Entrepreneurship

Chapter 1
Entrepreneurial Mind Set
Economic Definition
“Entrepreneurship is a dynamic process of creating
incremental wealth”

Business Definition # 1
“Entrepreneurship is a process of creating something new
assuming risks and rewards”.

Business Definition # 2
“Entrepreneurship is a process of creating something new
with value by devoting necessary time and effort assuming
the accompanying financial, psychic and social risk and
receiving the resulting financial rewards, personal
Satisfaction and independence”
Basic Aspects of Definition

• Value Creation (Benefit/utility to stake holders)

• Devotion of Time and effort. (Active
participation)
• Risks (Financial, Social and Psychic)
• Rewards (Monetary, Personal Satisfaction and
Social Acceptance i.e. Society recognize and
appreciate businessman)
Entrepreneurial Process

Identify and
Prepare a Resource Manage The
Evaluate
Opportunity Business Plan Acquisition Enterprise
• Identification • Written • Appraise • Implement
(Sources) Document Current Business Plan
• Evaluation • Internal and • Acquire • Implement
(Opportunity External Needed Variables for
Analysis Documents Success
Plan)
The Nature of Entrepreneurship

• Entrepreneurial Opportunities
– Entrepreneurial opportunities are those situations in
which new goods, services, raw materials and
organizing methods can be introduced and sold at
greater then their cost of production.
– Entrepreneurial Actions
• Actions through the creation of new products/processes
and/or entry into new markets which may occur through
a newly created organization or within an established
organization.
• Entrepreneurial Thinking
– Individual’s mental processes of overcoming
ignorance to decide whether a signal represents an
opportunity for some one and/or reducing doubt as to
whether an opportunity for some one is also an
opportunity for them specifically and /or processing
feedback from action steps taken.
 Knowledge:
Prior Knowledge:
Knowledge Feasibility
Assessment
Third
Entrepreneurial
Person
action: first-
opportuni
person
ty
opportunity
Motivation Motivation:
desirability
assessment

Attention Stage: Evaluation Stage:

Radical uncertainty (ignorance) Action-specific uncertainty
How Entrepreneurs Think

• Think Structurally
– Superficial Similarities exists when the basic relatively
easy to observe) elements of technology resembles the
basic (relatively easy to observe) elements of market
(knowledge about existing markets to new technology)

– Structural Similarities exists when underlying

mechanisms of the technology resembles the
underlying mechanisms of the market
(knowledge about a technology to a new market)
• Bricolage
– Entrepreneurs making do by applying combinations of
resources at hand to new problems and opportunities
– Taking existing resources (at hand) and
experimenting, tinkering, repackaging and/or
reframing them so they can be used in a way for which
they were not originally designed or conceived.
• Effectuation
Entrepreneurs think differently and make decision in
Uncertain environment.

Effectuation is a process that starts with what one has,

Who they are, what they know and whom they know and
Select among possible outcomes.
What one has ----------- Select one possible outcome
(Opportunities)
Causal process:
Causal process starts with a desired outcome and focus on
the means to generate that outcome.
Desired outcome ---------- Means to generate
Principles of Effectuation:
Patchwork Quilt Principle
• Means driven actions that emphasize on creation of
something new with existing means, rather discovering
new ways to achieve given goals.

Affordable Loss Principle

• What one is willing to loose rather than expected returns
of project.
Bird in Hand Principle

• Negotiating with all stakeholders who are willing to make

actual commitment to the project and determine the
goal in the enterprise.
The Lemonade Principle:
• This prescribe leveraging surprise for benefit rather than
to avoid them, overcome them, and adopt to them.
The Pilot in the Plan Principle:
• Relying on and working with people as the prime driver of
opportunity and not limiting entrepreneurial efforts to
exploit factors external to the individual.
Above principles help Entrepreneur to navigate the
environment as well as shape it and exploit the
Unexpected events

Entrepreneurial mindset involves the ability to rapidly sense,

act and mobilize even under certain conditions
• Cognitive Adaptability
Dynamism
Extent to -- Flexibility -----Generate decisions -----
Self regulation
Engagement

