Chapter 10
Entrepreneurial Firm
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Define entrepreneurship, entrepreneurs, and entrepreneurial firms
2. Understand how institutions and sources affect entrepreneurship
3. Identify the three characteristics of a growing entrepreneurial firm
4. Differentiate international strategies that enter foreign markets and that
stay in domestic markets
5. Participate in three leading debates on growing and internationalizing the
entrepreneurial firm
6. Draw implications for action
ENTREPRENEURSHIP AND
ENTREPRENEURIAL FIRMS
small and medium-sized enterprises (SMEs) generally defined in the US as firms with fewer than 500
employees
entrepreneurship – identification and exploitation of
previously unexplored opportunities
entrepreneurs - founders and owners of new businesses
or managers of existing firms
international entrepreneurship - combination of
innovative, proactive, and risk seeking behavior that crosses
national borders and is intended to create wealth in
organizations
Institutions and Entrepreneurship
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entrepreneurship is thriving around the
globe in general, its development is
unequal
In general, governments in developed
economies impose fewer procedures
entrepreneurs confront harsher regulatory
burdens in poor countries
GROWING THE ENTREPRENEURIAL FIRM
growth - an entrepreneurial firm can be viewed as an
attempt to more fully utilize currently underutilized
resources and capabilities
Innovation - heart of entrepreneurship and allows
for a more sustainable basis for competitive advantage
financing - start-ups need to raise capital; “4F”
sources of entrepreneurial financing: founders, family,
and friends, and fools
Microfinance
Lending institutions provide tiny loans ($50–
$300) to entrepreneurs in developing
countries that would lift them out of poverty
INTERNATIONALIZING
THE ENTREPRENEURIAL FIRM
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There is a myth based on historical
stereotypes that only large MNEs do
business abroad and that SMEs mostly
operate domestically
Transaction costs may seem so high that
many firms may choose not to pursue
international opportunities
Some born global start-ups attempt to
do business abroad from inception
Many venture investors look for a global
view in candidate organizations
Strategies for
Entering Foreign Markets
direct exports - sale of products made by
entrepreneurial firms in their home country to customers in
other countries
sporadic (or passive) exporting - sale of
products prompted by unsolicited inquiries
licensing - agreement to give another organization the
rights to use proprietary technology (such as a patent) or
trademark (such as a corporate logo) for a royalty fee
franchising - as licensing, except typically used in
service industries
foreign direct investment - strategic alliances,
joint ventures, green-field wholly owned subsidiaries,
and/or foreign acquisitions
International Strategies for Staying
in Domestic Markets
indirect exports - SMEs reach overseas customers
by exporting through domestic-based export
intermediaries
export intermediaries - perform an important
“middleman” function by linking sellers and buyers
overseas that otherwise would not have been connected:
export trading companies (ETCs), export management
companies (EMCs)
Traits versus Institutions
What motivates entrepreneurs to establish
new firms, while most others are simply
content to work for bosses?
The “traits” school of thought argues it is
personal traits that matter.
Critics, however, argue that some of these
traits, such as a strong achievement
orientation, are not necessarily limited to
entrepreneurs, but instead are characteristic
of many successful individuals.
Slow Internationalizers versus
Born Global Start-Ups
Can SMEs internationalize faster than
what has been suggested by traditional
stage models?
or
Should they rapidly internationalize?
Antifailure Bias versus EntrepreneurFriendly Bankruptcy Law
One of the leading debates is how to treat failed
entrepreneurs who file for bankruptcy.
If entrepreneurship is to be encouraged, there is a need
to ease the pain associated with bankruptcy by means
such as allowing entrepreneurs to walk away from debt, a
legal right that bankrupt American entrepreneurs
appreciate.
In contrast, bankrupt German entrepreneurs may
remain liable for unpaid debt for up to 30 years. Further,
German and Japanese managers of bankrupt firms can
also be liable for criminal penalties.