CHAPTER 2

Entrepreneurship: An Evolving Concept

CHAPTER OBJECTIVES
1. To examine the historical development of entrepreneurship 2. To explore and debunk the myths of entrepreneurship 3. To define and explore the major schools of entrepreneurial thought 4. To explain the process approaches to the study of entrepreneurship 5. To set forth a comprehensive definition of entrepreneurship

Most of what you hear about entrepreneurship, says America's leading management thinker, is all wrong. It's not magic; it's not mysterious; and it has nothing to do with genes. It's a discipline and, like any discipline, it can be learned. Peter F. Drucker Innovation and Entrepreneurship

THE EVOLUTION OF ENTREPRENEURSHIP

The word entrepreneur is derived from the French entreprendre, meaning "to undertake." The entrepreneur is one who undertakes to organize, manage, and

assume the risks of a business. In recent years entrepreneurs have been doing so many things that it is necessary to broaden this definition. Today, an entrepreneur is an innovator or developer who recognizes and seizes opportunities; converts those opportunities into workable/marketable ideas; adds value through time, effort, money, or skills; assumes the risks of the competitive marketplace to implement these ideas; and realizes the rewards from these efforts. 1 The entrepreneur is the aggressive catalyst for change in the world of business. He or she is an independent thinker who dares to be different in a background of common events. The literature of entrepreneurial research reveals some similarities, as well as a great many differences, in the characteristics of entrepreneurs. Chief among these characteristics are personal initiative, the ability to consolidate resources, management skills, a desire for autonomy, and risk taking. Other characteristics include aggressiveness, competitiveness, goal-oriented behavior, confidence, opportunistic behavior, intuitive-ness, reality-based actions, the ability to learn from mistakes, and the ability to employ human relations skills. 2 Although no single definition of entrepreneur exists and no one profile can represent today's entrepreneur, research is providing an increasingly sharper focus on the subject. A brief review of the history of entrepreneurship illustrates this. America currently is in the midst of a new wave of business and economic development, and entrepreneurship is its catalyst. Yet the social and economic forces of entrepreneurial activity existed long before the 1990s. In fact, as noted in Chapter 1, the entrepreneurial spirit has driven many of humanity's achievements.
Humanity's progress from caves to campuses has been explained in numerous ways. But central to virtually ad of these theories has been the role of the "agent of change," the force that initiates and implements material progress. Today we recognize that the agent of change in human history has been and most likely will continue to be the entrepreneur. 3

The recognition of entrepreneurs dates back to eighteenth-century France when economist Richard Cantillon associated the "risk-bearing" activity in the economy with the entrepreneur. In England during the same period, the Industrial Revolution

was evolving, with the entrepreneur playing a visible role in risk taking and the transformation of resources .4 The association of entrepreneurship and economics has long been the accepted norm. In fact, until the 1950s the majority of definitions and references to entrepreneurship had come from economists. For example, Cantillon (1725), just mentioned; Jean Baptiste Say (1803), the renowned French economist; and Joseph Schumpeter (1934), a twentieth-century economic genius, all wrote about entrepreneurship and its impact on economic development.
5

Over the decades

writers have continued to try to describe or define what entrepreneurship is all about. Here are some examples:
Entrepreneurship . . . consists in doing things that are not generally done in the ordinary course of business routine; it is essentially a phenomenon that comes under the wider aspect of leadership. 6 Entrepreneurship, at least in all nonauthoritarian societies, constitutes a bridge between society as a whole, especially the noneconomic aspects of that society, and the profit-oriented institutions established to take advantage of its economic endowments and to satisfy, as best they can, its economic desires. 7 In . . . entrepreneurship, there is agreement that we are talking about a kind of behavior that includes: (1) initiative taking, (2) the organizing or reorganizing of social economic mechanisms to turn resources and situations to practical account, and (3) the acceptance of risk of failure. 8

After reviewing the evolution of entrepreneurship and examining its varying definitions, Robert C. Ronstadt put together a summary description:
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. 9

Entrepreneurship as a topic for discussion and analysis was introduced by the economists of the eighteenth century, and it continued to attract the interest of economists in the nineteenth century. In the present century, the word has become synonymous or at least closely linked with free enterprise and capitalism. Also, it is generally recognized that entrepreneurs serve as agents of change; provide creative, innovative ideas for business enterprises; and help businesses grow and become profitable.

Whatever the specific activity they engage in, entrepreneurs today are considered the heroes of free enterprise. Many of them have used innovation and creativity to build multimillion-dollar enterprises from fledgling businessessome in less than a decade! These individuals have created new products and services and have assumed the risks associated with these ventures. Many people now regard entrepreneurship as "pioneership" on the frontier of business.
Entrepreneurship is the ability to create and build a vision from practically nothing: fundamentally it is a human, creative act. It is the application of energy to initiating and building an enterprise or organization, rather than just watching or analyzing. This vision requires a willingness to take calculated risksboth personal and financialand then to do everything possible to reduce the chances of failure. Entrepreneurship also includes the ability to build an entrepreneurial or venture team to complement your own skills and talents. It is the knack for sensing an opportunity where others see chaos, contradiction, and confusion. It is possessing the know-how to find, marshal, and control resources (often owned by others). 10

THE MYTHS OF ENTREPRENEURSHIP

Throughout the years many myths have arisen about entrepreneurship. These myths are the result of a lack of research on entrepreneurship, As many researchers in the field have noted, the study of entrepreneurship is still emerging, and thus "folklore" will tend to prevail until it is dispelled with contemporary research findings. Ten of the most notable myths with an explanation to dispel each myth appear next.

