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Ch. 2: Individual Leadership and Entrepreneurial Start-Ups
Table of Contents
Brief Chapter Outline...............................................................................................2
Chapter Outline and Lecture notes..........................................................................3
Key Terms.............................................................................................................. 10
Suggested Text Responses.................................................................................... 11
Class Activities and Sample Assignments.............................................................14
Discussion Questions for Online/Hybrid classes....................................................15
Lecture Links......................................................................................................... 18
Lecture Link 2.1: Incubators and the Concept of Legitimacy.................................18
Lecture Links 2.2: Social Networking in Practice...................................................20
Lecture Link 2.3: Do Not Compete Agreements and other Con$dentiality Issues. 22
Bonus Internet Exercises....................................................................................... 24
Bonus Internet Exercise 2.1: Business Risk...........................................................24
Bonus Internet Exercise 2.2: Organizational Slack: Not for New Businesses.........26
Bonus Internet Exercise 2.3: Personality and the Entrepreneur............................27
Critical Thinking Exercises..................................................................................... 29
Critical Thinking Exercise 2.1: The Elements of Entrepreneurial Orientation........29
Critical Thinking Exercise 2.2: The Two Categories of Triggers.............................31
Critical Thinking Exercise 2.3: Business Assessment............................................33
Bonus Cases.......................................................................................................... 35
Bonus Case 2.1: The Current State of the Entrepreneur.......................................35
Bonus Case 2.2: Lifesaver Realtor and Entrepreneurial Leadership......................37
Bonus Case 2.3: Paint a Pretty Picture: One Individual’s Approach to
Entrepreneurship................................................................................................... 39
Endnotes............................................................................................................... 41
Brief Chapter Outline
I. Learning Objectives (text page 19)
Explain how entrepreneurial founders impact the business world as a whole
Discuss the importance of an entrepreneurial orientation
IM 2-1
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written consent of McGraw-Hill Education.
Ch. 2: Individual Leadership and Entrepreneurial Start-Ups
List the triggers that encourage new business formations
Compare and contrast various types of new business supports
Explain how you can evaluate those things that you enjoy the most and
discover how they may lead to business opportunities
II. Founders are the Reason Why Entrepreneurial Business Works So Well (text
pages 24 and 25)
