978-1259912191 Chapter 2 Lecture Notes

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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

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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

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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

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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

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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

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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

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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

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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)

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