Chapter 1
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-1
LEARNING OBJECTIVES
1.
To introduce the concept of entrepreneurship and explain
the entrepreneurial process.
2.
To introduce effectuation as a way that expert entrepreneurs
sometimes think.
3.
To develop the notion that entrepreneurs learn to be
cognitively adaptable.
4.
To acknowledge that some entrepreneurs experience failure
and to recognize the process by which they maximize their
ability to learn from that experience.
5.
To recognize that entrepreneurs have an important
economic impact and ethical and social responsibility
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-2
Concepts and Definitions

Entrepreneur: is commonly seen as an innovator
( a generator of new ideas, and business processes. )
1.

a)
Entrepreneur is a person who starts an enterprise.
Entrepreneurship
Can be described as a process of an action of an entrepreneur
to establish his enterprise.
b)
Creative activity. It is the ability to create and build something
from almost nothing.
c)
Is the attitude of mind to seek opportunities, take risks and
obtain benefits by setting up a business enterprise.
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-3
Concepts and Definitions

The process of creation is called (entrepreneurship).
 The entrepreneur is the actor and entrepreneurship is the
act.
 The outcome of the actor +act = is called the enterprise.
Enterprise: is the business organization that is formed and
which provides goods and services, creates jobs
contributes to national income, exports and over all
economic development
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-4
Definitions of the entrepreneurs mind-set
Entrepreneurial Mind-set: Involves the ability to make
sense about the opportunities in the context of changing
goals ,act, and mobilize even under uncertain condition.
To be good in this task the individuals must develop a
cognitive adaptability.
Cognitive adaptability : Describe the point to which
entrepreneurs are dynamic, flexible, self adaptable +
engaging to the process of generating multiple decision
frame works
focused on sensing dealing out change
in their environments and then acting on them .
Entrepreneurship, Published by: McGraw
Hill, 8th edition
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Achieving cognitive adaptability by
1. Comprehension questions – Aids understanding of the
nature of the environment before addressing an
entrepreneurial challenge.
2. Connection tasks – Stimulates thinking about the
current situation in terms of similarities and differences
with situations previously faced and solved.
3. Strategic tasks – Stimulates thoughts about which
strategies are appropriate for solving the problem (and
why) or pursuing the opportunity (and how).
4. Reflection tasks – Stimulates thinking about their
understanding and feelings as they progress through the
entrepreneurial process.
Entrepreneurship, Published by: McGraw
Hill, 8th edition
Definition of Entrepreneurship

Entrepreneurship is the process of creating something
new with value by devoting the necessary time and
effort; assuming the additional financial, psychic, and
social risks and uncertainties; and receiving the resulting
rewards of monetary and personal satisfaction.

Entrepreneurial action - Behavior in response to a
judgmental decision under uncertainty about a possible
opportunity for profit
Entrepreneurship, Published by: McGraw
Hill, 8th edition
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The definition stresses 4 basic aspects of being
an entrepreneur

First, entrepreneurship involves the creation process—
creating something new of value to both said
entrepreneur and to the audience for which is it
developed.

Second, entrepreneurship requires the devotion of the
necessary time and effort.(appreciate the amount of time
spending in creating something new)
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-8
The definition stresses 4 basic aspects of being
an entrepreneur (con’t)

Third part of the definition involves the rewards of
being an entrepreneur. The most important of these
rewards is independence, followed by personal
satisfaction, for some entrepreneurs, money becomes the
indicator of the degree of success achieved.

Forth -Entrepreneurs must decide to act even in the face
of uncertainty over the outcome of that action.( they
respond to and create change through their entrepreneur
action)
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-9
3 Kinds of Behavior
1.
Initiative taking ( Idea of the project)
2.
The organizing and reorganizing of social and
economic mechanisms to collect resources in
innovative ways
3.
The acceptance of risk, that can ambiguity or the
possible for failure
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-10
The Entrepreneurial Process

Is The process of pursuing a new venture. The process
has 4 phases:
1.
Opportunity identification - The process by which an
entrepreneur comes up with the opportunity for a new
venture.

How by looking at the Market size & The length
of the window of opportunity are the primary bases
for determining risks and rewards.

Window of opportunity - The time period available
for creating the new venture.
Entrepreneurship, Published by: McGraw
Hill, 8th edition
The Entrepreneurial Process
2. Develop a Business plan - The description of
the future direction of the business.
3. Determine the Resources Required :
The Entrepreneur must determine the resources
needed for addressing the opportunity
4. Manage the enterprise: is the last stage of the
process and it required to implement the
business plan.
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-12
Table 1.1 - Aspects of the Entrepreneurial Process
Entrepreneurship, Published by: McGraw
Hill, 8th edition
How Entrepreneurs Think
Entrepreneurs in particular situations may think differently when
faced with a different task or decision environment.

Ways of thought : Entrepreneurs need to sometimes:
1. Effectuation
 There
A.
are two ways that task can be organized :
Causal process it’s a process that
1. Starts with a desired outcome.
2. Focuses on the means to generate that outcome.
Entrepreneurship, Published by: McGraw
Hill, 8th edition
How Entrepreneurs Think
B. Effectuation process it’s a process that
1. Starts with what one has (who they are, what
they know, and whom they know).
2. Selects among possible outcomes.
Entrepreneurship, Published by: McGraw
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How Entrepreneurs Think (cont.)
2. Be cognitively
adaptable.
Entrepreneurs who are able to increase cognitive
adaptability have an improved ability to:
1. Adapt to new situations.
2. Be creative.
3. Communicate one’s reasoning behind a
particular response.
Entrepreneurship, Published by: McGraw
Hill, 8th edition
How Entrepreneurs Think (cont.)
3. Learning from Business Failure
◦ Uncertainty, changing conditions, and insufficient
experience can contribute to failure among
entrepreneurial firms. It occurs when a fall in revenue
or rise in expenses of project fail.
◦ Loss of a business can result in a negative emotional
response from the entrepreneur..
Entrepreneurship, Published by: McGraw
Hill, 8th edition
How Entrepreneurs Think (cont.)
An entrepreneur’s motivation is not simply from
personal profit but from:
1. Loyalty to a product.
2. Loyalty to a market and customers.
3. Personal growth.
4. The need to prove oneself.
Entrepreneurship, Published by: McGraw
Hill, 8th edition
1-18
Ethics and Social Responsibility of
Entrepreneurs
Business ethics - The study of behavior and morals in a
business situation.

Personal value systems tend to be influenced by:
1. Peer pressure.
2. General social norms in the community.
3. Pressures from their competitors.
Entrepreneurship, Published by: McGraw
Hill, 8th edition
Role of Entrepreneurship in
Economic Development
Innovation is important key to the economic development.

3 types of innovation:
1. Ordinary - New products with little technological
change.
2. Technological – New products with significant
technological advancement.
3. Break-through – New products with some
technological change.
Entrepreneurship, Published by: McGraw
Hill, 8th edition