Principles of Entrepreneurship Exam 1

A "Gazelle"

A business establishment with at least 20% sales growth in each year for five years, starting with a base of at least $100,000 in annual sales.

Entrepreneur

A catalyst for economic change who uses purposeful searching, careful planning, and sound judgment when carrying out the entrepreneurial process

Integrated Definition of Entrepreneurship

A dynamic process of vision, change, and creation. Requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. Essential ingredients include: The willingness to take calculated risks—in terms of time, equity, or career. The ability to formulate an effective venture team; the creative skill to marshal needed resources. The fundamental skills of building a solid business plan. The vision to recognize opportunity where others see chaos, contradiction, and confusion.

Ecovision

A leadership style that encourages open and flexible structures that encompass the employees, the organization, and the environment, with attention to evolving social demands.

Reasons for the exceptional entrepreneurial activity in the U.S. include

A national culture that supports risk taking and seeking opportunities. Americans' alertness to unexploited economic opportunity and a low fear of failure. U.S. leadership in entrepreneurship education at both the undergraduate and graduate level. A high percentage of individuals with professional, technological or business degrees who are likely to become entrepreneurs.

Social Entrepreneurs

A person or small group of individuals who founds and/or leads an organization or initiative engaged in social entrepreneurship. Also referred to as "public entrepreneurs," "civic entrepreneurs," or "social innovators." Creative thinkers continuously striving for innovation in technologies, supply sources, distribution outlets, or methods of production. Change agents who create large-scale change using pattern-breaking ideas to address the root causes of social problems.

Entrepreneurship

A process of innovation and new-venture creation through four major dimensions—individual, organizational, environmental, and process—that is aided by collaborative networks in government, education, and institutions.

Corporate Entrepreneurship

A process whereby an individual or a group of individuals, in association with an existing organization, creates a new organization or instigates renewal or innovation within the organization

Innovative (I) Team

A semi-autonomous self-directing, self-managing, high-performing group of two or more people who formally create and share the ownership of a new organization. The leader is called a "innovation champion" or a "corporate entrepreneur."

Corporate Entrepreneurship Strategy

A vision-directed, organization-wide reliance on entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations through the recognition and exploitation of entrepreneurial opportunity. It requires the creation of congruence between the entrepreneurial vision of the organization's leaders and the entrepreneurial actions of those throughout the organization.

Corporate Social Responsibility

Actions that appear to further some social good, beyond the interests of the firm and that which is required by law and often denotes societal engagement of organizations

Social Entrepreneurship

Activities and processes undertaken to discover, define, and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organizations in an innovative manner

Triple Bottom Line (TBL)

An accounting framework that goes beyond the traditional measures of profit, return on investment, and shareholder value to include environmental and social dimensions.

Shared Value

An approach to creating economic value that also creates value for society by addressing its needs and challenges. Transforms business thinking by addressing issues through innovation and methods.

Entrepreneurial Persistence

An entrepreneur's choice to continue with an entrepreneurial opportunity regardless of counterinfluences or other enticing alternatives

Corporate entrepreneurship strategy is manifested through the presence of three elements:

An entrepreneurial strategic vision A pro-entrepreneurship organizational architecture Entrepreneurial processes and behavior as exhibited throughout the organization

Gazelles as leaders in innovation:

Are responsible for 55% of innovations in 362 different industries and 95% of radical innovations. Produce twice as many product innovations per employee as do larger firms. Obtain more patents per sales dollar than do larger firms. Gazelles are the goal of all entrepreneurs. Gazelles receive venture capital. Gazelles were never mice. Gazelles are high-tech. Gazelles are global.

Factors in large corporations that are successful innovators:

Atmosphere and vision Orientation to the market Small, flat organizations Multiple approaches Interactive learning Skunk Works

Integrative Process Approach to Entrepreneurship

Built around the concepts of input to the entrepreneurial process and outcomes from the entrepreneurial process. Focuses on the entrepreneurial process itself and identifies five key elements that contribute to the process. Provides a comprehensive picture regarding the nature of entrepreneurship that can be applied at different levels.

Defining the Social Enterprise

Challenges are presented regarding the boundaries of what is and what isn't a social enterprise. Social causes can be based on personal goals. General agreement that there is the desire to benefit society in some way. Arguments can begin over the location of the social goals and with the purposes of the social goals.

Entrepreneurs: Type A Personalities

Chronic and severe sense of time urgency. Constant involvement in multiple projects subject to deadlines. Neglect of all aspects of life except work. A tendency to take on excessive responsibility, combined with the feeling that "Only I am capable of taking care of this matter." Explosiveness of speech and a tendency to speak faster than most people.

