ENTREPRENEURSHIP REVIEWER

Entrepreneur- comes form the French word ENTREPRENDRE which means to undertake.

- It is a reference to individuals who initiated the establishment of a business

enterprise.

The Theory of Economic Development (Joseph Schumpeter)

- JOSEPH SCHUMPETER emphasized the role of entrepreneurs in the process of economic
transformation.

-through their business ventures, entrepreneurs introduce to the market, innovations in the form of
new products, new processes, new markets, and new organizations.

Megaentrepreneurs- the entrepreneurs described by Schumpeter, however, are individuals

who have generated substantial value and profits from innovations in a
very short period of time.
- These individuals are also willing to absorb huge risks of using enormous
amounts of capital in their business ventures (Quickmba.com)
- Because of the speed by which they create a big amount of value added,
these entrepreneurs were cited by Schumpeter as having contributed
much to the economic progress the developed countries in the West.

Microentrepreneurs- Although they initiate business enterprises, the value-added and profits
they make are limited.
- Some introduce innovations in the form of changes in their production
and distribution processes, but their contributions are minimal and attract
few competitors and imitators.
- Because they are short in funds and inadequate in skills, they cannot
undertake projects that involve huge capital, sophisticated technology,
and extensive risks.
- Unlike megaentrepreneurs, they engage in micro and small businesses as
an alternative to formal employment.

Innovation and Entrepreneurship (Peter Drucker)

- Microentrepreneurs and megaentrepreneurs both start business from opportunities facing them.
- Given this, PETER DRUCKER (1985) in this book, emphasized the ‘discipline’ in the process of starting
and managing a business.
- Even if the contributions of entrepreneurship can vary, what is important is the system of
entrepreneurs follow to achieve their goals. In seizing opportunities and converting them into business
ventures, there are several steps to follow.

Entrepreneurial Process
- Although Drucker acknowledged how personal traits and elements of the external environment could
influence the outcomes of an enterprise, what he emphasized is the importance of how these personal
traits and external factors managed to achieve the goals of the enterprise.
- thus, there is important to formulate a strategy, which should include an articulation of a plan and how
this going to be implemented.
- this entrepreneurial discipline is often referred to as the entrepreneurial process, which involves
several stages from the awareness of an opportunity to the realization of a business idea.
The steps include the following:
a. discovery
b. development of concept
c. organizing resources
d. implementation
e. reaping the returns
1. Discovery- refers to the recognition of a business idea or the detection of opportunities that
could make money for the entrepreneur.
- megaentrepreneurs draw their ideas from current invention and other
technological developments that can bring about huge profits for them.
2. Development of Concept- the business idea is then transformed into a business concept.
- The development of a business concept gives more details on how
the general business idea can be realized.
- It suggests the preparation of a business plan, which must spell out
the various activities that must be done from production to the
distribution of the product or service.
- The business plan must also describe how the enterprise is going to
be organized and managed, and how the business is going to be
financed, among others.

3. Organizing resources- describes the process of identifying, sourcing, and financing human,
nonhuman, and other resources needed for the conduct of business.
- Megaentrepreneurs usually require highly educated, technologically
savvy, and creative employees, who are sourced from the best
universities and training institutions nationally or globally.
-Microentrepreneurs draw their resources, including labor, from what is
available in their locality.

4. Implementation- is the process of carrying out the business plan. It covers a number of activities, including the
management of human, physical, technological, and financial resources of the business.

5. Reaping the Returns- pertains to strategies related to the expansion of the business firm.
- It also covers mechanisms for addressing conditions in the business
environment that may affect the future of the firm.

Entrepreneurial Traits and Creation of Value Added

1. Level of Education-Studies have shown that entrepreneurs need some formal education to
be able to seize the opportunities presented by inventions, innovations,
and other technological developments.
2. Employment Status- Individuals who become entrepreneurs in developed countries are
usually former employees of companies in the formal sector.
- The choice of pursuing entrepreneurship can be viewed as a step in the
entrepreneur’s professional development.

3. Entrepreneur’s Wealth- the wealth of the entrepreneur is also an important factor.

- Usually megaentrepreneurs source their funds from their own
wealth or families.
- this is not the case for microentrepreneurs, who have very limited
funds.

4. Risk Appetite- Risk is also an important factor in undertaking any business venture.
- Risk are associated with uncertainties in business operation. These
uncertainties can threaten the survival and stability of a business operation.

Entrepreneurial Traits and Entrepreneurial Intentions

-Every individual who set up a business venture started out by intending to do so. Thus, we examine
ENTREPRENEURIAL INTENTIONS, which are planned actions formulated in the mind of individuals which
are geared toward the objective of establishing business venture from potential business opportunities.
Based on studies, there are two broad set of factors that may influence the formation of entrepreneurial
intentions: internal and external factors.

Internal Factors- include mainly the qualities of individuals such as demographics, personal traits,
psychological characteristics, individual skills, prior knowledge and social ties.

a. Demographics- reefer to gender, marital status, age, and employment status of individuals who are
likely to form entrepreneurial intentions.

b. Personal traits- there are theoretical bases for the contributions of self-confidence, determination,
and enthusiasm and other positive human qualities in influencing entrepreneurial intentions. However,
studies have shown that these personal traits are weak predictors of entrepreneurial intentions.

c. Psychological traits- include a host of qualities, including need for achievement, risk appetite,
acceptance for vagueness, self-efficacy, and goal setting. There are also theoretical bases for these
psychological traits in influencing entrepreneurial intentions, but only appetite for risk and self-efficacy
or belief in one’s strength have been empirically verified.

d. Knowledge and Skills- learned from prior employment are valuable in setting up a business.

External Factors- among the external factors are environmental support and environmental
influence.

a. Environmental Support-many studies have affirmed the positive effects of government,

financial institutions, and training institutions in setting up business.
 An individual will be inclined to pursue entrepreneurship if support
from various government agencies are forthcoming.

b. Environmental Influence- includes regulatory structure, patents, protection of property rights, and
competitive environment.

Types of Mental Processes

1. Critical Thinking- refers to the systematic and rational way of providing an answer to a question.
- It is systematic since it follows steps in responding to an inquiry.
- What to produce?
- How to produce?
- Whom to produce?

2. Creative Thinking- refers to the thought processes that bring about discovery of new ideas.
- Unlike critical thinking, it does not follow a systematic or analytical
process.
- Sometimes, creative ideas start from a DREAM, an INSIGHT, or from mere
OBSERVATION.
- the intent of creative thinking is not to provide an answer but to ask
questions that can lead to discovery and change.

3. Strategic Thinking- involves thought processes that assess current situation that can be useful
in the formulation of plans for the future.
- Porter’s five forces of competition, trend analysis, and scenario building,
for example, are utilized to provide an intelligent forecast of future
events that can assist the entrepreneur in formulating strategic plans
that can enhance the growth of an enterprise.

Risk- can be described as uncertain situations and developments that can increase the
probability of loss or business failure.
- Since these hazards can originate from a variety of sources, business risks can be generally
categorized into those emanating from internal and external factors.
Internal Risks- pertain to dangers coming from the management of resources of a business
enterprise that may imperil its operations.
- For example, liquidity, and financial risks, failure to hire the best talents, damage
to reputation, and failure to innovate.

External Risks- are threats coming from various environments outside the business firm.
- Some examples are a lethargic economy, increased competition, commodity
price risks, regulatory risk, business interruptions, power and political risks.

Risk Management-the process of identifying, assessing, and responding to these risks.

Cognitive adaptability- refers to the ability of individuals to be involved in the process of

producing several ways of decision-making based on the identification
and management of changes in their environment.