Chapter 1 Entrepreneurship and the Entrepreneurial Mind-Set © 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Learning Objectives • To introduce the concept of entrepreneurship and explain the process of entrepreneurial action • To describe how structural similarities enable entrepreneurs to make creative mental leaps • To highlight bricolage as a source of entrepreneurs’ resourcefulness 1-2 Learning Objectives • To introduce effectuation as a way expert entrepreneurs sometimes think • To develop the notion that entrepreneurs cognitively adapt • To introduce sustainable entrepreneurship as a means of sustaining the natural environment and communities and developing gains for others 1-3 The Nature of Entrepreneurship • Entrepreneurial opportunities • Situations in which new goods, services, raw materials, and organizing methods: • Can be introduced • Sold at greater than their cost of production • Entrepreneurial action: • Involves creation of new products or processes • Involves entry into new markets 1-4 The Nature of Entrepreneurship • May occur through a newly created organization or within an established organization • Entrepreneurial thinking • An individuals’ mental processes of overcoming ignorance to: • Decide whether a signal represents an opportunity for someone • Decide whether that opportunity is applicable to the individual specifically • Process feedback from action steps taken 1-5 Figure 1.1 - Entrepreneurial Action 1-6 How Entrepreneurs Think • Entrepreneurs should: • • • • • Think structurally Engage in bricolage Effectuate Cognitively adapt Learn from failures 1-7 How Entrepreneurs Think • Think structurally • Superficial similarities: Basic elements of the technology resemble the basic elements of the market • Structural similarities: Underlying mechanisms of the technology resemble the underlying mechanisms of the market 1-8 How Entrepreneurs Think • Bricolage • Applying combinations of the resources at hand to new problems and opportunities • Taking existing resources and tinkering and/or reframing them so they can be used in new ways 1-9 How Entrepreneurs Think • Effectuation • Causal process • Starts with a desired outcome • Focuses on the means to generate that outcome • Effectuation process • Starts with what one has • Selects among possible outcomes • Entrepreneurial mind-set: Ability to rapidly sense, act, and mobilize, even under uncertain conditions 1-10 How Entrepreneurs Think • 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 • Metacognitive awareness - Ability to reflect upon,understand, and control one’s thinking and learning 1-11 How Entrepreneurs Think • Achieving cognitive adaptability • Comprehension questions • Increase entrepreneurs’ understanding of the nature of the environment • Connection tasks • Stimulate thinking about similarities and differences of current situations with situations previously faced and solved • Strategic tasks • Identify strategies that are appropriate for solving the problem or pursuing the opportunity 1-12 How Entrepreneurs Think Reflection tasks • Stimulate entrepreneurs to think about their understanding and feelings as they progress through the entrepreneurial process • Increasing cognitive ability helps in: • Adapting to new situations • Being creative • Communicating one’s reasoning behind a particular response 1-13 The Intention to Act Entrepreneurially • Entrepreneurial intentions • Motivational factors that influence individuals to pursue entrepreneurial outcomes • Entrepreneurial self-efficacy • Conviction that one can successfully pursue entrepreneurial outcomes • Perceived desirability • Degree to which a potential entrepreneurial outcome is evaluated as favorable or unfavorable 1-14 Entrepreneur Background and Characteristics • Education • Facilitates integration and accumulation of knowledge thus providing a larger opportunity set • Casts a wider net for the discovery or generation of potential opportunities • Assists entrepreneurs in adapting to new situations • Does not necessarily determine whether the individual will create a new business 1-15 Entrepreneur Background and Characteristics • Age • Chronological age – Usually between the ages 22 and 45 • Work history • Past work experience of an individual 1-16 Role Models and Support Systems • Role models: Individuals whose example an entrepreneur can aspire to and copy • Moral-support network: Individuals who give psychological support to an entrepreneur • Professional-support network: Individuals who help the entrepreneur in business activities 1-17 Sustainable Entrepreneurship • Preserving nature, life support, and community in the pursuit of perceived opportunities to: • Bring future products, processes, and services into existence for gain • Can generate: • Economic gains • Environmental gains • Social gains 1-18