PowerPoint Presentation by Charlie Cook The University of West Alabama Entrepreneurship theory | process | practice Donald F. Kuratko Richard M. Hodgetts

© 2007 Thomson/South-Western.All rights reserved.© 2007 Thomson/South-Western.All rights reserved.

PowerPoint Presentation by Charlie CookThe University of West AlabamaPowerPoint Presentation by Charlie CookThe University of West Alabama

EntrepreneurshEntrepreneurshipiptheory | process | theory | process | practicepractice

Donald F. Kuratko Donald F. Kuratko • • Richard M. HodgettsRichard M. Hodgetts

Seventh editionSeventh edition

Part 1Entrepreneurship in the New Millennium

Part 1Entrepreneurship in the New Millennium

CHAPTER 2

The Evolution of Entrepreneurship

CHAPTER 2

The Evolution of Entrepreneurship

Chapter Objectives

1. To examine the historical development of entrepreneurship

2. To explore and debunk the myths of entrepreneurship

3. To define and explore the major schools of entrepreneurial thought

4. To explain the process approaches to the study of entrepreneurship

5. To set forth a comprehensive definition of entrepreneurship

Studying this chapter should provide you with the entrepreneurial knowledge needed:

© 2007 Thomson/South-Western. All rights reserved. 2–2


The Evolution of EntrepreneurshipThe Evolution of Entrepreneurship

Entrepreneur is derived from the French Entrepreneur is derived from the French entreprendreentreprendre, meaning “to undertake.”, meaning “to undertake.”

The The entrepreneurentrepreneur is one who undertakes to organize, is one who undertakes to organize, manage, and assume the risks of a business. manage, and assume the risks of a business.

Although no single definition of entrepreneur Although no single definition of entrepreneur exists and no one profile can represent today’s exists and no one profile can represent today’s entrepreneur, research is providing an entrepreneur, research is providing an increasingly sharper focus on the subject.increasingly sharper focus on the subject.


A Summary Description of Entrepreneurship

A Summary Description of Entrepreneurship

Entrepreneurship (Robert C. Ronstadt)Entrepreneurship (Robert C. Ronstadt) The dynamic process of creating incremental wealth.The dynamic process of creating incremental wealth. This wealth is created by individuals who assume This wealth is created by individuals who assume

major risks in terms of equity, time, and/or career major risks in terms of equity, time, and/or career commitment of providing value for a product or commitment of providing value for a product or service. service.

The product or service itself may or may not be new or The product or service itself may or may not be new or unique but the entrepreneur must somehow infuse unique but the entrepreneur must somehow infuse value by securing and allocating the necessary skills value by securing and allocating the necessary skills and resources.and resources.


An Integrated DefinitionAn Integrated Definition

EntrepreneurshipEntrepreneurship A dynamic process of vision, change, and creation.A dynamic process of vision, change, and creation.

• Requires an application of energy and passion towards the Requires an application of energy and passion towards the creation and implementation of new ideas and creative creation and implementation of new ideas and creative solutions.solutions.

Essential ingredients include:Essential ingredients include:• The willingness to take calculated risksThe willingness to take calculated risks——in terms of time, in terms of time,

equity, or career.equity, or career.

• The ability to formulate an effective venture team; the creative The ability to formulate an effective venture team; the creative skill to marshal needed resources.skill to marshal needed resources.

• The fundamental skills of building a solid business plan.The fundamental skills of building a solid business plan.

• The vision to recognize opportunity where others see chaos, The vision to recognize opportunity where others see chaos, contradiction, and confusion.contradiction, and confusion.


The Myths of EntrepreneurshipThe Myths of Entrepreneurship

Myth 1:Myth 1: Entrepreneurs Are Doers, Not ThinkersEntrepreneurs Are Doers, Not Thinkers

Myth 2:Myth 2: Entrepreneurs Are Born, Not MadeEntrepreneurs Are Born, Not Made

Myth 3:Myth 3: Entrepreneurs Are Always InventorsEntrepreneurs Are Always Inventors

Myth 4:Myth 4: Entrepreneurs Are Academic and Social MisfitsEntrepreneurs Are Academic and Social Misfits

Myth 5:Myth 5: Entrepreneurs Must Fit the “Profile”Entrepreneurs Must Fit the “Profile”

