INTRODUCTION TO ENTREPRENEURSHIP

There is tremendous interest in entrepreneurship around the world. Although

this statement may seem bold, there is evidence supporting it, some of which is
provided by the Global Entrepreneurship Monitor (GEM). GEM, which is a joint
research effort by Babson College, London Business School, and Universidad
del Desarrollo, Santiago, Chile, tracks entrepreneurship in 59 countries,
including the United States. Of particular interest to GEM is early stage entrepreneurial
activity, which consists of businesses that are just being started
and businesses that have been in existence for less than three and one-half
years. The 2010 survey shows, in the countries analyzed, some 110 million people between 18 and 64 years old just
starting businesses, and another
140 million running businesses they started less than three and one-half years
ago. Taken together, some 250 million people were involved in early entrepreneurial
activity in the 59 countries included in the study. A sample of the
rate of early-stage entrepreneurial activity in countries included in the GEM
study is shown in Table 1.1. While the highest rates of entrepreneurial start-up
activities occur in low-income countries, where good jobs are not plentiful, the
rates are also impressive in high-income countries like France (5.8 percent),
United Kingdom (6.4 percent), and the United States (7.6 percent). What the
7.6 percent means for the United States is that almost 1 out of every 13 American
adults is actively engaged in starting a business or is the owner/manager of a
business that is less than three and one-half years old.3
The GEM study also identifies whether its respondents are starting a new
business to take advantage of an attractive opportunity or because of necessity
to earn an income. The majority of people in high-income countries are drawn
to entrepreneurship to take advantage of attractive opportunities. The reverse
is true of people in low-income countries, who tend to be drawn to entrepreneurship
primarily because of necessity (resulting from a lack of career
prospects).4
One criticism of entrepreneurship, which is often repeated in the press, is
that the majority of new businesses fail. It simply isn’t true. The often used
statistic that 9 out of 10 businesses fail in their first few years is an exaggeration.
According to Brian Headd, an economist for the U.S. Small Business
Administration, after four years 50 percent of new businesses are still open,
33 percent have failed, and 17 percent are closed but were considered to be
successful by their owners.5 While overall these figures are heartening, the
33 percent of start-ups that fail show that a motivation to start and run a business
isn’t enough; it must be coupled with a solid business idea, good financial
management, and effective execution to maximize chances for success. In this
book, we’ll discuss many examples of entrepreneurial firms and the factors
separating successful new ventures from unsuccessful ones.