Entrepreneurship & the Entrepreneurial Mindset

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Transcript of Entrepreneurship & the Entrepreneurial Mindset

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    Hisrich

    Peters

    Shepherd

    Chapter 1

    Entrepreneurshipand the

    Entrepreneurial Mind-Set

    Copyright 2010 by The M cGraw-Hi ll Companies, Inc. All ri ghts reserved.McGraw-Hill/Irwin

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    Nature and Development ofEntrepreneurship

    Entrepreneur An individual who takesinitiative to bundle resources in innovativeways and is willing to bear the risk and/or

    uncertainty to act. Being an entrepreneur today:

    Involves creation process.

    Requires devotion of time and effort.

    Involves rewards of being an entrepreneur.

    Requires assumption of necessary risks.

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    Nature and Development ofEntrepreneurship(cont.)

    Entrepreneurial action- Behavior inresponse to a judgmental decision underuncertainty about a possible opportunity for

    profit.

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    Table 1.1 - Aspects of theEntrepreneurial Process

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    The Entrepreneurial Process

    Opportunity identification-The process bywhich an entrepreneur comes up with theopportunity for a new venture.

    Market size and the length of the window ofopportunity are the primary bases fordetermining risks and rewards.

    Window of opportunity - The time periodavailable for creating the new venture.

    Business plan - The description of thefuture direction of the business.

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    How Entrepreneurs Think

    Entrepreneurs in particular situations maythink differently when faced with a differenttask or decision environment.

    Given the nature of their decision-makingenvironment, entrepreneurs need tosometimes:

    Effectuate.

    Be cognitively adaptable.

    Learn from failure.

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    Causal process Starts with a desired outcome.

    Focuses on the means to generate thatoutcome.

    Effectuation process Starts with what one has (who they are, what

    they know, and whom they know).

    Selects among possible outcomes.

    Entrepreneurial mind-set involves theability to rapidly sense, act, and mobilize,even under uncertain conditions.

    How Entrepreneurs Think (cont.)

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    Cognitive adaptability describes the extentto which entrepreneurs are:

    Dynamic, flexible, self-regulating and engaged

    in the process of generating multiple decisionframeworks focused on sensing and processingchanges in their environments and then actingon them.

    It reflects in an entrepreneursmetacognitive awareness.

    How Entrepreneurs Think (cont.)

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    Achieving cognitive adaptability

    Comprehension questions Aids understanding of thenature of the environment before addressing anentrepreneurial challenge.

    Connection tasks Stimulates thinking about thecurrent situation in terms of similarities and differenceswith situations previously faced and solved.

    Strategic tasks Stimulates thoughts about whichstrategies are appropriate for solving the problem (and

    why) or pursuing the opportunity (and how). Reflection tasks Stimulates thinking about their

    understanding and feelings as they progress throughthe entrepreneurial process.

    How Entrepreneurs Think (cont.)

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    Entrepreneurs who are able to increasecognitive adaptability have an improved abilityto:

    Adapt to new situations.

    Be creative.

    Communicate ones reasoning behind a particularresponse.

    How Entrepreneurs Think (cont.)

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    Learning from Business Failure

    Uncertainty, changing conditions, andinsufficient experience can contribute to failure

    among entrepreneurial firms. An entrepreneurs motivation is not simply from

    personal profit but from:

    Loyalty to a product.

    Loyalty to a market and customers.

    Personal growth.

    The need to prove oneself.

    How Entrepreneurs Think (cont.)

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    Loss of a business can result in a negativeemotional response from the entrepreneur.

    It can interfere with:

    Entrepreneurs ability to learn from the failure.

    Motivation to try again.

    How Entrepreneurs Think (cont.)

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    Recovery and Learning Process

    Emotional recovery from failure happens whenthoughts about the events surrounding, and

    leading up to the loss of the business, no longergenerate a negative emotional response.

    Primary descriptions of the process ofrecovering are:

    Loss-orientation.

    Restoration-orientation.

    How Entrepreneurs Think (cont.)

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    Loss-Orientation

    Involves working through, and processing, someaspect of the loss experience and, as a result of thisprocess, breaking emotional bonds to the object lost.

    This process gradually provides the loss with meaningand eventually produces a changed viewpoint.

    Involves confrontation, which is physically andmentally exhausting.

    Characterized by feelings of relief and pain that wax

    and wane over time.

    How Entrepreneurs Think (cont.)

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    Restoration-Orientation

    Based on both avoidance and a proactiveness towardsecondary sources of stress arising from a major loss.

    Involves suppression, which requires mental effort and

    presents potentially adverse consequences for health. Provides an opportunity to address secondary causes

    of stress.

    May reduce emotional significance of the loss.

    How Entrepreneurs Think (cont.)

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    A Dual Process for Learning from Failure

    The dual process of oscillating between the loss-orientation and restoration-orientation enables a

    person to: Obtain the benefits of each.

    Minimize the costs of maintaining one for too long.

    This dual process speeds the recovery process.

    How Entrepreneurs Think (cont.)

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    How Entrepreneurs Think (cont.)

    Practical implications of the dual process:

    Knowledge that feelings and reactions beingexperienced are normal.

    Realizing that psychological and physiological outcomes

    caused by the feelings of loss are symptoms canreduce secondary sources of stress.

    There is a process of recovery to learn from failure,which offers some comfort that current feelings of losswill eventually diminish.

    Recovery and learning process can be enhanced bysome degree of oscillation.

    Recovery from loss offers an opportunity to increaseones knowledge of entrepreneurship.

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    Ethics and Social Responsibility ofEntrepreneurs

    Entrepreneurs usually develop an internalethical code.

    Personal value systems tend to be

    influenced by: Peer pressure.

    General social norms in the community.

    Pressures from their competitors.

    Business ethics - The study of behavior andmorals in a business situation.

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    Role of Entrepreneurship inEconomic Development

    Innovation is depicted as a key to economicdevelopment.

    Product-evolution process - Process through

    which innovation is developed andcommercialized.

    Iterative synthesis - The intersection of knowledgeand social need that starts the productdevelopment process.

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    Role of Entrepreneurship inEconomic Development(cont.)

    Three types of innovation:

    Ordinary - New products with little technologicalchange.

    Technological New products with significanttechnological advancement.

    Breakthrough New products with sometechnological change.

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    Figure 1.1 - Product Evolution