Myth 6:Myth 6: All Entrepreneurs Need Is MoneyAll Entrepreneurs Need Is Money

Myth 7:Myth 7: All Entrepreneurs Need Is LuckAll Entrepreneurs Need Is Luck

Myth 8:Myth 8: Ignorance Is Bliss For EntrepreneursIgnorance Is Bliss For Entrepreneurs

Myth 9:Myth 9: Entrepreneurs Seek Success But Experience High Failure Entrepreneurs Seek Success But Experience High Failure RatesRates

Myth 10:Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers)Entrepreneurs Are Extreme Risk Takers (Gamblers)


Figure 2.1 Entrepreneurial Schools-of-Thought Approach


Macro View: External Locus of ControlMacro View: External Locus of Control

The Environmental School of ThoughtThe Environmental School of Thought Considers the external factors that affect a potential Considers the external factors that affect a potential

entrepreneur’s lifestyle. entrepreneur’s lifestyle.

The Financial/Capital School of ThoughtThe Financial/Capital School of Thought Based on the capital-seeking processBased on the capital-seeking process—t—the search for he search for

seed and growth capital. seed and growth capital.

The Displacement School of ThoughtThe Displacement School of Thought Alienation drives entrepreneurial pursuitsAlienation drives entrepreneurial pursuits

• Political displacement (laws, policies, and regulations)Political displacement (laws, policies, and regulations)• Cultural displacement (preclusion of social groups)Cultural displacement (preclusion of social groups)• Economic displacement (economic variations)Economic displacement (economic variations)


Table 2.1 Financial Analysis Emphasis


Micro View: Internal Locus of ControlMicro View: Internal Locus of Control

The Entrepreneurial Trait School of ThoughtThe Entrepreneurial Trait School of Thought Focuses on identifying traits common to successful Focuses on identifying traits common to successful

entrepreneurs.entrepreneurs.• Achievement, creativity, determination, and technical Achievement, creativity, determination, and technical

knowledge knowledge

The Venture Opportunity School of ThoughtThe Venture Opportunity School of Thought Focuses on the opportunity aspect of venture Focuses on the opportunity aspect of venture

developmentdevelopment—t—the search for idea sources, the he search for idea sources, the development of concepts, and the implementation of development of concepts, and the implementation of venture opportunities.venture opportunities.

• Corridor principle:Corridor principle: New pathways or opportunities will arise New pathways or opportunities will arise that lead entrepreneurs in different directions.that lead entrepreneurs in different directions.


Table 2.2 Definitions And Criteria Of One Approach To The Micro View

Source: Adapted from J. Barton Cunningham and Joe Lischeron, “Defining Entrepreneurship,” Journal of Small Business Management (January 1991): 56.59(1) (winter 1994): 21-31. Reprinted with permission.


Table 2.2 Definitions And Criteria Of One Approach To The Micro View (cont’d)



Table 2.2 Definitions And Criteria Of One Approach To The Micro View (cont’d)



Micro View… (cont’d)Micro View… (cont’d)

The Strategic Formulation School of ThoughtThe Strategic Formulation School of Thought Emphasizes the planning process in successful Emphasizes the planning process in successful

venture development.venture development.

Ronstadt’s ViewRonstadt’s View Strategic formulation is a leveraging of unique Strategic formulation is a leveraging of unique

elements:elements:• Unique Markets: mountain gap strategiesUnique Markets: mountain gap strategies• Unique People: great chef strategiesUnique People: great chef strategies• Unique Products: better widget strategiesUnique Products: better widget strategies• Unique Resources: water well strategiesUnique Resources: water well strategies


Process Approaches to Entrepreneurship

Process Approaches to Entrepreneurship

Integrative ApproachIntegrative Approach

Built around the concepts of input to the Built around the concepts of input to the entrepreneurial process and outcomes from the entrepreneurial process and outcomes from the entrepreneurial process.entrepreneurial process.

Focuses on the entrepreneurial process itself and Focuses on the entrepreneurial process itself and identifies five key elements that contribute to the identifies five key elements that contribute to the process.process.

Provides a comprehensive picture regarding the Provides a comprehensive picture regarding the nature of entrepreneurship that can be applied at nature of entrepreneurship that can be applied at different levels. different levels.


Figure 2.2 An Integrative Model of Entrepreneurial Inputs and Outcomes

Source: Michael H. Morris, P. Lewis, and Donald L. Sexton, “Reconceptualizing Entrepreneurship: An Input-Output Perspective,” SAM Advanced Management Journal 59(1) (winter 1994): 21–31.


