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MGT602 - Entrepreneurship - Lecture Handout 10

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THE INDIVIDUAL ENTREPRENEUR (continued…)

LEARNING OBJECTIVES

  1. To identify some key entrepreneurial feelings and motivations.
  2. To identify key elements in an entrepreneur’s background.
  3. To discuss the importance of role models and support systems.
  4. To identify the similarities and differences between male and female entrepreneurs.
  5. To explain the differences between inventors and entrepreneurs.

ROLE MODELS AND SUPPORT SYSTEMS One of the most important factors influencing entrepreneurs in their career choice is role models. Role models can be parents, relatives, or successful entrepreneurs in the community. Role models can also serve in a supportive capacity as mentors during and after the new venture is launched. This support system is most crucial during the start-up phase.

It is important that an entrepreneur establish connections to support resources early in the venture formation process. As contacts expand they form a network with density (extensiveness of ties between two individuals) and centrality (the total distance of the entrepreneur to all other individuals.) The strength of ties between the entrepreneur and any individual is dependent on the frequency, level, and reciprocity of the relationship. An informal network for moral and professional support benefits the entrepreneur.

Moral-Support Network It is important for the entrepreneur to establish a moral support network of family and friends. Most entrepreneurs indicate that their spouses are their biggest supporters. Friends can provide advice that is more honest than that received from others, plus encouragement, understanding, and assistance. Relatives can also be sources of moral support, particularly if they are also entrepreneurs.

Professional-Support Network The entrepreneur also needs advice and counsel, which can be obtained from members of a professional support network. A mentor-protégé relationship is an excellent way to secure the needed professional advice. The mentor is a coach, sounding board, and advocate. The individual selected needs to be an expert in the field. An entrepreneur can initiate the "mentor-finding process" by identifying and contacting a number of experts. The mentor should be periodically apprised of the progress of the business so that a relationship can gradually develop. Another source of advice is a network of business associates. Self-employed individuals who have experience in starting a business are good sources. Clients and buyers are also important as they provide word-of-mouth advertising. Suppliers are good components of the professional-support network-they help to establish credibility with creditors and customers, and provide good information on trends in the industry. Trade associations are good network additions, as they keep up with new developments and can provide overall industry data. Affiliations with individuals developed in hobbies, sporting events, civic involvements and school alumni groups are excellent sources of referrals, advice, and information. Each
entrepreneur needs to establish both a moral- and a professional-support network to share problems with and gain overall support.

MALE VERSUS FEMALE ENTREPRENEURS

Women are now starting new ventures at three times the rate of men. Women form over 70 percent of all new businesses. Women now own over 8.5 million small businesses, an increase of over 45 percent since 1990. In some respects female entrepreneurs possess very different motivations, business skills, and occupational backgrounds. Factors in the start-up process for male and female entrepreneurs are different, especially in such areas as support systems, sources of funds, and problems. Men are motivated by the drive to control their own destinies. Women tend to be more motivated by the need for achievement arising from job frustration.
Departure points and reasons for starting the business are similar for both men and women. Both generally have a strong interest and experience in the area of their venture. For men, the transition to a new venture is easier when the venture is an outgrowth of a present job. Women often leave a previous occupation with a high level of frustration and enthusiasm for the new venture rather than experience.

Start-Up Financing

Males often have investors, bank loans, or personal loans in addition to personal funds as sources of startup capital. Women usually rely solely on personal assets or savings. Obtaining financing and lines of credit are major problems for women.

Occupations

Both groups tend to have experience in the field of their ventures. Men more often have experience in manufacturing, finance, or technical areas. Most women usually have administrative experience, often in service-related fields.

Personality

Both men and women tend to be energetic, goal-oriented, and independent. Men are often more confident and less flexible and tolerant than women.

Backgrounds

The backgrounds of male and female entrepreneurs tend to be similar. Women are little older when they embark on their careers. Men often have studied in technical- or business-related areas, while women tend to have liberal arts education. Many women business owners are empty nesters or single and need business insurance as well as personal life insurance.

Support Groups

Men usually list outside advisors as most important supporters, with spouse being second. Women list their spouse first, close friends second, and business associates third. Women usually rely more heavily on a variety of sources for support and information than men.

Nature of the Venture

Women are more likely to start a business in a service-related area. Men are more likely to enter manufacturing, construction, or high-technology fields.

MINORITY ENTREPRENEURSHIP

It is difficult to research race and ethnicity as entrepreneurial factors as the differences in behavior of various groups must be understood in the context of the environment and economic opportunities available. Most literature dealing with minority entrepreneurship has focused on the characteristics of the group under study. In terms of ownership, one study found:

  • The lowest participation rate is for blacks.
  • The second highest but fastest growing rate is for Hispanics.
  • The highest rate is for Asians.

Studies have also found differences in education, age, family background, and age when starting the venture. Black businesses tend to be smaller and less profitable, but there are no differences in survival rates between black- and white-owned businesses. Studies have also found differences between ethnic groups in benefiting from community resources. Entrepreneurship has increased among Asians, African Americans, Hispanics, and Native Americans.

ENTREPR E NEURS VERSUS INVENTORS

An inventor, an individual who creates something for the first time, is a highly driven individual motivated by his or her own work and personal ideas. An inventor:

  1. Tends to be well-educated.
  2. Has family, educational, and occupational experiences that contributes to freethinking.
  3. Is a problem solver.
  4. Has a high level of self-confidence.
  5. Is willing to take risks.
  6. Has the ability to tolerate ambiguity and uncertainty.
  7. A typical inventor places a high premium on being an achiever, and is not likely to view monetary benefits as a measure of success.
  8. An inventor differs from an entrepreneur.
  9. An entrepreneur falls in love with the new venture, while the inventor falls in love with the invention.
  10. The development of a new venture based on an inventor’s work often requires the expertise of an entrepreneur.

KEY TERMS

Motivations

What causes people to do something

Need for achievement

An individual’s need to be recognized

Need for independence

Being one’s own boss-one of the strongest needs of an entrepreneur

Professional-support network

Individuals who help the entrepreneur in business activities

Role models

Individuals influencing an entrepreneur’s career choice and style

Social status

The level at which an individual in viewed by society

Work history

The past work experiences of an individual

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