Module 1

Chapter 1:
INTRODUCTION
About Chapter 1

This chapter introduces the concepts to help the students

understand entrepreneurship. It provides definitional history of
entrepreneurship, articulates the role of entrepreneurship in
economic development, acquaints the students on how to spot
entrepreneurial opportunity, and states the advantages and
drawbacks.

Learning Outcomes:
At the end of the Chapter, the student should be able to:
1. Define and explain the concept of entrepreneurship;
2. Deal with uncertainty;
3. Articulate how entrepreneurship help the economy grow with
examples cited;
4. State the important barriers to entrepreneurship;
5. Explain how ethics is a key ingredient to success as
entrepreneurs
6. Formulate strategies on entrepreneurial processes; and
7. Describe the three main stages of entrepreneurial process.

Learning Content:
1. The Concept of Entrepreneurship
2. The Role of Entrepreneurship in Economic Development
3. The Impact of Globalization to Entrepreneurship
4. The Importance of Ethics in Business
5. The Entrepreneurial Process

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Topic 1: The Concept of Entrepreneurship

What is Entrepreneurship and Entrepreneur?
Entrepreneurship, the process of being an
entrepreneur, is more than just learning how to run a
business. It can affect the economy, your community, and
ultimately the world in which we live. Setting the wheels
in motion for economic development, entrepreneurial
ventures make a significant contribution to national income.
Entrepreneurship started in France after the French
Revolution, the start of Capitalism. This field sees change as
normal and healthy. It promotes doing something different rather
than making the existing better. It is defined as the process of
creating or seizing an opportunity, and pursuing it regardless
of the resources currently controlled.
Entrepreneurship is the willingness and ability of an
individual to seek out investment opportunities, establish and
run an enterprise successfully. The concept of entrepreneurship
has been associated with several activities concerned with the
establishment and operations of the business – enterprises.
Stevenson (1985) defines entrepreneurship as the process of
creating value by putting together a unique package of resources
to exploit an opportunity. Entrepreneurship is the ability to
create and build something from practically nothing. It is
initiating, doing, achieving, risk – taking and building an
enterprise.

Interesting Definitional History of Entrepreneurship

1725 A.D. Entrepreneurship as arbitrage.
Richard Cantillon of France gave the concept of
entrepreneurship an economic meaning and the entrepreneur a role
in economic development. Cantillon had defined discrepancies
between supply and demand as options for buying cheaply and
selling at a higher price. Entrepreneurs were alert to supply-
demand arbitrage options; however, they were assumed to purchase
inputs at a certain price while selling them at an uncertain
price. He described entrepreneur as the person who bears the
risk and faces the uncertainty of an activity.

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1885–1950. Entrepreneurship as creative destruction.

According to Joseph Schumpeter, entrepreneurship forces
“creative destruction” across markets and industries,
simultaneously creating new products and business models.
The core of Schumpeter’s definition is that innovation is an
effort made by one or more people who produce an economic gain,
either by reducing costs or by creating extra income. The
economic gain is in this case not related – as in traditional
economic models – to the reduction of wages or to the increase
of prices. Rather, there must be a qualitative leap induced by
the change: there must be elements which are new to the given
sector or industry.
Important merits of Schumpeter’s contribution on the
development of Entrepreneurship theory:
1. The entrepreneurial activity is largely responsible for the
dynamism of industries and long-run economic growth.
2. The ability to break with established practice and “keep
capitalism moving forward” have great social consequences.
3. Schumpeter portrayed entrepreneurs as visionary change agents
and characterized them with the desire to build up wealth.
Schumpeter’s reasoning of creative destruction stimulated
considerable discussion. According to Kirzner (1973), for
example, entrepreneurship consists of competitive behaviors that
drive market processes. Simon (in Davidson, 2003:318) put it
slightly differently; by emphasizing that entrepreneurship is
the introduction of a new economic activity that leads to change
in the marketplace. Both definitions highlight that
entrepreneurship is about making a difference. If it does not,
it is not entrepreneurship (Davidson, 2003:318).

1959-1990. Entrepreneurship, as value creation.

