneurs not distinguished from managers and were viewed from an economical perspective.  an entrepreneur organizes and operates for personal gain.  For eg., Andrew Carniege, descended from poor Scottish family made the American steel industry one of the wonders– invented nothing but adapted new tech in the creation of products to achieve economic vitality
  • 13. 20TH CENTURY • the notion of an entrepreneur as an innovator was established • The concept of innovation and newness is an integral part of entrepreneurship. • The newness can consist of anything from a new product to a new distributions system to a method for developing a new organizational structures
  • 14. CONTRIBUTORS TO THE ENTREPRENEURSHIP THEORY • 18th Century: – 1725: RICHARD CANTILLION ( person bearing risks is different from one supplying capital) • 19th Century: – 1803: JEAN BAPTISTE SAY (separated profits of entrepreneur from profits of capital) – 1876: FRANCIS WALKER (distinguished between those who supplied funds and received interest and those who received profit from managerial capabilities)
  • 15. CONTRIBUTORS TO THE ENTREPRENEURSHIP THEORY • 20th Century: – 1934: JOSEPH SCHUMPETER (entrepreneur is an innovator and develops untried technology) – 1961: DAVID McCLELLAND (entrepreneur is an energetic, moderate risk taker) – 1964: PETER DRUCKER (maximizes opportunities)
  • 16. CONTRIBUTORS TO THE ENTREPRENEURSHIP THEORY – 1975: ALBERT SHAPERO (takes initiative, organizes some social and economic mechanisms, and accepts risks of failure) – 1980: KARL VESPER (entrepreneur seen differently by economists, psychologists, business persons and politicians) – 1983: GIFFORD PINCHOT (intrapreneur is an entrepreneur within an already established organization)
  • 18. DEFINITIONS Richard Cantillon One of the early theorist, founder of the term entrepreneurship He viewed the entrepreneur as a risk taker by observing merchants, farmers, craftsmen… “Buy at a certain price and sell at an uncertain price , therefore operating at a risk”
  • 19. DEFINITIONS Jean Baptiste Say Entrepreneurs shift economic resources out of areas of lower and into areas of higher productivity and yield Joseph Schumpeter The function is to reform or revolutionize the pattern of production by exploiting an invitation or more generally an untried technological method of producing a new commodity or producing an old one in a new way , opening a new source of supply or new outlet for products, by organizing a anew industry
  • 20. DEFINITIONS Peter Drucker The entrepreneur always searches for change, responds to it, and exploits it as an opportunity Howard Stevenson Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled
  • 21. DEFINITIONS Robert C. Ronstadt Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by individuals who assume the major risks in terms of equity, time, and/or career commitment of providing value for some product or service. The product or service itself may or may not be new or unique but value must somehow be infused by the entrepreneur by securing and allocating the necessary skills and resources.
  • 22. Robert Hisrich Entrepreneurship is the process of creating something new with value by devoting their necessary time and effort assuming the accompanying financial, psychic and social risks and receiving the resulting rewards of monetary and personal satisfaction and independence
  • 23. AN INTEGRATED DEFINITION  Entrepreneurship is a dynamic process of vision, change, and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions.
  • 24. All definitions of entrepreneurship includes • Newness, organizing, creating, wealth and risk taking • Entrepreneurs are found in all professions
  • 25. • Individuals have difficulty bringing their ideas to the market & creating a new venture • Yet entrepreneurial decisions have resulted in several new businesses through out the world • Despite recession- inflation- high interests rate, lack of infrastructure-economic uncertainty & high probability of failure
  • 26. Deciding to become an entrepreneur by leaving present activity Changing from present life style  Work Environment  Disruption
  • 27. Types of Start-Ups • Lifestyle firm-a small venture that supports the owners and usually does not grow • Foundation Company-is created from research and development that usually does not go public. • High-potential venture-has high growth potential and receives the greatest investment interest and publicity. • Gazelles-very high growth ventures.
  • 28. ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT • More than per capita and income, it involves change in business and society. This change is accompanied by growth and increased output, which allows more wealth to be divided among the various participants • What facilitates needed change and development?
  • 29. • One theory of economic growth depicts innovation as the key not only in developing new products but also stimulating investment interest in the new ventures being created. The new capital created expands the capacity for growth • It is the process through which innovation develops and commercializes through entrepreneurial activity which in turn stimulates economic growth
  • 30. Economic Impact of Entrepreneurial Firms • Innovation – Is the process of creating something new, which is central to the entrepreneurial process. – Small firms are twice as innovative per employee as large firms. • Job Creation – In the past two decades, economic activity has moved in the direction of smaller entrepreneurial firms, which may be due to their unique ability to innovate and focus on specialized tasks. 1-30
  • 31. 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 in new ways. • 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. 1-31
  • 32. Role of Entrepreneurship in Economic Development • Product evolution process-process for developing and commercializing an innovation • Iterative Synthesis-the intersection of knowledge and social need that starts the product development process
  • 33. • Ordinary innovations-new products with little technological change • Technological innovations- new products with significant technological innovation • Breakthrough innovation- extremely unique innovations that sets the basis for further innovation.
  • 34. The future of Entrepreneurship • In spite of the difference conceptual perspectives, there are common aspects: risk taking, creativity, independence & rewards • The future– we are living in the age of entrepreneurship!