Myth 1: Entrepreneurs Are Doers, Not Thinkers

Although it is true entrepreneurs tend toward action, they are also thinkers. Indeed, they are often very methodical people who plan their moves carefully. The emphasis today on the creation of clear and complete business plans (see Part 2) is an indication that "thinking" entrepreneurs are as important as "doing" entrepreneurs.

Myth 2: Entrepreneurs Are Born, Not Made

The idea that the characteristics of entrepreneurs cannot be taught or learned, that they are innate traits one must be born with, has long been prevalent. These traits include aggressiveness, initiative, drive, a willingness to take risks, analytical ability, and skill in human relations. Today, however, the recognition of entrepreneurship as a discipline is helping to dispel this myth. Like all disciplines, entrepreneurship has models, processes, and case studies that allow the topic to be studied and the knowledge to be acquired.

Myth 3: Entrepreneurs Are Always Inventors The idea that entrepreneurs are inventors is a result of misunderstanding and tunnel vision. Although many inventors are also entrepreneurs, numerous entrepreneurs encompass all sorts of innovative activity.'' For example, Ray Kroc did not invent the fast-food franchise, but his innovative ideas made McDonald's the largest fast-food enterprise in the world. A contemporary understanding of entrepreneurship covers more than just invention. It requires a complete understanding of innovative behavior in all forms.

Myth 4; Entrepreneurs Are Academic and Social Misfits

The belief that entrepreneurs are academically and socially ineffective is a result of some business owners having started successful enterprises after dropping out of school or quitting a job. In many cases such an event has been blown out of proportion in an attempt to "profile" the typical entrepreneur. Historically, in fact, educational and social organizations did not recognize the entrepreneur. They abandoned him or her as a misfit in a world of corporate giants. Business education, for example, was aimed primarily at the study of corporate activity. Today the entrepreneur is considered a herosocially, economically, and academically. No longer a misfit, the entrepreneur is now viewed as a professional.

Myth 5: Entrepreneurs Must Fit the "Profile"

Many books and articles have presented checklists of characteristics of the successful entrepreneur. These lists were neither validated nor complete; they were based on case studies and on research findings among achievement-oriented people. Today we realize that a standard entrepreneurial profile is hard to compile. The environment, the venture itself, and the entrepreneur have interactive effects, which result in many different types of profiles. Contemporary studies conducted at universities across the United States will, in the future, provide more accurate insights into the various profiles of successful entrepreneurs. As we will show in Chapter 4, an "Entrepreneurial Perspective" within individuals is more understandable than a particular profile. Myth 6: All Entrepreneurs Need Is Money It is true that a venture needs capital to survive; it is also true that a large number of business failures occur because of a lack of adequate financing. Yet having money is not the only bulwark against failure. Failure due to a lack of proper financing often is an indicator of other problems: managerial incompetence, lack of financial understanding, poor investments, poor planning, and the like. Many successful entrepreneurs have overcome the lack of money while establishing their ventures. To those entrepreneurs, money is a resource but never an end in itself. Myth 7: All Entrepreneurs Need Is Luck Being at "the right place at the right time" is always an advantage. But "luck happens when preparation meets opportunity" is an equally appropriate adage. Prepared entrepreneurs who seize the opportunity when it arises often seem "lucky." They are, in fact, simply better prepared to deal with situations and turn them into successes. What appears to be luck really is preparation, determination, desire, knowledge, and innovativeness. Myth 8: Ignorance Is Bliss for Entrepreneurs

The myth that too much planning and evaluation lead to constant problemsthat over-analysis leads to paralysisdoes not hold up in today's competitive markets, which demand detailed planning and preparation. Identifying a venture's strengths and weaknesses, setting up clear timetables with contingencies for handling problems, and minimizing these problems through careful strategy formulation are all key factors for successful entrepreneurship. Thus careful planningnot ignorance of itis the mark of an accomplished entrepreneur.

Myth 9: Entrepreneurs Seek Success but Experience High Failure Rates

It is true that many entrepreneurs suffer a number of failures before they are successful. They follow the adage "If at first you don't succeed, try, try, again." In fact, failure can teach many lessons to those willing to learn and often leads to future successes. This is clearly shown by the corridor principle, which states that with every venture launched, new and unintended opportunities often arise. The 3M Corporation invented Post-it notes using a glue that had not been strong enough for its intended use. Rather than throw away the glue, the company focused on finding another use for it and, in the process, developed a multimillion-dollar product. Yet, the statistics of entrepreneurial failure rates have been misleading over the years. In fact, one researcher, Bruce A. Kirchoff, has reported that the "high failure rate" most commonly accepted may be misleading. Tracing 814,000 businesses started in 1977, Kirchoff found that more than 50 percent were still surviving under their original owners or new owners. Additionally, 28 percent voluntarily closed down, and only 18 percent actually "failed" in the sense of leaving behind outstanding liabilities. 12 Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers) As we will show in Chapter 4, the concept of risk is a major element in the entrepreneurial process. However, the public's perception of the risk most entrepreneurs assume is distorted. Although it may appear that an entrepreneur is "gambling" on a wild chance, the fact is the entrepreneur is usually working on a moderate or "calculated" risk. Most successful entrepreneurs work hard through

planning and preparation to minimize the risk involved in order to better control the destiny of their vision. These ten myths have been presented to provide a background for today's current thinking on entrepreneurship. By sidestepping the "folklore," we can build a foundation for critically researching the contemporary theories and processes of entrepreneurship.

