CHAPTER 1 ENTREPRENEURSHIP AND ENTREPRENEURIAL MINDSET

Entrepreneur means different things to different people. This about a kind of behavior that includes: 1. Initiative taking 2. The organizing and reorganizing of social and economic mechanisms to bundle resources in innovative ways 3. The acceptance of risk, uncertainty, and/or the potential of failure Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume the major risks in terms of equity, time, and/or career commitment to provide value for some product or service. The product or service may or may not be new or unique, but the entrepreneur must somehow infuse value by receiving and bundling the necessary skills and resources. Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort; assuming the accompanying financial, psychic, and social risks and uncertainties; and receiving the resulting rewards of monetary and personal satisfaction. This definition stresses four basic aspects of being an entrepreneur. 1. Entrepreneurship involves the creation processcreating something new of value. The creation has to have value to the entrepreneur and value to the audience for which it is developed. This audience can be: (1) the market of organizational buyers for business innovation, (2) the hospitals administration for a new admitting procedure and software, (3) prospective students for a new course or even college of entrepreneurship, (4) the constituency for a new service provided by a nonprofit agency. 2. Entrepreneurship requires the devotion of the necessary time and effort. Only those going through the entrepreneurial process appreciate the significant amount of time and effort it takes to create something new and make it operational. 3. The third part of the definition involves the rewards of being an entrepreneur. The most important of these rewards is independence, followed by personal satisfaction, but monetary reward also comes into play. For some entrepreneurs, money becomes the indicator of the degree of success achieved.

4. Assuming the necessary risks and uncertainties is the final aspect of entrepreneurship. Because action takes place over time, and the future is unknowable, action is inherently uncertain. This uncertainty is further enhanced by the novelty intrinsic to entrepreneurial actions, such as the creation of new products, new services, and new ventures. Entrepreneurs must decide to act even in the face of uncertainty over the outcome of that action. Therefore, entrepreneurs respond to, and create, change through their entrepreneurial actions, where entrepreneurial action refers to behavior in response to a judgmental decision under uncertainty about a possible opportunity for profit.

THE ENTREPRENEURIAL PROCESS An entrepreneur must find, evaluate, and develop an opportunity by overcoming the forces that resist the creation of something new. The process has four distinct phases: 1. Identification and evaluation of the opportunity The assessment of the opportunity requires answering the following questions: What market need does it fill? What personal observations have you experienced or recorded with regard to that market need? What social condition underlies this market need? What market research data can be marshaled to describe this market need? What patents might be available to fulfill this need? What competition exists in this market? How would you describe the behavior of this competition? What does the international market look like? What does the international competition look like? Where is the money to be made in this activity? 2. development of the business plan, 3. determination of the required resources, 4. management of the resulting enterprise Although these phases proceed progressively, no one stage is dealt with in isolation or is totally completed before work on other phases occurs. For example, to successfully identify and evaluate an opportunity (phase 1), an entrepreneur must have in mind the type of business desired (phase 4).

HOW ENTREPRENEURS THINK Entrepreneurs think differently than non entrepreneurs. Moreover, an entrepreneur in a particular situation may think differently when faced with a different task or decision environment. Entrepreneurs must often make decisions in highly uncertain environments where the stakes are high, time pressures are immense, and there is considerable emotional investment. We think differently in these environments than we do when the nature of a problem is well understood and we have time and rational procedures at hand to solve it. Given the nature of an entrepreneurs decision-making environment, he or she must sometimes 1. effectuate Effectuation helps entrepreneurs think in an environment of high uncertainty. This entrepreneurial mind-set involves the ability to rapidly sense, act, and mobilize, even under uncertain conditions. In developing an entrepreneurial mind-set, individuals must attempt to make sense of opportunities in the context of changing goals, constantly questioning ones dominant logic in the context of a changing environment, and revisiting deceptively simple questions about what we think to be true about markets and the firm. For example, effective entrepreneurs are thought to continuously rethink current strategic actions, organization structure, communications systems, corporate culture, asset deployment, investment strategies, in short every aspect of a firms operation and long-term health. 2. be cognitively adaptable 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. We can achieve this by asking ourselves a series of questions that relate to a. comprehension b. connection c. strategy d. reflection 3. learn from failure Although there are many causes of failure, the most common is insufficient experience. That is, entrepreneurs who have more experience will possess the knowledge to perform more effectively the roles and tasks necessary for success. This experience

need not come solely from success. In fact, it appears that we may learn more from our failures than our successes. ETHICS AND SOCIAL RESPONSIBILITY OF ENTREPRENEURS Entrepreneurship can play a role in the fair deployment of resources to alleviate the exploitation of certain stakeholders. Most of us can think of examples of firms that have benefited financially because their managers have exploited certain stakeholders-receiving more value from them than they supply in return. This exploitation of a stakeholder group can represent an opportunity for an entrepreneur to more fairly and efficiently redeploy the resources of the exploited stakeholder. Simply stated, where current prices do not reflect the value of a stakeholders resources, an entrepreneur who discovers the discrepancy can enter the market to capture profit. In this way the entrepreneurial process acts as a mechanism to ensure a fair and efficient system for redeploying the resources of a victimized stakeholder to a use where value supplied and received is equilibrated. Therefore, while there is evidence that some use the entrepreneurial process to exploit others for profit, it is important to understand that the entrepreneurial process can be an important means of helping exploited stakeholders and at the same time setting up a viable business. Think of the entrepreneurial process as a tool that can be used effectively to achieve outcomes for the benefit of others (and the entrepreneur) rather than to the detriment of others.

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT The role of entrepreneurship in economic development involves more than just increasing per capita output and income; it involves initiating and constituting change in the structure of business and society. This change is accompanied by growth and increased output, which allows more wealth to be divided by the various participants. What in an area facilitates the needed change and development? One theory of economic growth depicts innovation as the key, not only in developing new products (or services) for the market but also in stimulating investment interest in the new ventures being created.