Learning Objective 2-1: Explain how entrepreneurial business founders impact
the business world as a whole
III. Evaluating Your Entrepreneurial Orientation (text pages 26 through 29)
Learning Objective 2-2: Discuss the importance of an entrepreneurial orientation
IV. Triggers for Starting a Business (text pages 30 and 31)
Learning Objective 2-3: List the triggers that encourage new business formations
V. Supports (text pages 31 through 33)
Learning Objective 2-4: Compare and contrast various types of new business
supports
VI. Form a Business Doing What You Like (text page 36)
Learning Objective 2–5: Explain how you can evaluate those things that you
enjoy the most and discover how they may lead to business opportunities
VII. Summary (text page 37)
Chapter Outline and Lecture notes
1. Learning Objectives (text page 21).
Explain how entrepreneurial business founders impact the business world as a
whole
Discuss the importance of an entrepreneurial orientation
List the triggers that encourage new business formations
Compare and contrast various types of new business supports
Explain how you can evaluate those things that you enjoy the most and discover
how they may lead to business opportunities
2. Founders Are the Reason Why Entrepreneurial Businesses Work So Well
Learning Objective 2-1: Explain how entrepreneurial business founders impact
the business world as a whole
IM 2-2
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Ch. 2: Individual Leadership and Entrepreneurial Start-Ups
A. New businesses have advantages that larger businesses do not have
i. New businesses
1. Increased flexibility compared to a larger businesses
because the entrepreneur can respond quicker to changes,
opportunities, and threats in a business environment
2. It is typical for new business founders to capture niche
markets
3. The most important and notable advantage for a new
business is the founder of the new business is both a
manager and an owner
4. Entrepreneurs in new businesses are dedicated to their work
ii. Large businesses
1. Multiple committees in large businesses prevent them from a
quick response time to changes, opportunities, and threats in
a business environment
2. Large firms do not have a competitive advantage in niche
markets because they can’t afford to compete with smaller
firms
3. A major disadvantage in large businesses is that the
managers do not have ownership in the business. As a
result, they do not have any substantial stock ownership in
the firm
B. Agency theory is a management theory that argues that individuals act to
maximize their own benefit
i. In large organizations it is typical for the manager to perform for
their personal benefit and not the greater good of the firm
ii. In small organizations it is typical for the entrepreneur to perform for
the greater good of the firm
3. Evaluating Your Entrepreneurial Orientation (text pages 26 through 29)
Learning Objective 2-2: Discuss the importance of an entrepreneurial orientation
A. Entrepreneurs need to consider the three elements of entrepreneurial
orientation before they open a new business (text page 26)
i. Risk tolerance
1. Risk tolerance is the amount of risk an entrepreneur is willing
to assume when they start a new business
2. Break-even point
IM 2-3
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Ch. 2: Individual Leadership and Entrepreneurial Start-Ups
a. The point when a new business has reached a level
where revenue coming into the firm is sufficient to
cover expenses.
ii. Prior experience
1. Bounded rationality is rational decision making that is
constrained by the background and history of the decision
maker
a. Bounded rationality promotes future leaders because
they are not limited by past experiences
iii. Personality orientation of the individual
1. Personality orientation occurs when an individual examines
his/her individual personality
2. The extroverted and outgoing entrepreneur performs better
in a business environment that has extensive interpersonal
interactions
3. The introverted entrepreneur performs better in a business
environment that has limited interpersonal interactions
4. Personality tests evaluate the factors in the environment that
sparked an interest that led the entrepreneur to start a new
business
5. Three popular tests include the Myers-Briggs test, the
Enneagram, and the Big Five test
a. The Myers-Briggs test focuses on the following four
variables
i. Extroversion-introversion focuses on an
outward or internal variable
ii. Sensing-intuiting focuses on how individuals
gather data
iii. Thinking-feeling focuses on how people make
decisions
iv. Judgment-perception focuses on order versus
flexibility
b. The Enneagram test evaluates the following nine
different personality types
i. Reformer refers to the idealist/perfectionist
personality
ii. Helper refers to the caring/good interpersonal
skills
iii. Achiever refers to the competent/driven
individual
IM 2-4
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Ch. 2: Individual Leadership and Entrepreneurial Start-Ups
iv. Individualist refers to the sensitive/dramatic
personality type
v. Investigator refers to the cerebral/focused
individual
vi. Loyalist refers to the committed/pessimistic
individual
vii. Enthusiast refers to the fun-loving/impatient
individual
viii. Peacemaker refers to the easygoing/passive
aggressive individual
ix. Challenger refers to the action oriented, cynical
individual.
c. The Big Five test emerged as a result of data analysis
and it explores the following personality traits
i. Open-mindedness
ii. Conscientiousness
iii. Agreeableness
iv. Emotional stability
v. Extroversion
6. Ask students to evaluate their personality using one of these
personality tests
4. Triggers for Starting a Business (text pages 30 and 31)
Learning Objective 2-3: List the triggers that encourage new business formations
A. Triggers are a result of positive or negative stimuli that encourage an
individual or group to initiate a new business
i. Loss of employment
ii. Inspired to establish business by other individuals or groups
iii. Tolerable levels of risk and return
iv. Financial security
v. Innovative ideas that inspire improvement
vi. Inspired by books, entrepreneurs, or seminars
vii. Life changes associated with crisis
viii. Observations of incubator or business development in community
ix. Employed by a firm with no growth potential
1. Did not graduate from an ivy league college
2. Women entrepreneurs initiate new businesses
3. The glass ceiling : Women are unable to climb the corporate
ladder in a male-dominated industry or corporation
4. Women entrepreneurs represent the fastest growing
segment of entrepreneurs
IM 2-5
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written consent of McGraw-Hill Education.