APPROACHES TO ENTREPRENEURSHIP
To understand the nature of entrepreneurship, it is important to consider some of the theory development so as to better recognize the emerging importance of entrepreneurship. The research on entrepreneurship has grown dramatically over the years. As the field has developed, research methodology has progressed from empirical surveys of entrepreneurs to more contextual and process-oriented research. As yet, no comprehensive theory base has emerged, however. A theory of entrepreneurship is defined as a verifiable and logically coherent formulation of relationships, or underlying principles that either explain entrepreneurship, predict entrepreneurial activity (for example, by characterizing conditions that are likely to lead to new profit opportunities to the formation of new enterprises), or provide normative guidance (that is, prescribe the right action in particular circumstances).13 As we are now in the new millennium, it has become increasingly apparent that we need to have some cohesive theories or classifications to better understand this emerging field. In the study of contemporary entrepreneurs hip, one concept recurs: Entrepreneurship is interdisciplinary. As such it contains various approaches that can increase one's understanding of the field. l4 Thus we need to recognize the diversity of theories as an emergence of entrepreneurial understanding. One way to examine these theories is with a "schools of thought" approach that divides entrepreneurship into specific activities. These activities may be within a "macro" view or a "micro" view, yet all address the conceptual nature of entrepreneur ship. The Schools of Entrepreneurial Thought

In this section we will highlight the ideas emanating from the macro and micro views of entrepreneurial thought, and we will further break down these two major views into six distinct schools of thought, three within each entrepreneurial view (sec Figure 2.1). Although this presentation does not purport to be all-inclusive, neither does it claim to limit the schools to these six, for a movement may develop for unification or expansion. Whatever the future holds, however, it is important to become familiar with these conceptual ideas on entrepreneurship to avoid the semantic warfare that has plagued general management thought for so many years. 15

THE MACRO VIEW The macro view of entrepreneurship presents a broad array of factors that relate To success or failure in contemporary entrepreneurial ventures. This array includes external processes that are sometimes beyond the control of the individual entrepreneur, for they exhibit a strong external locus of control point of view. Three schools of entrepreneurial thought represent a breakdown of the macro view: (1) the environmental school of thought, (2) the financial/capital school of thought, and (3) the displacement school of thought. The first of these is the broadest and the most pervasive school.

The Environmental School of Though! This school of thought deals with the external factors that affect a potential entrepreneur's lifestyle. These can be either positive or negative forces in the molding of entrepreneurial desires. The focus is on institutions, values, and mores that, grouped together, form a sociopolitical environmental entrepreneurs.
16

framework that strongly influences the development of For example, if a middle manager experiences the freedom and

support to develop ideas, initiate contracts, or create and institute new methods, the work environment will serve to promote mat person's desire to pursue an entrepreneurial career. Another environmental factor that often affects the potential development of entrepreneurs is their social group. The atmosphere of friends and relatives can influence the desire to become an entrepreneur. The Financial/Capitol School of Thought This school of thought is based on the capital-seeking process. The search for seed and growth capital is the entire focus of this entrepreneurial emphasis. Certain literature is devoted specifically to this process, whereas other sources tend to treat it as but one segment of the entrepreneurial process. entrepreneur's
17

In any case, the venture capital process is vital to an Business-planning guides and texts for

development.

entrepreneurs emphasize this phase, and development seminars focusing on the funds application process are offered throughout the country on a continuous basis. This school of thought views the entire entrepreneurial venture from a financial management standpoint. As is apparent from Table 2.1, decisions involving finances occur at every major point in the venture process. The Displacement School of Thought This school of thought focuses on group phenomena. It holds that the group affects or eliminates certain factors that project the individual into an entrepreneurial venture. As Ronstadt has noted, individuals will not pursue a venture unless they arc prevented or displaced from doing other activities. thought:
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Three major types of displacement illustrate this school of

1. Political displacement. This is caused by factors ranging from an entire political regime that rejects free enterprise (international environment) to governmental regulations and policies that limit or redirect certain industries.

2. Cultural displacement. This deals with social groups precluded from professional fields. Ethnic background, religion, race, and sex arc all examples of factors that figure in the minority experience. Increasingly, this experience will turn various individuals from standard business professions and toward entrepreneurial ventures. According to the U.S. government, the number of minority businesses grew by nearly half a million during the last ten years and represents one-tenth of all the nation's businesses. 19 3. Economic, displacement. This is concerned with the economic variations of recession and depression. Job loss, capital shrinkage, or simply "bad limes" can create the foundation for entrepreneurial! pursuits, just as it can affect venture development and reduction. These examples of displacement illustrate the external forces that can influence the development of entrepreneurship. Cultural awareness, knowledge of political and public policy, and economic indoctrination will aid and improve entrepreneurial understanding under the displacement school of thought. The broader the educational base in economics and political science, (lie stronger the entrepreneurial understanding.

THE MICRO VIEW The micro view of entrepreneurship examines the factors that are specific to entrepreneurship and are part of the internal locus of control. The potential entrepreneur has the ability, or control, to direct or adjust the outcome of each major influence in this view. Although some researchers have developed this approach into various definitions and segments, as shown in Table 2.2, our approach presents the entrepreneurial trait theory (sometimes referred to as the "people school of thought"), the venture opportunity theory, and the strategic formulation theory. Unlike the macro approach, which focuses on events from the outside looking in, the micro approach concentrates on specifics from the inside looking out. The first of these schools of thought is the most widely recognized.