Entrepreneurial Leadership

Combining two capacities of the pursuit of innovation. Capacity to lead Capacity to risk Leadership is measured. Sense of opportunity Drive to innovate Capacity for accomplishment One of the most significant phrases in the twenty-first century.

Online Ethical Dilemmas in E-Commerce

Continuing to obtain consumer trust. Protecting their business's online reputation. Avoiding tactics that betray trust. Continuing to exhibit strong ethical responsibility. Establishing an ethical strategy.

Metacognitive Model

Describes the higher-order cognitive process that results in the entrepreneur framing a task effectually, and thus why and how a particular strategy was included in a set of alternative responses to the decision task (metacognition).

Entrepreneurial Mind-Set

Describes the most common characteristics associated with successful entrepreneurs as well as the elements associated with the "dark side" of entrepreneurship

Characteristics of the Entrepreneurial Mind-Set

Determination and perseverance Drive to achieve Opportunity orientation Initiative and responsibility Persistent problem solving Seeking feedback Internal locus of control Tolerance for ambiguity Calculated risk taking High energy level Creativity and innovativeness Vision Passion Independence Team building

Critical steps of a corporate entrepreneurial strategy:

Developing the vision Encouraging innovation Structuring for an intrapreneurial climate Developing individual managers for corporate entrepreneurship Developing venture teams.

3M's Innovation Rules

Don't kill a project Tolerate failure Keep divisions small Motivate the champions Stay close to the customer Share the wealth

Steps to help restructure corporate thinking and encourage an intrapreneurial environment:

Early identification of potential innovators Top management sponsorship of innovative projects Creation of innovation goals in strategic activities Promotion of entrepreneurial thinking through experimentation Development of collaboration between innovators and the organization at large

Role failure Morally Questionable Act

Effect against the firm Superficial performance appraisal, not confronting expense account cheating Palming off a poor performer with inflated praise

Role Distortion Morally Questionable Act

Effect for the firm Bribery Price fixing Manipulating suppliers

Role Assertion Morally Questionable Act

Effect for the firm Investing in unethically governed countries, Using nuclear technology for energy generation, Not withdrawing product line in face of initial allegations of inadequate safety

Nonrole Morally Questionable Act

Effect goes against the firm Expense account cheating, Embezzlement, Stealing supplies

Impediments to Creativity

Either/or thinking (concern for certainty) Security hunting (concern for risk) Stereotyping (abstracting reality) Probability thinking (seeking predictable results)

Key Steps in an Environmental Strategy

Eliminate the concept of waste. Restore accountability. Make prices reflect costs. Promote diversity. Make conservation profitable. Insist on accountability of nations

Rules for Innovative Environment

Encourage action. Use informal meetings whenever possible. Tolerate failure, and use it as a learning experience. Persist in getting an idea to market. Reward innovation for innovation's sake. Plan the physical layout of the enterprise to encourage informal communication. Expect clever bootlegging of ideas—secretly working on new ideas on company time as well as personal time. Put people on small teams for future-oriented projects. Encourage personnel to circumvent rigid procedures and bureaucratic red tape. Reward and promote innovative personnel.

Entrepreneurs lead to growth by:

Entering and expanding existing markets. Creating entirely new markets by offering innovative products. Increasing diversity and fostering minority participation in the economy.

Entrepreneurship Theory

Entrepreneurs cause entrepreneurship. Entrepreneurship is a function of the entrepreneur: E = f(e) Entrepreneurship is characterized as the interaction of skills related to inner control, planning and goal setting, risk taking, innovation, reality perception, use of feedback, decision-making, human relations, and independence.

New Venture Facts

Entrepreneurs create over 400,000 new businesses each year. 28.2 million small firms provide 49.6 % of private-sector jobs and make up 99.7 % of employing firms. Over the past five years, the number of minority-owned firms increased 45.6% while women-owned businesses increased 20.1%. 1 of every 150 adults participates in the founding of a new firm each year

Social Entrepreneurship

Entrepreneurship that is a form that exhibits characteristics of non-profits, governments, and businesses. Combination of private-sector focus on innovation, risk-taking, and large-scale transformation with social problem solving.

Ecopreneurship

Environmental entrepreneurship with entrepreneurial actions contributing to preserving the natural environment, including the Earth, biodiversity, and ecosystems.