Entrepreneurial activity was viewed as rooted in an economic
system in which information is unevenly distributed across
people (Shane, 2001). The division of knowledge explains the
presence of uncertainty, which gives rise to market
opportunities. Because every person has some information that
others do not have, the information as well as knowledge is
randomly dispersed. Thus, there are inherently rooms for
improvement in the system, which also implies that resources are
not coordinated in an effective way.
Consequently, the inefficiencies create opportunities to new
economic activities that add value (e.g.: a new alternative that
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buyers can choose). By seeking out these opportunities and by
constantly reorganizing resources in a more effective way, the
entrepreneur leads the process toward stability (Landström,
2005:39) thereby entrepreneurship contributes to the
reallocation of resources in society (Dahmeén, 1970 in
Landström, 2005). Creating something new, improved, or competing
is not a straightforward task, however. For Frank H. Knight
(1967) and Peter Drucker (1970) entrepreneurship was about
dealing with uncertainty. The behavior of the entrepreneur
reflects a kind of person willing to put his or her career and
financial security on the line and take risks in the name of an
idea, spending much time as well as capital on an uncertain
venture. Knight classified three types of uncertainty.
• Risk
• Ambiguity
• True Uncertainty or Knightian Uncertainty. The acts of
entrepreneurship are often associated with true
uncertainty, particularly when it involves bringing
something really novel to the world, whose market never
exists.

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Activity No. 1: ANALYSIS & APPLICATION

1. Based on the readings above, how will you define
entrepreneurship? Elaborate or explain your own
definition?
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2. In your own point of view, how could an entrepreneur deal

with the three types of uncertainty given by Frank H.
Knight?
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Continue on separate sheet if necessary.

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Topic 2: The Role of Entrepreneurship in Economic Development

Economic development essentially means a process of
upward change whereby the real per capita income of a country
increases for a long period of time.
Parson and Smelter described entrepreneurship as one of the
two necessary conditions for economic development, the other
being increased output of capital. Y.A. Say describes
entrepreneurship as a necessary dynamic force for economic
development.
The important role that an entrepreneurship plays in the
economic development of an economy can be put in a more
systematic manner as follows:
1. Entrepreneurship promotes capital formation by mobilizing the
idle saving of the public.
2. It provides immediate large-scale employment. Thus, it helps
to reduce unemployment in the country.
3. It provides balanced regional development.
4. It helps reduce the concentration of economic power.
5. It stimulates the equitable redistribution of wealth, income
and even political power in the interest of the country.
6. It encourages effective resources mobilization of capital and
skill which might otherwise remain unutilized and idle.
7. It also induces backward and forward linkages which stimulated
the process of economic development in the country.
8. It promotes country’s export trade i.e. an important
ingredient for economic development.

Drawbacks of Entrepreneurship
• Poor or absent infrastructure
• Unsupportive laws and regulations
• Lack of financial support
• Social barriers
• Lack of training facilities
• Lack of support services and trained extension staff
• Marketing constraints

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Activity No. 2: ANALYSIS & APPLICATION

1. How does entrepreneurship help the economy to grow?

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2. Cite at least two (2) examples of the importance of

entrepreneurship to the economy.
a)

b)

Continue on separate sheet if necessary.

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Topic 3: Impact of Globalization to Entrepreneurship

Globalization is seen as one of the most systematic factors

shaping the world today. It has led to substantial growth in
global trade. Exchange of goods and services has increasingly
become transparent, coordinated and easier.

So what is globalization, and what does this movement bring

to the world?

According to SERDEF (2013), the following are the reasons

for the fast development of globalization:

• Globalization has emerged because of the advances in

information, communication, and transportation
(ICT)technologies.
• There are new techniques of production and new forms of
organization that have given flexibility to the location of
industrial activities and reduced the share of wages in
production.
• In the international scene, the most influential
organizations, notably the International Monetary Fund
(IMF), the World Bank (WB), and the World Trade
Organization (WTO) are promoting the emergence of a global
market.
• Politically, the United State dominates the world scene and
the dollar is the international currency. The collapse of
the Soviet Union and the unification of Germany have
removed obstacles to the spread of capitalism.

Globalization stems from the integration of economies

around the world, particularly through the flow of goods,
services and resources across borders which has also led to
labor and technology movement transcending international
boundaries. It is the propensity of investment funds and
corporations to expand outside their local boundaries to the
international markets, enabling them to link with various
markets.

Due to globalization the world has become smaller brought

by developments in transportation and communication.
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Globalization connects countries and provides a path for the
growth of new markets and the opportunity to obtain significant
resources.

Globalization is linked to entrepreneurship as the latter

enable the creation of job opportunities and innovation,
resulting to economic development of developing countries.
Entrepreneurship is also seen as an integral part of
accelerating economic growth and development, creativity, and
competitiveness, and poverty alleviation in developed
countries.

Globalization breaks down the barriers that historically

divided local business opportunities and local firms from their
foreign partners. Local markets also become integral parts of
larger global markets. As local firms are presented with more
options, their preferences change, from previously thinking only
locally to now thinking globally. The global business
environment is radically changing. Competition traditionally
existing in international markets was the domain of big
corporations and smaller enterprises remained of local or
regional scope. The removal of barriers imposed by the
government and technological developments encourages the
participation of even small players and giving them the same
access to the same foreign suppliers and customers.

