TYPES OF START-UPS
Life-Style Firms
A life-style firm exists primarily to support the
owners and usually has little growth opportunity. This type of firm may grow
after several years to 30 or 40 employees.
Foundation Companies
A type of company formed from research and development
that usually does not go public. This firm can grow in five to ten years from
40 to 400 employees.
High-Potential Venture
A venture has high growth potential and therefore
receives great investor interest. The company may start out like a foundation
company, but its growth is far more rapid. After five to ten years the company
could employ around 500 employees. These firms are also called gazelles and
are most important for the economic development of an area.
ROLE OF ENTREPRENEURSHIP IN ECONOMIC
DEVELOPMENT
The role of entrepreneurship in economic development
involves initiating change in the structure of business and society. One theory
of economic growth depicts innovation as the key, not only in developing new
products, but also in stimulating investment interest. The new capital created
expands the capacity for growth (supply side), and new spending utilizes the
new capacity and output (demand side.) In spite of the importance of investment
and innovation in the economic development of an area, there is still a lack of
understanding of few factors which are as follows:
The product-evolution process is the process
through which innovation develops and commercializes through entrepreneurial
activity, which in turn stimulates economic growth. It begins with knowledge in
the base technology and ends with products or services available in the marketplace.
The critical point in the process is the intersection of knowledge and a
recognized social need, called the iterative synthesis. This point often
fails to evolve into a marketable innovation.
Most innovations introduced in the market are ordinary
innovations, with little uniqueness.
Technological innovations refer to new products with significant technological
advancements.
Breakthrough innovations mean the development of new
products with some technological Change. Regardless of the level of uniqueness
or technology, each innovation evolves into and develops towards commercialization
through one of three mechanisms: the government, entrepreneurship, or entrepreneurship.
Entrepreneurship has assisted in revitalizing areas of the inner city.
Individuals in inner- city areas can relate to the concept and see it as a
possibility for changing their present situation.
GOVERNMENT AS AN INNOVATOR
A government active in commercializing technology is
known as an innovative government.
Commercializing technology is frequently called technology
transfer.
However, few inventions resulting from
government-sponsored research have reached the commercial market. Most of the
by-products from scientific research have little application to any social
need. The government lacks the business skills needed for successful
commercialization. Government bureaucracy and red tape also often inhibit the
timely formation of the business. Recently, federal labs have been required to
commercialize some of their technology each year and some are providing entrepreneurial
training.
Entrepreneurship
Entrepreneurship refers to entrepreneurship within an
existing organization or business structure. Entrepreneurship can also bridge
the gap between science and the marketplace.
Existing businesses have the financial resources,
business skills, and marketing and distribution system to commercialize
innovation successfully. Often the bureaucratic structure, emphasis on
short-term profits, and structured organization inhibit creativity. Some
corporations have tried to establish an Entrepreneurial spirit in their
organization, some in the form of strategic business units (SBUs.)
Entrepreneurship
The third method for bridging the gap between the science
and the marketplace is via entrepreneurship. Many entrepreneurs have difficult
time bridging this gap and creating new ventures. They may often lack managerial
skills, marketing capabilities, or financial resources. They frequently do not
know how to interface with banks, suppliers, customers, and distributors. Yet,
entrepreneurship is the most effective method for bridging the gap and creating
new enterprises, these activities affect an areas economy by building the
economic base and providing jobs.
ENTREPRENEURIAL CAREERS AND EDUCATION
Since 1985 there has been an increased interest in
entrepreneurial careers fostered by factors such as increased media coverage of
entrepreneurs and employment shifts. A conceptual model for understanding
entrepreneurial careers views the career stages as interacting with other
stages and events in the individual's life, the life-cycle approach. This
approach conceptualizes entrepreneurial careers in nine categories.
1. Educational environment
2. The individual's personality
3. Childhood family environment
4. Employment history
5. Adult development history
6. Adult family/non-work history
7. Current work situation
8. The individual's current perspective
9. The current family situation
Although there exist a common perception that
entrepreneur are less educated than the general population however studies have
found entrepreneurs overall and female entrepreneurs in particular, are far
more educated than the general population. However, this education sometimes
does not develop the specific skills needed in the venture, especially for
women entrepreneurs Childhood influences have been explored, particularly in
terms of values and the individual's personality. The traits most frequently
researched are the need for achievement, locus of control, risk-taking,
and gender identity. The research on the childhood family environment of the
entrepreneur has had more definite results.
