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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