The Entrepreneurial Trait School of Thought Many researchers and writers have been interested in identifying traits common to successful entrepreneurs.
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this approach is grounded in the study of successful people who tend to exhibit similar characteristics that, if copied, would increase success opportunities for the emulators. For example, achievement, creativity, determination, and technical knowledge are four factors that usually are exhibited by successful entrepreneurs. Family development and educational

incubation are also examined. Certain researchers have argued against educational development of entrepreneurs because they believe it inhibits the creative and challenging nature of entrepreneurship. 21 Other authors, however, contend that new programs and new educational developments are on the increase because they have been found to aid in entrepreneurial development .22 The family development idea focuses on the nurturing and support that exist within the home atmosphere of an entrepreneurial family. This reasoning promotes the belief that certain traits established and supported early in life will lead eventually to entrepreneurial success.

The Venture Opportunity School of Thought This 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 are the

important interest areas for this school. Creativity and market awareness are viewed as essential. Additionally, according to this school of thought, developing the right idea at the right time for the right market niche is the key to entrepreneurial success. Another development from this school of thought is the previously described corridor principle. New pathways or opportunities will arise that lead entrepreneurs in different directions. The ability to recognize these opportunities when they arise and to implement the necessary steps for action are key factors. The maxim that preparation meeting opportunity equals "luck" underlies this corridor principle. Proponents of this school of thought believe that proper preparation in the interdisciplinary business segments will enhance the ability to recognize venture opportunities. The Strategic Formulation School of Thought George Steiner has stated that "Strategic planning is inextricably interwoven into the entire fabric of management; it is not something separate and distinct from the process of management."
23

The strategic formulation approach to entrepreneurial theory

25

emphasizes the planning process in successful venture development. 24 Ronstadt views strategic formulation as a leveraging of unique elements.

Unique markets, unique people, unique products, or unique resources are identified, used, or constructed into effective venture formations. The interdisciplinary aspects of strategic adaptation become apparent in the characteristic elements listed here with their corresponding strategies: Unique markets: Mountain versus mountain gap strategies, which refers to identifying major market segments as well as interstice (in-between) markets that arise from larger markets. Unique people: Great chef strategies, which refers to the skills or special talents of one or more individuals around whom the venture is built. Unique products: Better widget strategies, which refers to innovations that encompass new or existing markets. Unique resources: Water well strategies, which refers to the ability to gather or harness special resources (land, labor, capital, raw materials) over the long term.

Without question, the strategic formulation school encompasses a breadth of managerial capability that requires an interdisciplinary approach. 26 SCHOOLS OF ENTREPRENEURIAL THOUGHT: A SUMMARY Although the knowledge and research available in entrepreneur ship are in an emerging stage, it is still possible to piece together and describe current schools of thought in the field. From this point we can begin to develop an appreciation for the schools and view them as a foundation for entrepreneurial theory. However, just as the field of management has used a "jungle" of theories as a basis for understanding the field and its capabilities, so too must the field of entrepreneurship use a number of theories in its growth and development.

PROCESS APPROACHES
Another way to examine the activities involved in entrepreneurship is through a process approach. Although numerous methods and models attempt to structure the entrepreneurial process and its various factors, we shall examine three of the more traditional process approaches here.
27

First, we will discuss the "entrepreneurial

28

events" approach, as described by William D. Bygrave.

Bygrave's model

incorporates theoretical and practical concepts as they affect entrepreneurs hip activity. The second approach is an assessment process based on an entrepreneurial perspective developed by Robert C. Ronstadt. The third process approach, developed by William B. Gartner, is multidimensional and weaves together the concepts of individual, environment, organization, and process. All of these methods attempt to describe the entrepreneurial process as a consolidation of diverse factors, which is the thrust of this book. Entrepreneurial Events Approach Entrepreneurship is not a series of isolated activities or undertakings. Rather, it is a process by which individuals plan, implement, and control their entrepreneurial activities. In addition, a number of elements affect each event in the entrepreneurial

process. The entrepreneurial events approach focuses on the process of entrepreneurial activity and includes the following factors: Initiative: An individual or group takes the initiative. Organization: Resources are brought together in organizational form to accomplish some objective (or the resources in an existing organization are reorganized). Administration: Those who look the initiative take over management of ihe organization. Relative autonomy: The initiators assume relative freedom to dispose of and distribute resources. Risk taking: The organization's success or failure is shared by the initiator's supervisors and employees. V Environment: This milieu includes the opportunities, resources, competitors, and so forth that affect the entrepreneurial events at different stages,* Bygrave has outlined a model that mixes theoretical concepts from basic social sciences with practical concepts from applied sciences. Figure 2.2 illustrates the four distinct events: innovation -> triggering event - implementation growth. The diagram depicts some of the numerous elements that affect each event in the process.

Entrepreneurial Assessment Approach Another model, developed by Robert C. Ronstadt, stresses making assessments qualitatively, quantitatively, strategically, and ethically in regard to the entrepreneur, the venture, and the environment .29 (Figure 2.3 depicts this model.) To examine entrepreneurship, the results of these assessments must be compared to the stage of the entrepreneurial career early, midcareer, or late. Ronstadt termed this process "the entrepreneurial perspective." We focus on this term in Chapter 4 when we examine the individual characteristics of entrepreneurship. Multidimensional Approach A more detailed process approach to entrepreneur ship is the multidimensional approach. 30 In this view entrepreneurship is a complex, multidimensional framework that, emphasizes the individual, the environment, the organization, and the venture process. Specific factors that relate to each of these dimensions follow.