Entrepreneurs tend to have self-employed fathers, and
many also have entrepreneurial mothers. The family plays an important role in
establishing the desirability of entrepreneurship as a career. Employment
history also has an impact on entrepreneur careers in both positive and a
negative sense. Entrepreneurs tend to have a higher probability of success when
the venture created is in their field of experience. Negative displacement
(such as dissatisfaction with various aspects of ones job) also encourages
entrepreneurship.
Although no definite research has been done on the adult
development history of entrepreneurs, it appears to also affect entrepreneur's
careers. One's development history has somewhat more of an impact on women,
since they tend to start businesses at a later stage in life. There is a lack
of data on adult family/non-work history and the available data adds little
understanding towards entrepreneurial career development.
Entrepreneurs are known for their strong work values,
their long workdays, and their dominant management style. They tend to fall in
love with the organization and will sacrifice almost anything in order for it
to survive. While in college, few future entrepreneurs realize that they will
pursue entrepreneurship as their major life goal. Relatively few individuals
will start a business immediately after graduation. Entrepreneurship education
is a fast growing area in colleges and universities. While the courses vary by
university, there is a great commonality, especially in the initial few
courses.
The skills required by entrepreneurs can be classified in to three
main areas:
1. Technical skills involve such things as
writing, listening, oral presentations, coaching, and technical know-how.
2. Business management skills include those areas involved in starting, developing and
managing any enterprise.
3. Personal entrepreneurial skills differentiate an entrepreneur
from a manager and include inner control (discipline), risk taking,
innovativeness, persistence, visionary leadership, and being change oriented. These
skills and objectives form the basis of the modular approach to an
entrepreneurship curriculum. Today entrepreneurs are recognizing the need to
learn some of the "science" of management in an MBA program in order
to grow their businesses effectively in the global environment.
ETHICS AND SOCIAL RESPONSIBILITY OF
ENTREPRENEURS
The entrepreneur must establish a balance between ethical
exigencies, economic expediency, and social responsibility. A managers
attitudes concerning corporate responsibility tend to be supportive of laws and
professional codes of ethics. Entrepreneurs have few reference persons, role
models, and developed internal ethics codes. Entrepreneurs are sensitive to
peers pressure and social norms in the community as well as pressures from
their companies.
While ethics refers to the "study of whatever
is right and good for humans," business ethics concerns itself with
the investigation of business practices in light of human values. The word
"ethics" stems from the Greek êthos, meaning custom and usage.
Development of Our Ethical Concepts
Socrates, Plato, and Aristotle provide the earliest
writings dealing with ethical conceptions; earlier writings involving moral
codes can be found in both Judaism and Hinduism. American attitudes on ethics
result from three principle influences: Judeo-Christian heritage, a belief in individualism
and opportunities based on ability rather than social status. Research on
business ethics can be broken down into four broad classifications:
1. Pedagogically-oriented inquiry
2. Theory-building without empirical testing
3. Empirical research, measuring the attitudes and
ethical beliefs of students and academic faculty
4. Empirical research within business environments
THE FUTURE OF ENTREPRENEURSHIP
In spite of the differences in definition of
entrepreneurship, there are common aspects such as risk taking, creativity,
independence, and rewards. Entrepreneurship is currently being embraced by
educational institutions, governments, societies, and corporations. Schools are
increasing their emphasis on entrepreneurship in terms of courses and academic
research. In Europe many universities have started programs in
entrepreneurship. There has also been an increase in academic research, endowed
chairs and centers of entrepreneurial activity. Governments have also promoted
the growth of entrepreneurship. Individuals are encouraged to form new
businesses and provided tax incentives, roads, and a communications system to
facilitate this creative process. Some state governments are developing
strategies for fostering entrepreneurial activity.
The venture capital industry has benefited from lowering
of capital gains tax rates and more relaxed rules regarding pension fund
investment. Society's support of entrepreneurship is critical in providing
motivation and public support. The media has played a powerful role in
developing public support. Media coverage uplifts the image of the entrepreneur
and growth companies. Articles have appeared in newspapers such as New York
Times, The Wall Street Journal, and the Washington Post. Business
magazines such as Barrons, Business Week, Forbes, and Fortune have
provided coverage. Magazines such as Black Enterprise, Entrepreneur, Inc., and
Venture focus on issues of the entrepreneurial process. Television on
both a national and local level has highlighted entrepreneurship.
Large companies will continue to have a special interest
in Entrepreneurship in the future. The largest 15 companies account for over 20
percent of the total U.S. research and development. Other companies will create
more new businesses through Entrepreneurship.
KEY TERMS
Product-evolution
process- Process for developing and commercializing an innovation
Risk taking- Taking
calculated chances in creating and running a venture.
Technological
innovation- A new product with significant technological advancement
Technology
transfer- Commercializing the technology in the laboratories into
new products
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