978-1305500891 Chapter 9 Lecture Note

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CHAPTER 9

GROWING AND INTERNATIONALIZING

THE ENTREPRENEURIAL FIRM

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. define entrepreneurship, entrepreneurs, and entrepreneurial firms.

2. identify the institutions and resources that affect entrepreneurship.

3. discuss three characteristics of a growing entrepreneurial firm.

4. understand how international strategies for entering foreign markets are different from

those for staying in domestic markets.

5. participate in two debates concerning entrepreneurship.

6. draw implications for action.

GENERAL TEACHING SUGGESTIONS

This chapter should be of practical value to those who are currently entrepreneurs, those who

plan to be, and those who dream of being entrepreneurs. For those who have much different

career plans, point out that not all who become entrepreneurs do so early in their life. Some wait

until they have retired and have a stable retirement income (useful during the first three to five

years in which the firms may be tiny) and have the savings needed to launch a venture.

OPENING CASE DISCUSSION GUIDE

Sriracha Spices Up American Food

David Tran, a Vietnamese-Chinese immigrant, was an entrepreneur who saw an opportunity to

provide a product that wasn’t available in U.S. stores. Tran manufactured Sriracha sauce. Tran

initially sold the spicy sauce in Asian supermarkets and restaurants. Its popularity and its market

grew. Today, it can be purchased at any Wal-Mart in America.

CHAPTER OUTLINE: KEY CONCEPTS AND TERMS

Sections I through VI of Chapter 9

I. ENTREPRENEURSHIP AND ENTREPRENEURIAL FIRMS

1. Key Concept

Entrepreneurship is the identification and exploration of previously unexplored

opportunities. Entrepreneurs may be founders and owners of new businesses or

managers of existing firms. Entrepreneurial firms in this chapter are defined as SMEs

that employ fewer than 500 people.

2. Key Terms

Entrepreneur is a founder and/or owner of new businesses or a manager of an

existing firm, who identifies and exploits new opportunities.

Entrepreneurship is the identification and exploitation of previously unexplored

opportunities.

International entrepreneurship is a combination of innovative, proactive, and

risk-seeking behavior that crosses national borders and is intended to create wealth in

organizations.

Small and medium-sized enterprise (SME) is a firm with fewer than 500

employees in the United States, or with fewer than 250 employees in the European

Union.

II. INSTITUTIONS, RESOURCES AND ENTREPRENEURSHIP

1. Key Concept

Institutions—both formal and informal—enable and constrain entrepreneurship around

the world. Resources and capabilities determine entrepreneurial success and failure.

2. Key Term

None

III. GROWING THE ENTREPRENEURIAL FIRM

1. Key Concept

Characteristics of a growing entrepreneurial firm include (1) growth, (2) innovation, (3)

financing, and (4) internationalization.

2. Key Term

Born global firm (international new venture) is a start-up company that attempts

to do business abroad from inception.

Microfinance is a practice to provide tiny loans ($50–$300) to entrepreneurs in

developing countries that would lift them out of poverty.

Venture capitalist (VC) is an investor who provides risk capital for early stage

ventures.

IV. INTERNATIONALIZING THE ENTREPRENEURIAL FIRM

1. Key Concepts

Entrepreneurial firms can internationalize by entering foreign markets through entry

modes such as (1) direct exports, (2) franchising/licensing, and (3) foreign direct

investment.

Entrepreneurial firms can also internationalize without venturing abroad by (1) exporting

indirectly, (2) becoming suppliers for foreign firms, (3) becoming licensees or

franchisees of foreign brands, (4) becoming alliance partners of foreign direct investors,

and (5) harvesting and exiting through sell-offs.

2. Key Terms

Direct export is the sale of products made by firms in their home country to

customers in other countries.

Export intermediary is a firm that performs an important middleman function by

linking domestic sellers and foreign buyers that otherwise would not have been

connected.

Franchising is Firm A’s agreement to give Firm B the rights to use A’s proprietary

assets for a royalty fee paid to A by B. This is typically done in service industries.

Indirect export is a way to reach overseas customers by exporting through

domestic-based export intermediaries.

Letter of credit (L/C) is a financial contract that states that the importer’s bank will

pay a specific sum of money to the exporter upon delivery of the merchandise.

V. DEBATES AND EXTENSIONS

1. Key Concept

Debates include (1) traits versus institutions and (2) slow versus rapid

internationalization.

2. Key Terms

Serial entrepreneur is an entrepreneur who starts, grows, and sells several

businesses throughout a career.

Stage model is a model of internationalization that portrays the slow step-by-step

(stage-by-stage) process an SME must go through to internationalize its business.

VI. MANAGEMENT SAVVY

1. Key Concept

Institutions that facilitate entrepreneurship development—both formal and informal—are

important, so entrepreneurs need to proactively support them. When internationalizing,

the savvy entrepreneur should be bold but not too bold.

2. Key Terms

None