THE INDIVIDUAL 1. Need for achievement 5. Previous work experience 2. Locus of control 6. Entrepreneurial parents 3. Risk-taking propensity 7. Age 4. Job satisfaction 8. Education THE ENVIRONMENT

1. Venture capital availability

7. Proximity of universities

2. Presence of experienced entrepreneurs

8. Availability of land or facilities

3. Technically skilled labor force

9. Accessibility of transportation

4. Accessibility of suppliers

10. Attitude of the area population

5. Accessibility of customers or new markets 11. Availability of supporting services

6. Governmental influences

12. Living conditions

THE ORGANIZATION 1. Type of firm 4 Strategic variables 2 Entrepreneurial environment a) Cost b) Differentiations c) Focus 3 Partners 5 Competitive entry wedges

THE PROCESS 1. Locating a business opportunity 2. Accumulating resources 3. Marketing products and services

4. Producing the product 5. Building an organization 6. Responding to government and society 31 Figure 2.4 depicts the interaction of the four major dimensions of this entrepreneurial, or new-venture, process and lists more variables. This type of process moves entrepreneurship from a segmented school of thought to a dynamic, interactive process approach.

INTRAPRENEURSHIP
Recently the term intrapreneurship has become popular in the business community, though very few executives thoroughly understand the concept. Gifford Pincliot has denned an intrapreneur as "any of the dreamers who do.... However, he goes on to say, "... take hands-on responsibility for creating innovation of any kind within an organization. The intrapreneur may be the creator or the inventor but is always the dreamer who figures out how to turn an idea into a profitable reality." 52 This definition has definite similarities to entrepreneurship except that intrapreneurship takes place within an organization. The major thrust of intrapreneuring, then, is to create or develop the entrepreneurial spirit within corporate boundaries, thereby allowing an atmosphere of innovation to prosper. More about this specific application of entrepreneurs hip is presented in Chapter 3.
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KEY CONCEPTS
Before concluding our discussion of the nature of entrepreneurship, we need to put into three perspective three key concepts: entrepreneurship, entrepreneur, and entrepreneurial management.

Entrepreneurship

Entrepreneurship is a process of innovation and new-venture creation through four majors dimensionsindividual, organizational, environmental, processthat is aided by collaborative networks in government, education, and institutions.. All of the macro and micro positions of entrepreneurial thought must he considered while recognizing and seizing opportunities that can be converted into marketable ideas capable of competing for implementation in today's economy.

Entrepreneur The entrepreneur is a catalyst for economic change who uses purposeful searching, careful planning, and sound judgment when carrying out the entrepreneurial process. Uniquely optimistic and committed, the entrepreneur works creatively to establish new resources or endow old ones with a new capacity, all for the purpose of creating wealth.

Entrepreneurial Management
The underlying theme of this book is the discipline of entrepreneurial management, a concept that has been delineated as follows: Entrepreneurship is based upon the same principles, whether the entrepreneur is on existing large institution or an individual starting his or her new venture single-handed. It makes little or no difference whether the entrepreneur is a business or a nonbusiness public-service organization, nor even whether the entrepreneur is a governmental or nongovernmental institution. The rules are pretty much the same, the things that work and those that don't are pretty much the same, and so are the kinds of innovation and where to look for them. In every case there is a discipline we might call Entrepreneurial Management. 34 The techniques and principles of this emerging discipline will drive the entrepreneurial economy of our time.

SUMMARY
This chapter examined the evolution of entrepreneurship, providing a foundation for further study of this dynamic and developing discipline. Exploring the early economic definitions as well as selected contemporary ones, the chapter presented a historical picture of how entrepreneurship has been viewed. In addition, the ten major myths of entrepreneur-ship were discussed to permit a better understanding of the folklore surrounding this newly developing field of study. Contemporary research is

broadening the horizon for studying entrepreneurship and is providing a better focus on the what, how, and why behind this discipline. The approaches to entrepreneurship were examined from two different perspectives: schools of thought and process. Six selected schools of thought were presented, and three approaches for understanding contemporary entrepreneurs!]ip as a process were discussed. The chapter concluded with definitions of entrepreneurship, entrepreneur, and entrepreneurial management.

KEY TERMS AND CONCEPTS better widget strategies financial/capital school of though! corridor principle great chef strategies displacement school of thought internal locus of control entrepreneur intrapreneurship entrepreneurial assessment approach macro view of entrepreneurship entrepreneurial events approach micro view of entrepreneurs hip entrepreneurial management mountain gap strategies entrepreneurial trait school of thought multidimensional approach entrepreneurship strategic formulation school of thought environmental school of thought venture opportunity school of thought external locus of control water well strategies

REVIEW AND DISCUSSION QUESTIONS

1. Briefly describe the evolution of the term entrepreneurship. 2. What are the ten myths associated with entrepreneurship? Debunk each. 3. What is the macro view of entrepreneurship? 4. What are the schools of thought that use the macro view of entrepreneurship? 5. What is the micro view of entrepreneurship? 6. What are the schools of thought that use the micro view of entrepreneurship? 7. What are the three specific types of displacement? 8. In the strategic formulation school of thought, what are the four types of strategies involved with unique elements? Give an illustration of each. 9. What is the process approach to entrepreneurship'.' In your answer describe the entrepreneurial assessment approach. 10. What are the major elements in the framework for entrepreneurship presented in Figure 2.4? Give an example of each.

EXPERIENTIAL EXERCISE
Understanding Your Beliefs about Successful Entrepreneurs Read each of the following ten statements, and to the left of each indicate your agreement or disagreement. If you fully agree with the statement, put a 10 on the line at the left. If you totally disagree, put a 1. If you tend to agree more than you disagree, give a response between 6 and depending on how much you agree. If you tend to disagree, give a response between 2 and 5. ____1. Successful entrepreneurs are often methodical and analytical individuals who carefully plan out what they are going to do and then do it. ____2. The most successful entrepreneurs are born with special characteristics such as high achievement drive and a winning personality, and these traits serve them well in their entrepreneurial endeavors. ____3. Many of the characteristics needed for successful entrepreneur ship can be learned through study and experience.