A code of ethics provides a clear understanding of the need for:

Ethical administrative decision-making Ethical behavior of employees Explicit rewards and punishments based on ethical behavior

The Entrepreneurial Process

Exploring the Entrepreneurial Context Identifying Opportunities and Possible Competitive Advantage Opportunities are positive external trends or changes that provide unique and distinct possibilities for innovating and creating value Competitive advantage is what sets an organization apart; it's competitive edge Starting the Venture Funds and partnering opportunities Managing the Venture

Sources of Innovative Ideas

External and internal environments alert entrepreneurs to opportunities. Trends signal shifts in current paradigm (or thinking) of major population. Valuable insights constitute source of potential entrepreneurial ideas.

Demographic Profile of Entrepreneurs

Family birth order and gender Tend to be "first born" and men more likely to start businesses than women Work experience Prior entrepreneurial experience positively correlated to being an entrepreneur Education Having a high school diploma sharply raises odds of trying to start a business Entrepreneurial family Tend to have parents who were entrepreneurial

Ongoing Venture Stage

Financial Consideration: Cash management, Investments, Financial analysis and evaluation Decision: Maintain, increase, or reduce size

Start up or Acquisition Stage

Financial Consideration: Seed capital, Venture Capital sources Decision: Proceed or abandon

The Entrepreneur's Confrontation with Risk

Financial risk versus profit (return) motive varies in entrepreneurs' desire for wealth. Career risk—loss of employment security Family and social risk—competing commitments of work and family Psychic risk—psychological impact of failure on the well-being of entrepreneurs

Sustainable Entrepreneurship

Focus on the preservation of nature, life support, and community. Pursuing opportunities to bring into existence future products, processes, and services for gain, including economic and noneconomic gains to individuals, the economy, and society.

Reasons for Unethical Behaviors Occur

Greed A reliance on other social institutions to convey and reinforce ethics Survival (bottom-line thinking) Distinctions between activities at work and activities at home Lack of a foundation in ethics

Novice Entrepreneur

Has no prior business ownership experiences as a business founder, inheritor, or purchaser

Habitual Entrepreneur

Has prior business ownership experience

Serial Entrepreneur

Has sold or closed an original business and establishes another new business Continues the cycle of selling/closing and establishing

Personality Profile of Entrepreneurs

High level of motivation Abundance of self-confidence Ability to be involved for the long term High energy level Persistent problem solver High degree of initiative Ability to set goals Moderate risk taker Type A personality?

Gazelles And Survival

How many gazelles survive? The simple answer is "none." Sooner or later, all companies wither and die. The Common Myth of Failure: 85% of all firms fail in the first year—in actuality, about half of all start-ups last between 5 and 7 years.

Lessons from the GEM study

Impacts economic measures for growth, innovation, and internationalization. Needs both dynamism and stability for the creation of new businesses and the exit of nonviable ones Requires a variety of business phases and types and different types of entrepreneurs including women and age groups Works best when there is a strong set of basic economic requirements in place to reinforce efficiency enhancers Flourishes when there is broad societal acceptance of the entrepreneurial mind-set

Nascent Entrepreneur

In the process of starting a new business Can be either a novice or a habitual entrepreneur

Who Are Entrepreneurs?

Independent individuals, intensely committed and determined to persevere, who work very hard. They are confident optimists who strive for integrity. They burn with the competitive desire to excel and use failure as a learning tool.

Linkages in the model for Corporate Entrepreneurship Strategy

Individual entrepreneurial cognitions of the organization's members External environmental conditions that invite entrepreneurial activity Top management's entrepreneurial strategic vision for the firm Organizational architectures that encourage entrepreneurial processes and behavior The entrepreneurial processes that are reflected in entrepreneurial behavior Organizational outcomes resulting from entrepreneurial actions.

Collective Entrepreneurship

Individual skills are integrated into a group; this collective capacity to innovate becomes something greater than the sum of its parts

Environmental Movement

Initiated primarily by values rather than by design. Developed by a plan to create sustainable future

Current Importance of Entrepreneurship

Innovation Process of creating, changing, experimenting, transforming, and revolutionizing Number of New Start-ups Important because new firms contribute to economic development through benefits such as product-process innovation Job Creation Vital to the overall long-term economic health of communities, regions, and nations

Corporate Venturing

Institutionalizing the process of embracing the goal of growth through development of innovative products, processes, and technologies with an emphasis on long-term prosperity

Restoration Orientation

Involves both distracting oneself from thinking about the failure event and being proactive towards secondary causes of stress.

