Chapter 1 - Answer

1. Answer: There are many reasons that entrepreneurship is growing around the world. Among the most important reasons are: (1) the downsizing of large firms, which have placed a large number of people off the job market that would rather start their own firm than work for another large firm, (2) the push for improved efficiency and effectiveness on the part of firms and individuals, which has provided entrepreneurs the opportunity to meet needs, (3) the rapid pace of change that is taking place worldwide, which provides entrepreneurs additional opportunities to meet needs, and (4) the increasing recognition that entrepreneurship is the engine that fuels economic growth and prosperity worldwide. Most students will argue that entrepreneurship will 2. Answer: Entrepreneurship is the process by which individuals pursue opportunities without regard to resources they currently control. There are three types of firms salarysubstitute firms, lifestyle firms, and entrepreneurial firms. Salary substitute firms are small firms that afford their owner or owners a level or income similar to what they would earn in a conventional job (i.e., convenience store, drying cleaner, restaurant). Lifestyle firms provide their owners or owners the opportunity to pursue a particular lifestyle and earn a living while doing so (i.e., ski instructor, tour guide, home-based eBay business). Entrepreneurial firms, which are the focus of this book, bring new products and services to market by seizing opportunities. The person who just launched a restaurant is bringing a new product or service to market, and is assuming the risk associated with doing that. The person who just took a job as the general manager of a restaurant isnt bringing something new to market. While the person is assuming employment risk, he/she isnt assuming the risk of owning a business. 3. Answer: The three main attributes of firms that pursue high levels of corporate entrepreneurship are proactively, risk-taking, and innovation. All firms fall along a conceptual continuum that ranges from highly conservative to highly entrepreneurial. Entrepreneurial firms score high on the entrepreneurial intensity scale. 4. Answer: The three primary reasons that people become entrepreneurs and start their own firms are to (1) be their own boss, (2) pursue their own ideas, and (3) realize financial rewards. 5. Answer: The average entrepreneur does not make more money than someone with a similar amount of responsibility in a traditional job. As a result, some people are disappointed by the lack of significant financial returns when they start their own firms. The financial lure of entrepreneurship is its upside potential. People such as Michael Dell of Dell Inc., Jerry Yang of Yahoo!, and Sergey Brin of Google have made hundreds of millions of dollars building their firms.

6. Answer: Passion for the business, product/customer focus, tenacity despite failure, and execution intelligence. 7. Answer: The passion that an entrepreneur feels for his or her business typically stems from a belief that the business will positively influence peoples lives. It is important that this passion exists because the process of starting and building a new firm is demanding. 8. Answer: While there are many factors to consider in building a business, if a firm doesnt have a product or service people will buy, it will fail. 9. Answer: Tenacity is paramount characteristic because it often takes time (sometimes years) for an entrepreneurial firm to develop its full potential. Also, many entrepreneurs experience setbacks before they are eventually successful. Without a healthy amount of tenacity many entrepreneurs would throw in the towel before their businesses become successful. 10. Answer: Myth 1: Entrepreneurs are born, not made. Myth 2: Entrepreneurs are gamblers. Myth 3: Entrepreneurs are motivated primarily by money. Myth 4: Entrepreneurs should be young and energetic. Myth 5: Entrepreneurs love the spotlight. 11. Answer: Entrepreneurs are usually moderate risk takers. 12. Answer: Entrepreneurs are usually moderate risk takers. 13. Answer: Entrepreneurial behavior has a positive effect on the U.S. economy in at least two areas: innovation and job creation. Both of these areas are critical to both the short-term and long-term health of the economy. 14. Answer: Entrepreneurial firms create products and services that make our lives easier, enhance our productivity at work, improve our health, and entertain us. Ask your students to provides specific examples of entrepreneurial firms that have produced products or services that meet these, or similar, criteria.