Module 2: THE ENTREPRENEURIAL PROCESS

OVERVIEW
This chapter defines the entrepreneurship process and discusses why acquiring
skills is a key requirement of the entrepreneurial process. The chapter then proceeds to
investigate the importance of the characteristics, traits, and skills identified in chapter 1
in terms of their importance in each of the four main stages of the entrepreneurship
process. This review further highlights other key skills that are likely to influence
(positively or negatively) each stage of the entrepreneurship process. Thus this chapter
presents the final model of skills that SMEs or entrepreneurs must acquire to succeed in
each of the 4 stages of the entrepreneurship process.

Learning Objectives:
At the end of this module/topic, the students should be able to:
1. Define the entrepreneurial process
2. Distinguish the characteristics, traits, and skills of an entrepreneur
3. Be acquainted with the entrepreneurial process model
4. Be familiar with the 4 entrepreneurial event stages

THE ENTREPRENEURSHIP PROCESS

Following the discussion in Chapter 1, entrepreneurship involves analyzing
people and their actions together with how they interact with their environments, be
these social, economic, or political, and the institutional, policy, and legal frameworks
that help define and legitimize human activities. – Blackburn (2011, p. xiii)

It is described as the pursuit of market opportunities to create future innovative

goods and services discovered, evaluated, and exploited to extract social and economic
value from the environment, leading ultimately to new independent business/venture
creation (Shane & Venkataraman, 2000:218; Kirzner, 1973; Fox, 2004:1; Dess et al,
1999:94). The highly complex process of new venture creation is embodied in
entrepreneurship (Hisrich et al, 2005:39; Baron, 2004a:169).

At start-up, the entrepreneurship process is a course of action that involves all

functions, activities, and actions associated with identifying and evaluating perceived
opportunities and the bringing together of resources necessary for the successful
formation of a new firm to pursue and seize the said opportunities (Bygrave, 1997:2;
Cornwall & Naughton, 2003:62).

Once set up, the process of entrepreneurship becomes effectively a cyclical

progression of opportunity targeting and making strategic decisions regarding the
allocation of scarce resources in pursuit of value-adding opportunities (Glancey,
1998:18; Kodithuwakhu & Rosa, 2002:443).

Although theoretical models of the new venture creation process differ in the
assumptions and variables encompassed, they do include common elements (Mueller &
Thomas, 2001:53). Different authors have identified between two and five distinct
stages in the entrepreneurship process as briefly discussed below:

Pretorius et al (2005a:57) say that the literature cites two broad dimensions of
the entrepreneurial process, namely opportunity recognition and resource acquisition.
Gruber (2002:193) identifies three distinct stages, namely the pre-founding stage
(opportunity identification and evaluation); a founding stage (business plan, resource
gathering, incorporation, and market entry); and an early development stage (building
the company and market penetration). Baron (2004a:170) names the three stages of
the entrepreneurship process as screening ideas for feasibility; assembling needed
resources, and developing a new business.

Bhave (1995:223) identifies four stages namely opportunity identification,

technology set up, organization creation, and the exchange stages. This is supported by
Hisrich & Peters (2002:40) who articulate four stages of the entrepreneurial process
namely identifying and evaluating the opportunity; developing the business plan;
determining the resources required, and managing the resulting enterprise as illustrated
in Figure 2.1 below:

Figure 2.1: Entrepreneurial process model by Hisrich & Peters

Source: Hisrich & Peters (2002:48)

One of the models on the entrepreneurial process is of Robert Hisrich, a

professor at the Thunderbird School of Global Management, and Michael P. Peters
author of several books on entrepreneurship. This model establishes the various factors
and events surrounding the entrepreneurial process.
Within the study and analysis of the University of Pretoria, they made their own
model, which mixes different ideologies of different authors to adapt their
entrepreneurial model. This model stands out more for its definition of stages and
events throughout the process.

TASK 1

Task 1
Take a look at this!!

https://youtu.be/u9-BGRcA_uw
Watch the video and be able to
come up with your “In a Nutshell”
synopsis and provide examples
from real-life observations and
situations.

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 ENTREPRENEURIAL PROCESS DEFINITION

The entrepreneurial development of a person goes beyond education, which requires

various factors to take place this complex process. I added the definition of William Bygrave,
a professor at Babson College, about the entrepreneurial process.

The entrepreneurial process is a set of stages and events that follow one another. These
entrepreneurial process stages are: the idea or conception of the business, the event that
triggers the operations, implementation and growth. A critical factor that drive the
development of the business at each stage as with most human behavior, entrepreneurial
traits are shaped by personal attributes and environment.

The attitudes of the people are those who are shaping their own surroundings, if an
entrepreneur looks for the characteristics of successful people, their chances of success
increase, specially if they belong to an entrepreneurial ecosystem.

