CHAPTER 1
Understanding Entrepreneurship
SUMMARY AND AUTHOR’S NOTE
This chapter sets the stage for the course by explaining the role of entrepreneurship in a changing
world economy. It also deals with the industry and business formation processes and how to
CHAPTER OBJECTIVES
After reading this chapter, students will be able to:
• Define entrepreneurship.
CHAPTER OUTLINE
OPENING CASE: Amoeba Music: David Can Still Beat Goliath
I. The Role of Entrepreneurship—a description of the entrepreneurial process
• Figure 1.1—The New Venture Creation Process
a. Economic Growth—the relationship between entrepreneurship and technological
change
2 Chapter 1: Understanding Entrepreneurship
II. The Nature of Entrepreneurial Startups—characteristics of entrepreneurial ventures
a. New Business Formation—the process of new venture formation
SOCIAL ENTREPRENEURSHIP: MAKING MEANING—Salesforce.com’s Culture Is
About Philanthropy
III. A Brief History of the Entrepreneurial Revolution—the development of
entrepreneurship in the United States
• Figure 1.5—The Entrepreneurial Evolution
a. The Decades of Entrepreneurship—growth of entrepreneurship since the 1960s
IV. Entrepreneurial Trends—current trends in entrepreneurship
a. Global Economic Turmoil—the effects of economic downturn and global recession
RELEVANT CASE STUDIES
Instructor notes for the following cases can be found at the end of this manual.
Case 3 HomeRun.com
Case 7 1–800–Autopsy
ANSWERS TO QUESTIONS ON KEY ISSUES
1. Define the term entrepreneurship.
Entrepreneurship is a mindset or way of thinking that is opportunity-focused, innovative,
2. As the mayor of your community, what incentives would you put into place to encourage
entrepreneurship?
Students’ answers will vary, but they may suggest tax incentives for locating the business
3. Describe the current environment for entrepreneurship. How does it differ from the
environment pre-2000?
Since the early 1980s, when entrepreneurship was identified as a driver of economic
4. Which of the entrepreneurial trends discussed in the chapter will have the biggest impact,
and why?
Most students will probably say the Internet has had the biggest impact. The seismic shift
toward Internet technology and social networking will produce a multitude of new
5. How do entrepreneurial ventures differ from small businesses?
Schumpeter described entrepreneurs as equilibrium disrupters who introduce new products
4 Chapter 1: Understanding Entrepreneurship
SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP
1. Interview an entrepreneur in an industry or business that interests you. Focus on how and
why this entrepreneur started his or her business. Be sure to include the following:
a. Contact information
b. The entrepreneur’s name, address, title, company name, and phone number
h. Describe the opportunity that the entrepreneur decided to pursue and the process the
entrepreneur used to evaluate the opportunity.
i. How did the entrepreneur evaluate the opportunity?
j. What criteria did the entrepreneur use to decide whether to pursue the opportunity?
Chapter 1: Understanding Entrepreneurship 5
2. Analyze how the factors in Question 1 affect this entrepreneur’s success.
Students will have a natural tendency to want to focus on the business, so you will have
3. Visit your local Chamber of Commerce and use an Internet search engine to discover
how many of the major entrepreneurial trends discussed in the chapter are reflected in