Loss Orientation Method of Dealing with Recovery

Involves focusing on the particular loss to construct an account that explains why the loss occurred.

Ethical rationalizations used to justify questionable conduct involve believing that the activity:

Is not "really" illegal or immoral. Is in the individual's or the firm's best interest. Will never be found out. Helps the firm so the firm will condone it.

Innovation:

Is the process by which entrepreneurs convert opportunities (ideas) into marketable solutions. Is a combination of the vision to create a good idea and the perseverance and dedication to remain with the concept through implementation. Is a key function in the entrepreneurial process. Is the specific function of entrepreneurship

Entrepreneurial Discipline

It matters not who or what the entrepreneur is—a business or a non-business public service organization, whether a governmental or non-governmental institution. The rules are much the same and so are the kinds of innovation and where to look for them.

Entrepreneurial components of the U.S. Economy:

Large firms have increased profitability by returning to their "core competencies through restructuring and downsizing. New entrepreneurial companies have been blossoming in new technologies and new markets. Thousands of smaller firms established by women, minorities, and immigrants have strengthened the economy.

Sources of Entrepreneurial Stress

Loneliness Immersion in business People problems Need to achieve

Entrepreneurial Schools of Thought Approach

Macro View (External Locus of Control): Environmental School of Though, Finacial/capital school of though, Displacement School of Thought Micro View: Entrepreneruial Trait School of Though (People School), Venture Opportunity School of Though, Strategic Formulation School of Thought

The Myths of Entrepreneurship

Myth 1: Entrepreneurs Are Doers, Not Thinkers Myth 2: Entrepreneurs Are Born, Not Made Myth 3: Entrepreneurs Are Always Inventors Myth 4: Entrepreneurs Are Academic and Social Misfits Myth 5: Entrepreneurs Must Fit the Profile Myth 6: All Entrepreneurs Need Is Money Myth 7: All Entrepreneurs Need Is Luck Myth 8: Entrepreneurship Is Unstructured and Chaotic Myth 9: Most Entrepreneurial Initiatives Fail Myth 10: Entrepreneurs Are Extreme Risk Takers

A Framework of Frameworks Process Approach to Entrepreneurship

Offers a more dynamic view of entrepreneurship. Allows for the profession to move forward. Identifies the static and dynamic elements of new theories, typologies, or frameworks of importance

Self-Destructive Characteristics of an Entrepreneur

Overbearing need for control Sense of distrust Overriding desire for success Unrealistic externalized optimism

Typical Creative Process

Phase 1: Background or knowledge accumulation Phase 2: The incubation process Phase 3: The idea experience Phase 4: Evaluation and implementation

Decline or succession Venture Stage

Profit question, Corporate buyout, Succession question Decision: Sell, retired, or dissolve operations

The Global Entrepreneurship Monitor (GEM)

Provides an annual assessment of the entrepreneurial environment of over 100 countries. Latest GEM study: the U.S. outranks the rest of the world in important entrepreneurial support.

Benefit Corporation

Purpose: To create a material positive impact on society and the environment. Accountability: To have a fiduciary duty to consider the interests of workers, the community, and the environment. Transparency: To report annually to the public on overall social and environmental performance with a credible and transparent third-party standard.

The Social Entrepreneurship Process

Recognition of a perceived social opportunity translated into an enterprise concept. Resources are acquired to execute the enterprise's goals.

Developing Your Creativity

Recognizing Relationships Looking for different or unorthodox relationships among the elements and people around you. Developing a Functional Perspective Viewing things and people in terms of how they can satisfy his or her needs and help complete a project. Using Your Brains The right brain helps us understand analogies, imagine things, and synthesize information. The left brain helps us analyze, verbalize, and use rational approaches to problem solving.

Portfolio Entrepreneur

Retains an original business and builds a portfolio of additional businesses Through inheriting, establishing, and purchasing the businesses

Important practices for establishing an innovation-driven organization:

Set explicit goals. Create a system of feedback and positive reinforcement. Emphasize individual responsibility. Provide rewards based on results. Do not punish failures

Dynamic States Process Approach to Entrepreneurship

Stresses dependency of venture on environment and the interaction of: The dominant logic of the firm The business model Value creation

5 Misconceptions About Entrepreneurship

Successful entrepreneurship needs only a great idea Put it to work Entrepreneurship is easy Entrepreneurship is a risky gamble Feasibility and assessment Entrepreneurship is found only in small businesses Intrapreneurship Entrepreneurial ventures and small businesses are the same thing Focus on growth

