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Examine the historical development of the term entrepreneur - what do they do?
Avoiding folklore: the myths of entrepreneurship
Approaches to entrepreneurship: schools of entrepreneurial thought
Define entrepreneurship
Learning resources
Chapter 1 of the textbook is essential: Kuratko, D.F., (2009),
Entrepreneurship: Theory Process Practice, 8th edition, South
Western Cengage Learning, Mason, Ohio.
Entrepreneur
Opportunity
Risk and uncertainty
Managerial competence and networks
Cantillon, Smith, Say, Schumpeter and Drucker
Entrepreneurs are born and made
Schools of thought in research about entrepreneurship
Definition of entrepreneurship
Individual, environment, organisation and process
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Later, Smith assumed that entrepreneurs were the capitalist who provided the capital for these
risky ventures. More recently, the term entrepreneur does not mean a capitalist but someone
who secures and allocates resources, such as capital for example. Say also used the term
entrepreneur around 1800 in his discussions of the person who shifts economic resources
out of an area of lower productivity and into an area of higher productivity and higher yield.
In 1931, the Harvard economist supported Say by emphasising that a dynamic disequilibrium
with new firms and industries being created and old one destroyed driven was the norm of a
healthy economy and was driven by entrepreneurs. More recently, Drucker (1992) claimed
that the greatest achievements in business come from ideas of entrepreneurs so that they are
the sources of wealth and prosperity in an economy. For example, although the modern
chemical industry should have arisen in England with the Englishman Perkins discovery of
aniline dyes in 1856, more entrepreneurial German business people took leadership in the new
industry.
Based on these and other thinkers, modern thinking emphasises that an entrepreneur:
Creates and/or recognise opportunities for something new.
Handles the uncertainty and risk of that new venture (which is not restricted to stand
alone business ventures).
Has the managerial competence to gather required resources from the environment
(like capital) without necessarily owning these resources. This includes possessing an
ability to plan, to lead a team and to network outside the venture.
In other words, at the heart of the entrepreneurial process is the creation and/or recognition
of opportunities, followed by the will and initiative to seize these opportunities and a
willingness to take risks - both personal and financial - but in a calculated fashion to
constantly shift the odds of success (Timmons & Spinelli 2004, p. 47).
Note that our use of the term venture above is not restricted to new business ventures. Most of
our thinking about entrepreneurs does emphasise business ventures, but the new venture could
be a part of a big business (as we will see in a later topic's coverage on of intrapreneurship or
corporate entrepreneurship) or be part of a public service organisation. Our emphasis is on
newness and risk, and these are not restricted to business ventures.
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2. Handles the uncertainty and risk of that new venture (which is not restricted to
stand alone business ventures).
3. Has the managerial competence to gather required resources from the
environment (like capital) without necessarily owning these resources, which
includes an ability to plan, to lead a team and to network outside the venture.
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Activity 1.2
To summarise your understanding of what entrepreneurship is, do the experiential
exercise on page 23 and 24 in the textbook about myths of entrepreneurship.
Activity 1.3
This activity helps you prepare for a possible examination question about whether
entrepreneurs are born or made, or both. For the activity, use the textbook to do a
force field analysis of the myth that entrepreneurs are born, not made. Identify some
'forces' that make you think that the question is answered in one way or another and
then say how strong a force is from 0 points (not important) to 10 points (very
important). The forces could be established as 'needs' by looking at other myths of
entrepreneurship like:
The need to be a doer rather than a thinker (for example, this would be 5 points
because a person can be made into a thinker by education and an entrepreneur
needs to be both a doer and a thinker)
The need to be an inventor (5 points for the reasons given in the textbook)
The need to be an academic and social misfit (0 points because the
entrepreneur no longer needs to be a misfit)
The need to fit a profile (3 points for the reasons in the textbook)and so on,
following the textbook.
Activity 1.4
Read the 'Paul's four shortcomings' case below and answer the three questions at
the end of the case. The case is copied from pages 50-51 of the seventh edition (or
pages 47-48 of the sixth edition of the textbook).
Paul Emden has always been a very reliable and a hard worker. For the past eight
years Paul has been working in a large auto service garage. During this time he has
made a number of recommendations to the owner regarding new services that could
be provided to customers. One of these is called 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 handle the job. It generally takes
less than 10 minutes to 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.
Pauls 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 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 to be a doer, not a thinker. Im a doer.