Process Approaches… (cont’d)Process Approaches… (cont’d)

Entrepreneurial Assessment ApproachEntrepreneurial Assessment Approach Stresses making assessments qualitatively, Stresses making assessments qualitatively,

quantitatively, strategically, and ethically in regard to quantitatively, strategically, and ethically in regard to the entrepreneur, the venture, and the environment the entrepreneur, the venture, and the environment

Multidimensional ApproachMultidimensional Approach Views entrepreneurship as a complex, Views entrepreneurship as a complex,

multidimensional framework that emphasizes the multidimensional framework that emphasizes the individual, the environment, the organization, and the individual, the environment, the organization, and the venture process. venture process.


Figure 2.3 Entrepreneurial Assessment Approach

Source: Robert C. Ronstadt, Entrepreneurship (Dover, MA: Lord Publishing Co., 1984), 39.


Figure 2.4

Variables in New-Venture Creation

Source: William B. Gartner, “A Conceptual Framework for Describing the Phenomenon of New Venture Creation,” Academy of Management Review (October 1985): 702. Reprinted with permission.


Intrapreneurship(Corporate Entrepreneurship)

Intrapreneurship(Corporate Entrepreneurship)

IntrapreneurshipIntrapreneurship Entrepreneurship that takes place Entrepreneurship that takes place within within an an

organizationorganization

Intrapreneuring (corporate entrepreneurship)Intrapreneuring (corporate entrepreneurship) To create or develop the entrepreneurial spirit within To create or develop the entrepreneurial spirit within

corporate boundaries, thereby allowing an corporate boundaries, thereby allowing an atmosphere of innovation to prosper.atmosphere of innovation to prosper.


Key ConceptsKey Concepts

EntrepreneurshipEntrepreneurship A process of innovation and new-venture creation A process of innovation and new-venture creation

through four major dimensions—individual, through four major dimensions—individual, organizational, environmental, process—that is aided organizational, environmental, process—that is aided by collaborative networks in government, education, by collaborative networks in government, education, and institutions.and institutions.

EntrepreneurEntrepreneur A catalyst for economic change who uses purposeful A catalyst for economic change who uses purposeful

searching, careful planning, and sound judgment searching, careful planning, and sound judgment when carrying out the entrepreneurial process.when carrying out the entrepreneurial process.


Key ConceptsKey Concepts

Entrepreneurial ManagementEntrepreneurial Management The discipline of entrepreneurial management:The discipline of entrepreneurial management:

• Entrepreneurship is based upon the same principles.Entrepreneurship is based upon the same principles.

• It matters not who or what that the entrepreneur isIt matters not who or what that the entrepreneur is——an an existing large institution or an individual, for-profit business or existing large institution or an individual, for-profit business or a public-service organization, a governmental or non-a public-service organization, a governmental or non-governmental institution.governmental institution.

• The rules are much the same: things that work and those that The rules are much the same: things that work and those that don’t are much the same, and so are innovations and where don’t are much the same, and so are innovations and where to look for them.to look for them.


Key Terms and ConceptsKey Terms and Concepts

better widget strategiesbetter widget strategies

corridor principlecorridor principle

displacement school of thoughtdisplacement school of thought

entrepreneurentrepreneur

entrepreneurial assessment entrepreneurial assessment approachapproach

entrepreneurial managemententrepreneurial management

entrepreneurial trait school of entrepreneurial trait school of thoughtthought

entrepreneurshipentrepreneurship

environmental school of thoughtenvironmental school of thought

external locus of controlexternal locus of control

financial/capital school of financial/capital school of thoughtthought

great chef strategiesgreat chef strategies

internal locus of controlinternal locus of control

intrapreneurshipintrapreneurship

macro view of entrepreneurshipmacro view of entrepreneurship

micro view of entrepreneurshipmicro view of entrepreneurship

mountain gap strategiesmountain gap strategies

multidimensional approachmultidimensional approach

strategic formulation school of strategic formulation school of thoughtthought

venture opportunity school of venture opportunity school of thoughtthought

water well strategieswater well strategies

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PowerPoint Presentation by Charlie Cook The University of West Alabama Entrepreneurship theory | process | practice Donald F. Kuratko Richard M. Hodgetts