The globalization of economies has also exacerbated the

relevance of entrepreneurial action for wealth creation. It
creates demographic shifts, trade liberalization, and
technological advancements.

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Activity No. 3: ANALYSIS & APPLICATION

1. The world has become smaller because of the advances in

transportation and communication making the availability
and flow of goods and services faster. Can you give
examples that indeed the world has become smaller?

2. Choose one neighboring country/ASEAN member country and

identify some of its influence in the globalization of
entrepreneurship.

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Continue on separate sheet if necessary.

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Topic 4: Ethics in Entrepreneurship

Effective entrepreneurs rely on good business principles

that are recognized and approved in every community.
Entrepreneurs face ethical problems all the time. Entrepreneurs
encounter multiple ethical issues, thus
introducing proper business ethics is important in developing
ones life as an entrepreneur.

David MacClelland in his book The Achieving Society

(MacClelland, 1961) raised serious ethical questions about
entrepreneurship issuing a call for more study. Entrepreneurs
today are urged to look seriously into ethics because more and
more people realize that the saying “We are brother’s keeper” is
true. Capital and money in the enterprises becomes depleted but
the character of the entrepreneur outlasts these material
resources.

Entrepreneurial Ethics are those codes of conduct, employed

by entrepreneurs which impact society positively, thereby
increasing the entrepreneur’s chances for greater success.
Ethics is internally imposed by the character of the
entrepreneur. Honesty cannot be imposed from outside the person;
honesty is part of a person’s character, carried over from the
person’s upbringing and character development. Without ethics
the person will fall under the weight of corruption brought
about by lack of conscience or lack of character.

Entrepreneurial ethics would lead to positive attitudes

towards raising successful entrepreneurs, who would, in turn,
build entrepreneurial institutions for societal growth and
advancement.

Thus, an entrepreneur must run his business taking into

account his responsibilities not only towards himself but also
towards others and towards the gifts of nature that he often
utilizes for his business. The entrepreneur must run the
business based on high ethical standards.

Doing business the ethical way builds consumer loyalty,

keeps good employees and makes them happy and productive, and
creates a stable environment that minimizes unexpected problems.
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Government can impose laws and organizations can draw up a
code of conduct for the employees. But these are intended for
people who violate them. Doing the right thing works from an
internal core and forms an uprights character. External codes
and laws can force people to do the right but fail to change the
internal core of one’s character.

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Activity No. 4: ANALYSIS & APPLICATION

1. What do you understand about the term “character” Why do

you think ethics is difficult to maintain in society? What
makes it easy for people to practice ethics? Can ethics be
learned by children? How?
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2. List unethical and ethical practices in the society.

Ethical Practices Unethical Practices

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Topic 5: The Entrepreneurial Process

The entrepreneurial process

is dynamic, since new
opportunities rarely if ever
emerge in a rational and
predictable fashion but rather
in the context of much
uncertainty (Busenitz et al,
2003) as well as unexpected
problems and barriers may arise
along the way (Gartner, et al.
1989). Temporal issues as well
uniquely and explicitly
characterize the entrepreneurial
process as most business
activities involve time, thus
high-speed decisions and action
(Bird and West, 1997).

DISCOVERY. The stage in which the entrepreneur generates

ideas, recognizes opportunities, and studies the market. Every
new venture begins with an idea. Idea, in this context, is
description of need or problem of some constituency coupled with
a concept of a possible solution. It is also a concept for a
product or service that does not exist or is not currently
available in a market niche. It may be a brand-new concept or an
improvement of a current product or service. In contrast, an
opportunity is an idea for a new product or service with a
market that is willing to pay for that product or service so
that it can form the basis of a profitable business. Innovation
is the process of making changes to something that adds value to
customers.
These things must be considered in the stage of discovery:
1. Your passion, hobbies or skills
2. Consumer needs and wants - conduct market research
3. Consumer demographics – conduct market research

DEVELOPING A BUSINESS PLAN. Once the opportunity is

identified, an entrepreneur needs to create a comprehensive
business plan.
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A business plan is a focusing device. It helps the
entrepreneur think long-term. A sound business plan contains the
information needed for effective operation and management of the
company. It explains what is possible for the business, how it
will be done and why it will be successful. Uses of a business
plan includes planning for marketing, operations and finance.
Delineating these three pillars of a business venture helps
demonstrate the viability of the entrepreneur’s ideas. It
clarifies how a business can be profitable, highlights financial
requirements and warns about barriers to success.