____4. The most successful entrepreneurs are those who invent a unique product or service. ____5. Highly successful entrepreneurs tend to have very little formal schooling. ____6. Most successful entrepreneurs admit that dropping out of school was the best thing they ever did. ____7. Because they are unique and individualistic in their approach to business, most successful entrepreneurs find it hard to socialize with others; they just do not fit in. ____8. Research shows that although it is important to have adequate financing before beginning an entrepreneurial venture, it is often more important to have managerial competence and proper planning. ____9. Successful entrepreneurship is more a matter of preparation and desire than it is of luck. ____10. Most successful entrepreneurs do well in their first venture, which encourages them to continue; failures tend to come later on as the enterprise grows. Put your answers on the following list in this way: (a) Enter answers to numbers 1, 3, 8, and 9 just as they appeal; and then ft) subtract the answers to 2,4,5,6,7, and 10 from 11 before entering them here. Thus, if you gave an answer of S to number 1, put an 8 before number 1 here. However, if you gave an answer of 7 to number 2 here, place a 4 before number 2 here. Then add both columns of answers and enter your total on the appropriate line. ____ 1 ____ 6* ____ 2* ____ 7* ____ 3 ____ 8 ____ 4* ____ 9 ____ 5* ____10*

____ Total Interpretation: This exercise measures how much you believe the myths of entrepreneurship. The lower your total, the stronger your beliefs; the higher your total, the less strong your beliefs. Numbers 1, 3, 8, and 9 are accurate statements; numbers 2, 4, 5, 6, 7, and 10 are inaccurate statements. Here is the scoring key: 80-100 Excellent. You know the facts about entrepreneurs. 61-79 Good, but you still believe in a couple of myths. 41-60 Fair. You need to review the chapter material on the myths of entrepreneurship. 0-40 Poor. You need to reread the chapter material on the myths of entrepreneurship and study these findings.

VIDEO CASE 2.1

DREW PEARSON COMPANIES: SUPER BOWL CHAMP PUTS A CAP ON SUCCESS When Drew Pearson, a wide receiver for the Dallas Cowboys, played in his third Super Bowl, he had no idea he'd become the CEO of one of the nation's top designers and manufacturers of sports caps. "When 1 left professional football, it was hard to imagine that my earning power off the field would ever eclipse my earning power on the field," Pear-son reveals. But in the megabuck business of logo-licensed headwear, Drew Pearson Companies (DPC) has racked up some impressive statistics since it was formed in 1985. Sales have skyrocketed from $3 million in 1985 to $10 million in 1989 to $77.5 million in 1993. DPC is one of only six companies to have scored licenses with the National Football League

(NFL), National Basketball Association, Major League Baseball, and the National Hockey League. Equally impressive is the fact that DPC is the only company to have exclusive worldwide rights with the Walt Disney Company. Nicknamed "The Clutch" during his Cowboy days, Pearson was accustomed to making spectacular plays. But DPC's superstar rise in die headwear industry hasn't been without a few fumbles along the way. "Of course, being a former NFL player, I thought the natural thing would be to approach the NFL first," Pearson says. "Roger Staubach, who was an initial investor, and I went to New York to meet with NFL Properties. The meeting lasted maybe 35 minutes. They just told us no." In time, Pearson proved that DPC had the financial resources and capabilities to produce quality products, and it became me first minority-owned business to secure a licensing agreement with the NFL. But more important, DPC discovered its competitive edge. "What's really set us apart from our competitors is our innovative designs," Pearson admits. Colorful, intricately stitched hats with names like "The Jagged Edge" are DPC's trademark. Early on, DPC embraced technology to create its fashion-forward caps. "We were able to bring together in our creative services area the first computer that generated art that could show three-dimensional variations in designsforward looks, backward looks things that our competition had no clue as to how we were generating. While they were trying to figure out the technology, we were gaining market share," DPC president Ken Shead explains. In 1995, DPC shipped 30 million trendsetting caps to 7,500 retailers throughout the United States, making it the industry's fastest-growing headwear company. The company's aggressive growth has been the payoff for Pearson's winning vision. "We knew that the spoils licensing industry, especially in the headwear category, is very competitive. We had to do something to set ourselves apart." DPC began courting the entertainment industry and was rewarded with lucrative licensing rights to feature Mickey Mouse, Looney Tunes characters, the Flinlstones, Barney, Garfield, and other pop-culture icons on DPC head-wear. "Our number-one-selling hat is Mickey Mouse," Pearson says. "It outsells the

NFL; it outsells Major League Baseball; it even outsold the Chicago Bulls with Michael Jordan." Impressive sales in the domestic market have served as a catalyst for DPC's expansion worldwide. "DPC is a global company. We made that decision to focus on the international market worldwide approximately three years ago," Mike Russell, executive vice president of marketing, says. "From the standpoint of developing products to sell internationally, we're somewhat unique in our industry since Mickey Mouse doesn't change whether he's sold in the Far East or Central America. We have a definitive line of products that transcend international markets, and the demand for American logo products is continually growing internationally." With new products and new markets on the horizon, Drew Pearson Companies is poised to extend its winning streak well into the next century. But the former NFL star-turned-CEO knows his team can't rest on its laurels. "When you win a Super Bowl, you're not necessarily satisfied with winning one Super Bowl. You want to go back and win it again. You like the adulation and the accolades that come along with success. We try to implement that same feeling, that same strategy at the Drew Pearson Companies, No matter what level of success we reach, we know there's more to attain. There's more to garner. We're not the number one headwear company in the world, and that's a goal of ours." Questions 1. What myths in entrepreneurship do DPC and Drew Pearson seem to debunk? 2. Describe the schools of entrepreneurial thought that may apply to Drew Pearson and his venture. 3. Using Figure 2.3, explain how Pearson's venture fits into the entrepreneurial assessment approach.

