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MGT602 - Entrepreneurship - Lecture Handout 02

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THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP

LEARNING OBJECTIVES

  1. To introduce the concept of entrepreneurship and its historical development.
  2. To explain the entrepreneurial decision process.

Desirability of New Venture Formation

(Aspects of a situation that make it desirable to start a new company)

The perception that starting a new company is desirable results from an individual’s culture, subculture, family, teachers and peers.
American culture places a high value on being your own boss, being a success and making money therefore, it is not surprising to find a high rate of company formation in the United States. On the other hand in some countries making money is not as valued and failure may be a disgrace. The rate of business formation in these countries is not as high. Many subcultures that shape value systems operate within a cultural framework.
Studies indicate that a high percentage of founders of companies had fathers and/or mothers who valued independence. Encouragement to form a company is also gained from teachers, who can significantly influence individuals. An area having a strong educational base is also a requirement for entrepreneurial activity. Peers are important, also, as is an area with an entrepreneurial pool and peer-meeting place.

Possibility of New Venture Formation

(Factors making it possible to create a new venture)

  • Although the desire of new venture formation derived from the individual’s culture, subculture, family, teachers and peers needs to be present before any action is taken, the second feature necessary centers around this question “What makes it possible to form a new company?”

    Formal education and previous business experience give a potential entrepreneur the skills needed to form and manage a new enterprise. Although educational systems are important in providing the needed business knowledge, individual will tend to be more successful in forming in fields in which they have worked. The government also contributes by providing the infrastructure to help a new venture.
    The market must be large enough and the entrepreneur must have the marketing know-how to put together the entire package.
    Finally, financial resources must be readily available. Although most start-up money comes from personal savings, credit, and friends, but there is often a need for additional capital. Risk- capital availability plays an essential role in the development and growth of entrepreneurial activity.

KEY TERMS

Foundation companies

A type of company formed from research and development that usually does not go public.

Gazelles

Very high growth ventures.

Government as an innovator

A government active in commercializing technology

High-potential ventures.

A venture that has high growth potential and therefore receives great investor interest

Entrepreneurship

Entrepreneurship within an existing business structure

Iterative synthesis

The intersection of knowledge and social need that starts the product development process

Lifestyle firm

A small venture that supports the owners and usually does not grow

Ordinary innovation

Z new product with little technological change

Possibility of new venture formation

Factors making it possible to create a new venture

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