---- Environmental Changes & Actions

“Extent to dynamism, flexibility, self regulation, engagement

that generate decision about environmental changes &
action”

Ability of Cognitive Adoptability helps in learning new tasks,

pursue the opportunities and manage the firm in an
uncertain environment.
Questions to assess cognitive adoptability includes

• Comprehension Questions
• Connection Tasks
• Strategic Tasks
• Reflection Tasks

Benefits:

• Adoption to new situation

• Creativity
• Communicate one’s reasoning behind a response
• Uncertain environments give birth to opportunities.
THE INTENTION TO ACT ENTREPRENIALLY

1. Entrepreneurial Intensions
The motivational factors that influence individuals to pursue
entrepreneurial outcomes.
Entrepreneurial Intentions --- Motivational Factors

2. Entrepreneurial Self Efficacy

The conviction that one can successfully execute the
entrepreneurial process.
Entrepreneurial Self Efficacy ---- Friction of Process
3. Perceived Desirability

The degree to which an individual has a favorable or

unfavorable evaluation of the potential entrepreneurial
outcomes.

Perceived Desirability -- Evaluation of Outcome

ENTREPRENEUR BACKGROUND AND
CHARACTERISITICS
There are three important determinants of an entrepreneur
background: Education, Age and Work History
1. EDUCATION:
• Education is important in upbringing of an entrepreneur
and helps in starting the venture and problem solving.
• Importance to be given to finance, strategic planning,
marketing and communication with people.
• Education helps in opportunity identification,
development of communication skills and problem-
solving skills
• Does not determine whether an entrepreneur will create
a new business to exploit the discovered opportunity.
2. AGE:
• Chronological Age (Personal Age)
• Entrepreneurial Age (Business Age)
• Most entrepreneurs initiate their entrepreneurial careers
between the ages of 22 and 45.
• Individuals are more inclined to start an entrepreneurial
career at milestone ages every five years (25, 30, 35, 40,
and 45).
• Male entrepreneurs tend to start their ventures in their
early 30s, while women entrepreneurs do so in their
middle 30s.
3. WORK HISTORY:
• The past work experience of individual
• That may include dissatisfaction, lack of challenge,
frustration and boredom as well as motivation and
related work experience.
• When venture starts growing managerial experience
becomes more important.
• The previous start up experience is also helpful in
prediction and benchmarking.
ROLE MODELS AND SUPPORT SYSTEMS:

ROLE MODEL:
• Individual Influencing an entrepreneur’s career choice
and style.
• They can be parents, brother or sister, other relatives or
entrepreneur.
• Act as a “mentor” through advice, information and
guidance
• Serves at a “catalyst”.
• Later on network with similar prevalent is established
depending on frequency, depth, mutual benefits and
reciprocity of relationships.
SUPPORT SYSTEM:
1. Moral Support network:

• A cheering squad providing psychological support.

• Supporting wives, honest friends, children parents,

grand-parents and uncles who encourage and
understand and relatives including.
2. Professional Support Networks:
Individuals helping the entrepreneur in business activities.
Mentors:
A coach, advocate and expert in the filed and provides
“HOW TO” advise. A person with which the entrepreneurs
can share his problems and success.

Business Associates:
Self employed individuals, clients, consultant, suppliers,
lawyers, accountants etc.
Trade Association:

Regional and national associations who keep the

developments and provide industry data and may include
trade association of respective field e.g. APTMA and the
Chamber of Commerce.

Personal Affiliation:

This includes shared hobbies, supporting activities, clubs,

civic involvement and school alumni group. These above
support system helps in resource identification and
acquisition and locates opportunities.
Sustainable Entrepreneurship
• Entrepreneurship focused on preserving nature, life
support and community (sustainability) in the pursuit of
perceived opportunities to bring future products,
processes and services into existence for gain where
gain is broadly constructed to include economic and non
economic benefits to individuals, the economy and
society (development)
• Examples Mini Jungle - Muakhaat