Thinking bores me. I wouldnt like being an entrepreneur. Second, those guys who do
best as entrepreneurs tend to be inventors. Im not an inventor. If anything, I think of
new approaches to old ways of doing business. Im more of a tinkerer than an
inventor. Third, youve got to be lucky to be an entrepreneur. Im hard working; Im not
lucky. Fourth, you have to have a lot of money to do well as an entrepreneur. I dont
Australian Institute of Business
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Environmental
2.
Financial
3.
Displacement
Entrepreneurial trait
5.
Venture opportunity
6.
Strategic formulation
Textbook
Please
read the brief
description
of
the
schools
of
entrepreneurial thought on pages 8-12 of the eighth edition
(or pages 37-41 of the seventh edition or pages 33-39 of the
sixth edition). This reading will help to broaden your
understanding of entrepreneurship. Although the details of
each school will not be an exam question, all students should
be aware that one particular school will give an incomplete
understanding of entrepreneurship and advanced students could
refer briefly to some of them in their answer to an exam
question.
Australian Institute of Business
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An individual with experiences and traits, like need for achievement and internal locus
of control.
2.
Working within an environment that has resources like capital and suppliers.
3.
4.
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Activity 1.5
Nominate a person you would identify as an entrepreneur and give reasons why you
consider this person to be classified as an entrepreneur. It may be a person you
know personally or someone you have read about in the popular media. Preferably,
the person you nominate should operate within your local or regional market or
national economy, but you can use a person described in the textbook
Activity 1.6
Finally, check your understanding of what is covered in the whole of the chapter of
the textbook through the quiz on the textbooks internet site:
First access the student resources at the companion site for the eighth edition
through the publishers web site www.cengage.com. That is, go to
http://kuratko.swlearning.comhttp://websites.swlearning.com/cgiwadsworth/course_products_wp.pl?fid=M20bI&flag=instructor&product_i
sbn_issn=9780324590913&disciplinenumber=416
(You get to that page by going to www.cengage.com, click on higher education
catalogue on the left, search at the top for kuratko, click on companion site for
Student towards the right.)
Click on the appropriate chapter number at the top left
Click at the left on 'Interactive quiz'
Do the quiz
Click on the option of End quiz and view summary
A summary of your results will appear. At the start of the summary, do not enter
your instructors details, go down a bit further down to see your results and why
you got any answer wrong.
Why not repeat the quiz by clicking on Start over until you get all the questions
correct!
By the way, there are lots of other reading materials at the site.
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Conclusion
In summary, this topic laid the foundations for this subject's examination of entrepreneurship.
It had four parts. First, the historical development of the term entrepreneur has identified three
things that an entrepreneur does. Next, some myths of entrepreneurship were identified that
showed that an entrepreneur was both born and made. Then six major schools of research
about entrepreneurship were identified. On the foundations of the three parts of this topic, the
final part established a comprehensive, four-dimensional definition of entrepreneurship.
In conclusion, entrepreneurship is a complex but very interesting and important area of study.
Here is one issue that a possible exam question could ask about this topic and that you might
like to consider when you prepare for your exam:
What is your comprehensive definition of entrepreneurship? Why do you think that
your definition is comprehensive? Does it cover all situations where entrepreneurship
occurs? Your answer should cover intrapreneurship within a business organisation
and you should justify why it covers other forms of creativity and innovation.
References
Drucker, P.F., (1992), 'The big power of little ideas', in
Sahlman, W.A. and Stevenson, H.H., (eds), The Entrepreneurial
Venture: Readings, Boston, Harvard Business School, Boston,
pp. 65-72.
Kuratko,
D.F.,
(2009),
Entrepreneurship:
Theory
Process
Practice, 8th edition, Thompson South Western, Mason, Ohio.
Timmons, J.A. and Spinlelli, S., (2004), New Venture Creation,
6th edition, Irwin, Boston.
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No, Paul does not need to be an inventor. That idea is one of the ten most
commonly known myths of entrepreneurship. Entrepreneurship covers all
varieties of profit-making activities, and thus is not limited to inventions.
2.
While having start-up capital is always important in new ventures, it is not the
only factor. In fact, many entrepreneurs are able to obtain enough capital
through loans because the funding source believes in the managerial ability of
the entrepreneur. Thus, having lots of money is not the only key to success.
3.
Activity 1.5
There is no one clear way of defining whether your nominated person has been
involved in entrepreneurial activities. But you might like to consider his or her story
along the three parts of the term entrepreneur in Part 1 and the four dimensions of
the comprehensive definition in Part 4. The person should have had experience and
been involved in things like:
An opportunity to make a creative change
An open system that interacted with its environment
External networking
Risk and uncertainty
The acquisition and management of resources
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10
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