Case 2.2

PAUL'S FOUR SHORT COMINGS

Paul Enden has always been very reliable and a hard worker. For the past eight years Paul has been working in a large auto service garage. During this lime he has made a number of recommendations to the owner regarding new services that could be provided to customers. One of these is called the "'fast lube." With this service people who want to have their oil changed and their car lubricated do not have to leave the auto and come back later in the day. Three service racks handle this job. It generally takes less than 10 minutes lo take care of a car, and most people can have the job completed within 25 minutes of the time they arrive. The service, which has become extremely popular with customers, resulted in an increase in overall profits of 5 percent last year. Paul's wife believes he has a large number of ideas that could prove profitable. "You ought to break away and open your own shop," she has told him, Paul would like to do so, but he believes four things help account for entrepreneurial success and he has none of them. Here is how he explained it to his wife: "To be a successful entrepreneur, you have lo be a thinker, not a doer. I'm a doer. Thinking bores me. I wouldn't like being an entrepreneur. Second, those guys who do best as entrepreneurs tend to he inventors. I'm not an inventor. If anything, I think of new approaches to old ways of doing business. I'm more of a tinkerer than an inventor. Third, you've got to be lucky to be a successful entrepreneur. I'm hard working; I'm not lucky. Fourth, you have to have a lot of money to do well as an entrepreneur. I don't have much money. 1 doubt whether $50,000 would get me started as an entrepreneur." Questions 1. Does Paul need to be an inventor to be an effective entrepreneur? Explain your answer. 2. How important is it that Paul have a lot of money if he hopes to be an entrepreneur? Explain your answer. 3. What is wrong with Paul's overall thinking? Be sure to include a discussion of the myths of entrepreneurs hip in your answer.

The "Entrepreneurs are Gamblers" Myth

By

Jeff Cornwall
on November 24, 2003 2:05 PM | Permalink | Comments (0) | TrackBacks (2)

"I could never start my own business. I cannot tolerate that kind of risk. After all, entrepreneurs are nothing more than gamblers who are willing to bet it all on a hunch of a business idea." Many people view entrepreneurship this way. To them entrepreneurship is as nothing more than a crap shoot. However, when we study financially successful entrepreneurs a very different picture emerges. This primary cause of this myth about entrepreneurs comes from a misunderstanding of risk. Risk is erroneously defined only in terms of the downside potential of the business. This can be thought of as "Sinking the Boat Risk". Ultimately, this could be the failure of the business. We read over and over that 80% of business start-ups fail. While this is may be true to a point, this risk can actually be drastically reduced with proper training and preparation as discussed in a previous posting on this site. In our writing about the "Good Entrepreneur", Mike Naughton and I talk about the virtue of prudence as playing such an important role in managing this type of risk. If entrepreneurs view their role as one of being a steward of the resources at their disposal, they begin to take a much more careful and thoughtful approach to business formation. The true act of entrepreneurial courage from this perspective is not blindly forging into a new venture, but rather become one of a willingness to only move ahead when "Sinking the Boat" risk is minimized. The view of entrepreneurs as gamblers obscures another key aspect of risk. "Missing the Boat" risk refers to what economists call the opportunity cost of not acting on a viable business idea. That is, there is a risk that is associated with not acting on an opportunity just as there is a risk associated with acting, but failing. In fact, failure to act on a business opportunity that has real potential for success can be seen as being equally imprudent and shows poor stewardship of the resources at your disposal (and ultimately the gifts you have been given). Succumbing to fear and not moving ahead can be viewed as the vice that corresponds to virtue of the courageous act of starting a new venture. The successful entrepreneurs I have been associated with are rarely gamblers. In fact, they are careful, thoughtful business people who understand the risk of moving ahead, and approach that risk with a sober understanding of their responsibilities.

Five Myths About Entrepreneurs

May 19, 2008 by Rich Whittle | 0 Comments

Donald F. Kuratko at IndyStar.com: Many myths have arisen about entrepreneurs. These ideas are the result of a lack of research and understanding. As many researchers in the field have noted, the study of entrepreneurship is still emerging, and thus folklore will tend to prevail until it is dispelled with contemporary research findings. Myth 1: Entrepreneurs are doers, not thinkers Although it is true entrepreneurs tend toward action, they are also thinkers. Indeed, they are often very methodical people who plan their moves carefully. The emphasis today on the creation of clear and complete business plans is an indication that thinking entrepreneurs are as important as doing entrepreneurs. Myth 2: Entrepreneurs are born, not made As a professor of entrepreneurship, I hear this one all the time. The idea that the characteristics of entrepreneurs cannot be taught or learned, that they are innate traits one must be born with, has long been prevalent. These traits include aggressiveness, initiative, drive, a willingness to take risks, analytical ability, and skill in human relations. Today, however, the recognition of entrepreneurship as a discipline is helping to dispel this myth. Like all disciplines, entrepreneurship has models, processes, and case studies that allow the topic to be studied and the knowledge to be acquired. We are all born with different traits, however, no special trait exists that will make you an entrepreneur. Myth 3: All entrepreneurs need is money It is true that a venture needs capital to survive; it is also true that a large number of business failures occur because of a lack of adequate financing. Yet having money is not the only bulwark against failure. Failure due to lack of proper financing often is an indicator of other problems: managerial incompetence, lack of financial understanding, poor investments, poor planning, and the like. Many successful entrepreneurs have overcome the lack of money while establishing their ventures. To those entrepreneurs, money is a resource but never an end in itself. If money was the sole answer then every professional athlete and every rock star would be an entrepreneur. Unfortunately they squander their money and never use it to develop an entrepreneurial venture because that is not where their passion lies.

