MGT 191

Chapter 1
Nature and Development
of Entrepreneurship

Hisrich
Peters
Shepherd
Nature and Development of
Entrepreneurship
 Entrepreneurship
 From two French words: Entre and Prendre
 Entre means “to enter” or adver “between”
 Prendre means “to take”
 Entrepreneurship evolved from the earliest
period up to the present

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Nature and Development of
Entrepreneurship
 Earliest period
 Marco Polo established trade
route to Far East.
 He signed a contract with “money
person” which today are
considered as “capitalist”.
 A common contract at the time
provided to a merchant- Marco Polo
adventurer is at 22.5 percent rate

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Nature and Development of
Entrepreneurship
 Earliest period
 Capitalist – passive risk bearer;
 Merchant-adventurer take the active role in
trading, physical and emotional risks.
 Who gets most of the profit after the journey?
 CAPITALIST: 75%, while
 Merchant-adventurer: 25%

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Nature and Development of
Entrepreneurship
 Middle Ages
 Entrepreneur was used to describe both an actor
and a person who managed large production
projects
 Cleric – person in charge of great architectural
works such as castles and fortifications, abbeys,
buildings, etc.

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Nature and Development of
Entrepreneurship
 17th Century
 The connection of risk with entrepreneurship
developed in this century
 Entrepreneurs entered into contractual
arrangement with the government to perform
services or supply stipulated products.
 Contract price is fixed; any resulting profits or
losses reflected to the entrepreneurs

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Nature and Development of
Entrepreneurship
 17th Century
 John Law was allowed to establish
Banque Generale, three-quarters of
the capital is comprised of
government bills and government-
accepted notes, the first central bank John Law
in France
 Exclusive franchise to trade in the
New World – Mississippi Company
 It led to Law’s downfall when he
attempted to push the company’s
stock price higher than the value of its
asset (Mississippi Company Bubble) 1-7
Nature and Development of
Entrepreneurship
 18th Century
 The person with capital is differentiated with the
person needing the capital.
 The entrepreneur was distinguished from capital
provider (present: venture capitalist)
 Differentiation occurred because of the
INDUSTRIALIZATION throughout the world

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Nature and Development of
Entrepreneurship
 18th Century
 Eli Whitney financed his cotton gin with
expropriated British crown property.

Eli Whitney Cotton Gin

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Nature and Development of
Entrepreneurship
 18th Century
 Thomas Alva Edison raised capital from
private sources to develop and experiment in
the complex field of electricity and chemistry.

Thomas Alva Edison

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Nature and Development of
Entrepreneurship
 18th Century
 Thomas Alva Edison and Eli Whitney are
considered as capital users (entrepreneurs), not
providers (venture capitalist)
 19th Century
 The notion of an entrepreneur as an
innovator was established
 The concept of innovation and newness is an
integral part of entrepreneurship

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Nature and Development of
Entrepreneurship
 19th Century
 Innovation is the act of introducing something
new, is the most difficult tasks for
entrepreneurs.
 The ability to create, conceptualize, and
understand all forces at work.
 Newness can consist of anything from a new
product to new distribution system to a method
fro developing a new organizational structure.

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Nature and Development of
Entrepreneurship
 19th Century
 Andrew Carnegie invented nothing but instead
adapted and developed a new technology into
products to achieve economic vitality.
 He established the AMERICAN steel industry.

Andrew Carnegie
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Nature and Development of
Entrepreneurship
 Entrepreneur –
 An individual who takes initiative to bundle
resources in innovative ways and is willing to
bear the risk and/or uncertainty to act.
 French word which literally translated “between-
taker” or “go-between”
 Being an entrepreneur today:
 Involves creation process.
 Requires devotion of time and effort.
 Involves rewards of being an entrepreneur.
 Requires assumption of necessary risks.
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Nature and Development of
Entrepreneurship
 Entrepreneurship
 According to Albert Shapero, there is agreement
that we are talking about a kind of behavior that
includes
 (1) initiative taking,
 (2) the reorganizing of social and economic
mechanism to turn resources and situations to
practical account,
 (3) acceptance of risks or failure.

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Nature and Development of
Entrepreneurship
 Entrepreneurship
 A process of creating something different with
value by devoting the necessary time and effort,
assuming the accompanying financial, psychic,
and social risks, and receiving the resulting
rewards of monetary and personal satisfaction
and independence (Hisrich and Brush, 1985).

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The Entrepreneurial Decision
Process
 Deciding to become an entrepreneur by
leaving the present activity
 Thousands, and even millions, of companies and
business are formed each year despite of
inflation, high interest rates, lack of
infrastructure, economic uncertainty and high
profitability of failure.
 Approximately, 70 to 80% fails.
 The entrepreneurial decision process entails
a movement, from something to something
– a movement from a present lifestyle to
forming a new enterprise. 1-19
The Entrepreneurial Decision
Process
 Change from present lifestyle
 Decision to leave a career or lifestyle is not
easy.
 It takes great deal of courage to change and do
something new and different
1. Work environment (R&D and Marketing)
 While working in a technology (Research and
Development), individuals develop new product
ideas and process.
 Often leaves the company if these ideas are not
welcomed by the company.
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The Entrepreneurial Decision
Process
1. Work environment (R&D and Marketing)
 Similarly, individuals in the marketing become
familiar with the markets and customers unfilled
wants and needs, they frequently leave to start
a new enterprise to fill these needs.

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The Entrepreneurial Decision
Process
2. Disruption (Negative force)
 A significant number of companies are formed
by individuals who retired, who relocated due to
a move a family member in a dual career family
or who have been fired.
 There is possibly no greater force than personal
dislocation to galvanize a personal’s will to act.

 The decision to start a new company

occurs when an individual perceives
that forming a new enterprise is both
desirable and possible. 1-23
The Entrepreneurial Decision
Process
 Desirability of new venture formation
 Aspect of a once situation that make desirable
to start a new enterprise are culture, subculture,
family, teachers and peers.

 Possibility of new venture formation

 Factors making possible to create a new venture
are government, background, marketing, role
models, financing

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The Entrepreneurial Decision
Process

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Thank you for your attention! 

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