Ch. 2: Individual Leadership and Entrepreneurial Start-Ups
5. Incorrect job fit
B. Triggers are categorized by personal motivations and circumstance
motivations
i. Personal motivations are the strongest motivations
1. Motivated to change career
2. Proactive
3. Goal driven
4. Circumstance motivations result in defense positioning
a. Opportunities for potential entrepreneurs present
themselves as a result of the environment
b. Motivated by start-up opportunities from competing
factors
c. Examples of circumstance motivations
d. Laid-off or displaced worker
e. Demoted from a prestigious position
f. Employed at a reduced or discounted pay
g. More flexibility in their lives and families
5. Supports (text pages 31 through 36)
Learning objective 2-4: Compare and contrast various types of new business
supports
A. Entrepreneurs have many supports and resources available to assist them
with their small business needs
B. Supports are unique to the individual entrepreneur
C. Supports are unique to the entrepreneur’s geographical location
D. Examples of supports include family, networks, community, and financial
support
i. Family
1. Ask students to create a list of close family members and
compose a list of the capabilities those individuals posses
that might provide support to the new business (text page 31
and 32)
2. New business owners and future entrepreneurs utilize all
resources from their family
3. New businesses are often referred to as a family business
a. The key staff and decision makers in the business
consist of family members
b. Compared to a non-family-owned business the
long-term management of a family business is unique
c. There are flexible payroll options in a family business
IM 2-6
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written consent of McGraw-Hill Education.
Ch. 2: Individual Leadership and Entrepreneurial Start-Ups
d. The level of commitment in a family-owned business
far exceeds that of a non-family-owned small
business
e. It is possible for a family business to have negative
outcomes
i. It is difficult to fire or reprimand a family
member
ii. A family member could make negative verbal
comments that a regular employee would not
make
iii. Nepotism can cause negative outcomes to the
other employees
iv. Ask students to discuss the pros and cons
related to a family-operated business
ii. Networks
a. Networks provide key support resources to
entrepreneurs
b. Former employees are a good
network resource
c. Individuals from fraternal organizations are potential
network resources
d. School organizations provide possible network
resources
e. Other organizations that provide potential network
resources are churches or synagogues
f. Good network resources can prevent corruption and
fraud
g. Good network resources establish legitimacy
h. Blogs and chat rooms from other similar businesses
can be a source of advice
i. Crowd sourcing sites such as Kickstarter.com and
Crowdfunder.com reach out to a wide community
online to get funding and advice
iii. Community
a. The community provides supports that can help
prevent or reduce the level or risk for a new business
b. An incubator is a facility that houses the new business
and provides essential services. New businesses are
expected to develop and leave the facility often within
18 months of founding.
ii. Examples include
IM 2-7
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written consent of McGraw-Hill Education.
Ch. 2: Individual Leadership and Entrepreneurial Start-Ups
1. Office machines
2. Office Furniture
3. Telephones
4. Fax machines
5. Copy machines
6. Other maintenance needs for new
business
c. The business incubator provides essential services
to assist the new business with their start-up and
continued business needs
iii. Receptionist at a centralized location helps to
build credibility for the new business
iv. Offers space to tenant firms at subsidized rates
v. Small Business Assistance Centers are centers
that are funded by the Small Business
Administration (SBA) that advise individuals
with their new business at no cost.
1. Assist the firm with funding resources
2. Counseling services provided by retired
executives
iv. Financial support
a. Entrepreneurs must understand the cost/benefit of
the new business
b. Entrepreneurs must utilize financial resources
c. Entrepreneurs must be able to have a broad
understanding of what financial resources are
available and a realistic idea of what will be needed to
expend.
6. Form a Business Doing What You Like (text page 36)
Learning Objective 2-5: Explain how you can evaluate those things that you
enjoy the most and discover how they may lead to business opportunities
A. The successful entrepreneurs enjoy their work
B. The time/reward relationship in a new business involves more than a
financial reward
7. For Review (text page 37)
IM 2-8
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