RESOURCING. The stage in which the entrepreneur identifies

and acquires the financial, human, and capital resources needed
for the venture startup, etc.
Ways for resourcing:
1. Identify potential investors
2. Apply for loans, grants and assistance
3. Hire employees

MANAGING COMPANY. Once the funds are raised and the

employees are hired, the next step is to initiate the business
operations to achieve the set goals. First of all, an
entrepreneur must decide the management structure or the
hierarchy that is required to solve the operational problems
when they arise. This is the stage in which the entrepreneur
operates the business and utilizes resources to achieve its
goals/objectives.

HARVESTING. The final step in the entrepreneurial process is

harvesting wherein, an entrepreneur decides on the future
prospects of the business, i.e. its growth and development.
Here, the actual growth is compared against the planned growth
and then the decision regarding the stability or the expansion
of business operations is undertaken accordingly, by an
entrepreneur.

Three Main Stages During the Entrepreneurial Process

As suggested by Landström (2005) three main phases can be
identified during the entrepreneurial process: each phase calls
for different activities and thus involves different
compositions of the personal network.
The first phase – firm emergence – focuses on what happens
before a venture is legally established. This phase starts when
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an entrepreneur, or a group of entrepreneurs, decides to
establish a business.
The second phase – the newly established firm – is concerned
with what happens early after the venture has been legally
formed.
The last phase – mature firm – starts when the firm is well
established.

Source: Evald & Klyver (2006: 17)

Freeman (1996) emphasizes another distinctive behavior of

entrepreneurs: successful entrepreneurs found to be especially
skilled at using their time to develop relationships with people
who are crucial to the successful realization of their perceived
opportunity. According to Byers et al. (1997) even in case of a
start-up, the new venture may start as the brainchild of one or
very few people, but it takes many more people to put together
the pieces of the puzzle that constitute a successful firm. The
first few pieces of the puzzle usually come from and through the
existing network of the entrepreneur or “insiders”: such as
friends, family and co-founders. As the creation of the venture
progresses, however, entrepreneurs need to reach beyond their
individual social network and involve “outsiders” like banks,
venture capitalists, lawyers, accountants, strategic partners,
customers, and industry analysts and influencers.

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Activity No. 5: ANALYSIS & APPLICATION

Discover a market opportunity in your community and make an

outline of a business plan. In a separate sheet of paper, follow
the instructions given below.

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Teaching and Learning Activities:

1. Defining and explaining the concept of entrepreneurship
2. Visualizing the importance of entrepreneurship in the
economy
3. Understanding the relevance of ethical practices in
entrepreneurship
4. Following the entrepreneurial processes
5. For LABORATORY - Watch TEDx Video Presentation
Entrepreneurship for the "Underdeveloped" by Sari Taha
(TEDxAlManaraSquare)
available through the link
https://www.youtube.com/watch?v=fgwkro9jWMU. Write a one-
page reaction paper and submit via Google Class or Edmodo.

Recommended Learning Materials and Resources for Supplementary Reading

• The Dimensions of Entrepreneurship, interview of Howard H.
Stevenson by Rick Goossen, Available online at
https://www.entrepreneurialleaders.com/downloads/sb_eleader
s/EntrepreneurshipExpertHowardStevenson.pdf

Flexible Teaching Learning Modality (FTLM) adopted

Remote learning will be done through module, handouts,
lectures saved in flash drive, as well as submission of
worksheet/activity sheets, reaction papers and activity report.
For online learning, the topics will be accessible through
Edmodo or Google Classroom as well as the online quizzes and
major exams.
Announcements will be made in Group Chat (FB messenger) and
announcement sections in Edmodo or Google Classroom.

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Assessment Task
The performance of the students will be assessed through:
• Worksheets/Activity Sheets
• Essays
• Reaction Papers
• Assignments
• Online Quizzes

References

Havinal, V. (2009). Management and Entrepreneurship. KArnataka:

New Age International.
Hortovanyi, L. (2012). Entrepreneurial Management. AULA Kiado
Kft, Hungary: Budapesti Corvinus Egyetem.
Mariotti, S. (2010). Entrepreneurship: Owning Your Future (11th
Edition ed.). New Jersey: Prentice Hall.
Ogbe, A. A. (2018). Funadamentals of Entrepreneurship
Development. Kampala: Panamaline Books Distributors
Limited.
Small Enterprises Research and Development Foundation (SERDEF).
(2013). Windows to Entrepreneurship: A Teaching Guide.
Quezon City: Small Enterprises Research and Development
Foundation.

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