Topic 1

Entrepreneurship
and the Individual
Entrepreneur Mind-Set

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document
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may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.  © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
 Learning Objectives
• Nature and Development of Entrepreneurship
• How Entrepreneur Think
• Role of Entrepreneurship in Economic Development
• The Intention to Act Entrepreneurially
• Entrepreneur Background & Characteristics
• Role Models & Support Systems
• Sustainable Entrepreneurship

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 Nature and Development of
Entrepreneurship
• Entrepreneur – An individual who takes initiative to bundle
resources in innovative ways and is willing to bear the risk
and/or uncertainty to act.

• Being an entrepreneur today:

• Involves creation process.
• Requires devotion of time and effort.
• Involves rewards of being an entrepreneur.
• Requires assumption of necessary risks.

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document
may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 
 Nature and Development of
Entrepreneurship
• Entrepreneurial action - Behavior in response
to a judgmental decision under uncertainty
about a possible opportunity for profit.

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Figure 1.1 - Entrepreneurial Action

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 Nature and Development of
Entrepreneurship
• Entrepreneurial opportunities
• Situations in which new goods, services, raw
materials, and organizing methods:
• Can be introduced
• Sold at greater than their cost of production
• Entrepreneurial action:
• Involves creation of new products or processes
• Involves entry into new markets

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 Nature and Development of
Entrepreneurship
• May occur through a newly created organization
or within an established organization
• Entrepreneurial thinking
• An individuals’ mental processes of overcoming
ignorance to:
• Decide whether a signal represents an opportunity for
someone
• Decide whether that opportunity is applicable to the
individual specifically
• Process feedback from action steps taken

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 How Entrepreneurs Think
• Entrepreneurs should:
• Think structurally
• Engage in bricolage
• Effectuate
• Cognitively adapt
• Learn from failures

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 How Entrepreneurs Think
• Think structurally
• Superficial similarities: Basic elements of the
technology resemble the basic elements of the
market
• Structural similarities: Underlying mechanisms of
the technology resemble the underlying
mechanisms of the market

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 How Entrepreneurs Think
• Bricolage
• Applying combinations of the resources at hand to
new problems and opportunities
• Taking existing resources and tinkering and/or
reframing them so they can be used in new ways

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 How Entrepreneurs Think
• Effectuation
• Causal process
• Starts with a desired outcome
• Focuses on the means to generate that outcome
• Effectuation process
• Starts with what one has
• Selects among possible outcomes
• Entrepreneurial mind-set: Ability to rapidly sense,
act, and mobilize, even under uncertain conditions

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 How Entrepreneurs Think
• Cognitive adaptability
• Describes the extent to which entrepreneurs are:
• Dynamic, flexible, self-regulating and engaged in the
process of generating multiple decision frameworks
• Focused on sensing and processing changes in their
environments and then acting on them
• Metacognitive awareness - Ability to reflect
upon,understand, and control one’s thinking and
learning

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 How Entrepreneurs Think
• Achieving cognitive adaptability
• Comprehension questions
• Increase entrepreneurs’ understanding of the nature of
the environment
• Connection tasks
• Stimulate thinking about similarities and differences of
current situations with situations previously faced and
solved
• Strategic tasks
• Identify strategies that are appropriate for solving the
problem or pursuing the opportunity
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 How Entrepreneurs Think
Reflection tasks
• Stimulate entrepreneurs to think about their
understanding and feelings as they progress through
the entrepreneurial process
• Increasing cognitive ability helps in:
• Adapting to new situations
• Being creative
• Communicating one’s reasoning behind a particular
response

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 Role of Entrepreneurship in Economic
Development

• Innovation
• Economic growth
• New industry formation
• Job creation

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 Role of Entrepreneurship in
Economic Development
Innovation
• Innovation is depicted as a key to economic
development.
• Product-evolution process - Process through which
innovation is developed and commercialized.
• Iterative synthesis - The intersection of knowledge
and social need that starts the product
development process.

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document
may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 
Role of Entrepreneurship in Economic
Development
• Three types of innovation:
• Ordinary - New products with little technological
change.
• Technological – New products with significant
technological advancement.
• Breakthrough – New products with some
technological change.

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Role of Entrepreneurship in
Economic Development
Economic Growth

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 Role of Entrepreneurship in Economic
Development
New Industry Formation
• New industries are born when technological change
produces a new opportunity that an enterprising
entrepreneur seizes.
• Disruptive or metamorphic technologies that destroy
previous technologies and create new industries display
a different pattern of behavior.
• The pattern of growth, shakeout, stabilization, and
decline of industry can be interrupted at any time by the
entry of another disruptive technology.

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 Role of Entrepreneurship in
Economic Development

Industry Life Cycles

Source: Adapted from M. R. Darby and L. G. Zucker, “Growing by Leaps and Inches: Creative Destruction, Real Cost
Reduction, and Inching Up,” Economic Inquiry, January 2003, pp. 1-19 (January 2003).

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document
may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 
 Role of Entrepreneurship in
Economic Development
Job Creation

• The most recent data from 2003 indicate that

small businesses created 1,990,326 net new
jobs as compared to 994,667 for large firms.*
*U.S. Bureau of the Census; Administrative Office of the U.S. Courts; Endogenous Growth and
Entrepreneurial Activities.

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The Intention to Act Entrepreneurially
• Entrepreneurial intentions
• Motivational factors that influence individuals to
pursue entrepreneurial outcomes
• Entrepreneurial self-efficacy
• Conviction that one can successfully pursue
entrepreneurial outcomes
• Perceived desirability
• Degree to which a potential entrepreneurial
outcome is evaluated as favorable or unfavorable

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 Entrepreneur Background and
Characteristics
• Education
• Facilitates integration and accumulation of
knowledge thus providing a larger opportunity set
• Casts a wider net for the discovery or generation
of potential opportunities
• Assists entrepreneurs in adapting to new
situations
• Does not necessarily determine whether the
individual will create a new business

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 Entrepreneur Background and
Characteristics
• Age
• Chronological age – Usually between the ages 22
and 45
• Work history
• Past work experience of an individual

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Role Models and Support Systems
• Role models: Individuals whose example an
entrepreneur can aspire to and copy
• Moral-support network: Individuals who give
psychological support to an entrepreneur
• Professional-support network: Individuals
who help the entrepreneur in business
activities

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 Sustainable Entrepreneurship
• Preserving nature, life support, and
community in the pursuit of perceived
opportunities to:
• Bring future products, processes, and services into
existence for gain
• Can generate:
• Economic gains
• Environmental gains
• Social gains
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