Micro View of Schools of Thought Detailed

The Entrepreneurial Trait School of Thought Focuses on identifying traits common to successful entrepreneurs. Achievement, creativity, determination, and technical knowledge The Venture Opportunity School of Thought Focuses on the opportunity aspect of venture development—the search for idea sources, the development of concepts, and the implementation of venture opportunities. Corridor principle: New pathways or opportunities will arise that lead entrepreneurs in different directions. The Strategic Formulation School of Thought Emphasizes the planning process in successful venture development. Strategic formulation is a leveraging of unique elements: Unique Markets—mountain gap strategies Unique People—great chef strategies Unique Products—better widget strategies Unique Resources—water well strategies

Macro View of Schools of Thought Detailed

The Environmental School of Thought Considers the external factors that affect a potential entrepreneur's lifestyle. The Financial/Capital School of Thought Based on the capital-seeking process—the search for seed and growth capital. The Displacement School of Thought Alienation drives entrepreneurial pursuits Political displacement (laws, policies, and regulations) Cultural displacement (preclusion of social groups) Economic displacement (economic variations)

Cognitive Adaptability

The ability to be dynamic, flexible, and self-regulating in one's cognitions given dynamic and uncertain task environments.

Types of people involved with contemporary small businesses

The entrepreneur who invents a business that works without him or her. The manager who produces results through employees by developing and implementing effective systems and, by interacting with employees, enhances their self-esteem and ability to produce good results. The technician who performs specific tasks according to systems and standards management developed.

Radical Innovation

The launching of inaugural breakthroughs. These innovations take experimentation and determined vision, which are not necessarily managed but must be recognized and nurtured. Cloud storage, Online dating, Mobile computing

Entrepreneurship

The process whereby an individual or group of individuals use organized efforts to pursue opportunities To create value and grow by fulfilling wants and needs through innovation and uniqueness

Entrepreneurial Motivation

The quest for new-venture creation as well as the willingness to sustain that venture

Incremental Innovation

The systematic evolution of a product or service into newer or larger markets. Many times the incremental innovation will take over after a radical innovation introduces a breakthrough. Frozen yogurt, Microwave popcorn

Entrepreneurial firms make two indispensable contributions to an economy

They are an integral part of the renewal process that pervades and defines market economies. They are the essential mechanism by which millions enter the economic and social mainstream of society.

Invention

Totally new product, service, or process Ex: Wright brothers—airplaneThomas Edison—light bulbAlexander Graham Bell—telephone

Major Research Themes

Venture Financing: venture capital and angel capital financing and other financing techniques strengthened in the 1990s. Corporate Entrepreneurship and the need for entrepreneurial cultures has drawn increased attention. Social Entrepreneurship has unprecedented strength within the new generation of entrepreneurs. Entrepreneurial Cognition is providing new insights into the psychological aspects of the entrepreneurial process. Women and Minority Entrepreneurs appear to face obstacles and difficulties different from those that other entrepreneurs face. The Global Entrepreneurial Movement is increasing Family Businesses have become a stronger focus of research. Entrepreneurial Education has become one of the hottest topics in business and engineering schools throughout the world.

Opportunity identification is central to the domain of entrepreneurship and revolves around the answers to the following:

Why? When? How?

Ch 1 Key Terms and Concepts

better widget strategies corridor principle displacement school of thought dynamic states model entrepreneur entrepreneurial discipline entrepreneurial leadership Entrepreneurial Revolution entrepreneurial trait school of thought entrepreneurship environmental school of thought external locus of control financial/capital school of thought framework of frameworks gazelle great chef strategies internal locus of control macro view of entrepreneurship micro view of entrepreneurship mountain gap strategies strategic formulation school of thought venture opportunity school of thought water well strategies

Chapter 3 Key Terms

bootlegging champion collective entrepreneurship corporate entrepreneurship corporate venturing incremental innovation innovation team (I-team) interactive learning intrapreneurship radical innovation Skunk Works strategic entrepreneurship top management support

Chapter 2 Key Terms

career risk code of conduct cognition cognitive adaptability dark side of entrepreneurship entrepreneurial behavior Entrepreneurial cognition entrepreneurial experience entrepreneurial mind-set entrepreneurial motivation entrepreneurial persistence ethics failure family and social risk financial risk grief recovery metacognitive model psychic risk rationalizations risk role assertion role distortion role failure social cognition theory stress

Creative destruction

the process whereby existing products, processes, ideas and businesses are replaced with better ones