CHAPTER 10

Managing New Venture Formation and

Entrepreneurship

Summary of Learning Objectives and Key Points

1. Discuss the nature of entrepreneurship.

• Entrepreneurship is the process of planning, organizing, operating, and assuming the risk of

a business venture.

• An entrepreneur is someone who engages in entrepreneurship. In general, entrepreneurs

start small businesses.

2. Describe the role of entrepreneurship in society.

• Small businesses are an important source of innovation

• Small businesses create numerous jobs

• Small businesses contribute to the success of large businesses.

3. Understand the major issues involved in choosing strategies for small firms and the role of

international management in entrepreneurship.

• In choosing strategies, entrepreneurs have to consider the characteristics of the industry in

which they are going to conduct business.

• Small businesses generally have several distinctive competencies that they should exploit in

choosing their strategy. Small businesses are usually skilled at identifying niches in

established markets, identifying new markets, and acting quickly to obtain first-mover

advantages.
• Small businesses are usually not skilled at exploiting economies of scale.

• Once an entrepreneur has chosen a strategy, the strategy is normally written down in a

business plan. Writing a business plan forces an entrepreneur to plan thoroughly and to

anticipate problems that might occur.

4. Discuss the structural challenges unique to entrepreneurial firms.

• With a strategy and business plan in place, entrepreneurs must choose a structure to

implement them. All of the structural issues summarized in the next five chapters of this

book are relevant to the entrepreneur.

• In addition, the entrepreneur has some unique structural choices to make. For example, the

entrepreneur can buy an existing business or start a new one.

• In determining financial structure, an entrepreneur has to decide how much personal capital

to invest in an organization, how much bank and government support to obtain, and whether

to encourage venture capital firms to invest.

• Entrepreneurs can also rely on various sources of advice.

5. Understand the determinants of the performance of small firms.

• Several interesting trends characterize new business start-ups today.

• There are several reasons why some new businesses fail and others succeed.