Read more. Photo by viryboss.

Nirma Ent. Myths Presentation Transcript

THE MYTHS OF ENTREPRENEURSHIP Introduction: Throughout the years many myths have been arisen about entrepreneurship. These myths are the result of a lack of adequate research on entrepreneurship. As many researchers in the field have noted, the study of entrepreneurship is still emerging, and thus folklore will tend to prevail until it is dispelled with contemporary research findings. Ten of the most notable myths are explained as under: Myth 1: Entrepreneurs Are Doers, Not Thinkers Although entrepreneurs tend to act, they are also thinkers. They are often very methodical who plan their actions carefully. The emphasis to-day on the creation of clear and complete business plans is an indication that entrepreneurs take action systematically after proper thinking. They are calculated risk takers i.e. they do risk analysis which is again a thinking process.

Myth 2: Entrepreneurs Are Borne, Not Made The idea that characteristics of entrepreneurs cannot be taught or learned, that they are innate traits one must be born with, has been long prevalent. These traits include aggressiveness, initiative, drive, a willingness to take risk, analytical ability, and skill in human relations. To-day, however, the recognition of entrepreneurship as a discipline is helping to dispel this myth. Like all disciplines, entrepreneurship has models, processes, and case studies that allow the topic to be studied and the knowledge to be acquired. Myth 3: Entrepreneurs Are Always Inventors The idea that entrepreneurs are inventors is a result of misunderstanding and tunnel vision. Although many inventors are also entrepreneurs, large number of entrepreneurs have undertaken innovative activity. This innovation may be the result of inventions. Invention is an incident, entrepreneurship is a innovation process.

A contemporary understanding of entrepreneurship covers more than just invention. It requires a complete understanding of innovative behavior in all forms. Myth 4: Entrepreneurs Are Academic and Social Misfits The belief that entrepreneurs are academically and socially ineffective is a result of some business owners having started successful enterprises after dropping out of a school or quitting a job. Historically, in fact, educational and social organizations did not recognize the entrepreneur. To-day the entrepreneur is considered a winner- socially, economically, and academically. No longer a misfit, the entrepreneur is now viewed as a professional and entrepreneurship plays is very important role for economic development. Myth 5 : Entrepreneurs Must Fit the Profile They are many publications listing characteristics of the successful entrepreneur. The list is neither validated nor complete; they are based on case studies and on research

findings among achievement-oriented people. To-day we realize that a standard entrepreneurial profile is hard to compile. The environment, the venture itself, and the entrepreneur have interactive effects, which result in many different types of profiles. Contemporary studied conducted at universities across the United States will, in the future, provide more accurate insights into various profiles of successful entrepreneurs. Entrepreneurial Perspective within individuals is more understandable than a particular profile. Myth 6 : All Entrepreneurs Need is Money It is true that a venture needs capital to survive; it is fact that a large number of business failures occur because of a lack of adequate financing. Yet having money is not the only bulwark against failure. Failure due to a lack of proper financing often is an indicator of other problems: managerial incompetence, lack of financial understanding, poor investments, poor planning, and the like.

Many successful entrepreneurs have overcome the lack of money while establishing their ventures. To those entrepreneurs, money is a source but never an end in itself. Myth 7: All entrepreneurs Need Is Luck Being at the right place at the right time is always an advantage. But luck happens when preparation meets opportunity is an equally appropriate adage. They are, in fact, simply better prepared to deal with situations and turn them into success.What appears to be luck really is preparation, determination, desire, knowledge, and innovativeness. Myth 8: Ignorance Is Bliss for Entrepreneurs The myth that too much planning and evaluation lead to constant problems that over-analysis

leads to paralysis does no hold up in to-days competitive markets, which demand detailed planning and preparation. Identifying a ventures strengths and weaknesses, setting up clear timetables with contingencies for handling problems, and

minimizing these problems through careful strategy formulation are all key factors for successful entrepreneurship. Thus careful planning not ignorance of it is the mark of an accomplished entrepreneur. Myth 9: Entrepreneurs Seek Success But Experience High Failure Rates Many entrepreneurs suffer a number of failures before they are successful. They follow the adage If at first you dont succeed, try, try, again. In fact, failure can teach many lessons to those willing to learn and often leads to future successes. This is clearly shown by the corridor principle, which states that with every venture launched, new and unintended opportunities often arise. Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers) The concept of risk is a major element in the entrepreneurial process. However, the publics perception of the risk most entrepreneurs assume is distorted. Although it may appear that an entrepreneur is gambling

on a wild chance, the fact is the entrepreneur is usually working on a moderate or calculated risk. Most successful entrepreneurs work hard through planning and preparation to minimize the risk involves in order to better control the destiny of their vision. These ten myths have been presented to provide a background for todays thinking on entrepreneurship. By sidestepping folklore we can build a foundation for critically researching the contemporary theories and processes of entrepreneurship. Exercise Read carefully :THE E-MYTH (page no.31) and explain the following observation: The owners must begin working on the business, in addition to working in it.