ENTREPRENEURIAL PROCESS & ITS STAGES

The entrepreneurial process stages that need to happen to start a business is not
easy for anyone. Many people have reasons to be an entrepreneur, many say the
things that should be done, and a few are the ones who do what is needed to start. It is
very common to see people who think, but a few who act. The entrepreneurial process
stages can be developed one step at a time, but some entrepreneurs are the ones who
continue on this lifestyle.
The entrepreneurial culture and spirit are on those who decide to take one step
ahead to achieve success. It is a long-term process, that visionary will have to keep on
working to transform their environment. There are several models created by
academics, that show what is the entrepreneurial process about.
In the rest of the article, it can be found two models that reflect what the
entrepreneurial process is. In this section I will mention the stages of the model of the
University of Pretoria, trying to simplify the main points that an entrepreneur should
consider.

1. IDEA GENERATION
The entrepreneur begins to wonder why there is not available a
product or service, why not improve certain things, how to generate
income to cover their expenses, etc. Thousands of questions might
arise, so they will help to identify opportunities to meet the market
needs. In previous years, there were not enough amount of goods and
services. It was a little bit easier to position a business, however now it
requires a search for information and market analysis to see the possibility of success. It
is possible that at this point in the entrepreneurial process, there are many people since
the generation of ideas can be much easier. However, the step towards decision
making is where many can stop and perhaps even abandon the idea of starting a
business.

2. DECISION MAKING AND BUSINESS PLANNING

A critical point in the entrepreneurial process is deciding to start the
project. Be active and stay motivated are the main factors for the
entrepreneur to start landing his idea. Asking what resources are
needed and where he will get them, is vital to generate at least one
way forward for the entrepreneur. The development of the business
plan will mark only a guide that can be used as a reference.
3. PROJECT CREATION

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The project is conducted when the entrepreneur decides to seek and obtain resources.
Getting or securing funds is difficult, and perhaps one of the main obstacles to starting a
business. When the entrepreneur begins to invest the resources and begin operating, it
is a point release of stress, as the entrepreneur will see the first steps of his company.

4. MANAGEMENT AND CONTROL

After having passed through the first months of operation, the
company will see if it decreases, maintains, or increases in sales. The
entrepreneur should strive to maintain revenue growth before
worrying about having a nice office. Managing a business is not easy,
but the experience that entrepreneurs acquire over time will surely
ease the handling of all resources. Perhaps one could say that the
entrepreneurial process ends here, but I think it is no longer an entrepreneur, and he
becomes a full businessman or businesswoman.

TASK#2 Exercises: LET’S PLAY !!!

Gap-Fill. Choose the word/description from the slogan box. Write your
answers on the line or space provided before each number.

Entrepreneur Independent Inquisitive

Businessman Goal-oriented Self-confident
Entrepreneurship Risk taker Responsible
Business Persistent Creative

__________________1. Someone who starts a business after seeing an opportunity to

satisfy wants and needs.
__________________2. Starting and operating a business
__________________3. Determination to overcome problems
__________________4. Constantly looking for new ways to solve problems
__________________5. Accountable for their actions
__________________6. Conduct research to solve problems
__________________7. Trusts in their abilities, qualities, and judgement
__________________8. Seek challenging opportunities
__________________9. Has a plan of action and makes descions to acheive that plan
_________________10. Wants to make their own descions and set their own schedules

ENTREPRENEURIAL PROCESS EVENTS STAGES

Within the entrepreneurial process, different events are generated along the process,
these are the 4 entrepreneurial process events stages:

1. INNOVATION

It is the time when the entrepreneur generates an innovative idea,

identifies the market opportunity, and look for information. Also, it
begins to see the feasibility of ideas, the ability to get value from
them, and how to generate the development of the product or service.

2. TRIGGERING EVENT

This event is the gestation time of the project. The entrepreneur

begins to motivate himself to start a business and to decide to
proceed with it. The business plan is created, as well as the

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 identification of the resources required, the project risk, the source of the funds, and
how they would use them.

3. IMPLEMENTATION

This event includes the incorporation of resources and arms the

project to launch their new business to the market. The strategy and
business plan begin to develop day by day, and the use of resources
are invested in favor of building a successful company.

Below is a less than 10minute video on some entrepreneurial concepts.

Create a two-page discussion with a focus on the reflective or discussion
questions:

Video link: https://youtu.be/iS-rHcNynAQ

1. In your judgement is the list of elements in the entrepreneurial process

complete?
Task#3
2. Do you think every element in the list is necessary for Entrepreneurship?

3. If an entrepreneur has a partner or partners it is common for a division of

labour to emerge among them if so do all of the partners have to be equally
entrepreneurial?

4. Research some biographies or case studies of entrepreneurs in history for

example john d rockefeller James J. Hill, Henry Ford, Mary Kay Ash does the
above list of elements described accurately the entrepreneurial process they
lived?

REFERENCES:

Stephen R. C. Hicks, What Business Ethics Can Learn From Entrepreneurship, Journal of
Private Enterprise, Vol. 24: 2, p. 49-57, 2009. Available online at the social science
research of the Social Science Research Network (http://www.ssrn.com/ )

Daniel Gross. Forbes Greatest Business Stories of All Time. John Wiley & Sons,

Burton Fulsom. The Myth of the Robber Barons: A New Look at the Rise of Big Business in
America. Young America’s Foundation, 1991

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