Who are Entrepreneurs?

Entrepreneurs are individuals who recognize opportunities where others see chaos, contradiction, and
confusion. They are aggressive catalysts of change within the marketplace.

Whatever their passion, entrepreneurs are the heroes of today's marketplace.

They start companies and create jobs at a breakthrough pace. The global economy has been revitalized
because of their efforts, and the world now embraces free enterprise as the most significant force for
economic development. The passion and drive of entrepreneurs moves the world of business forward.

They challenge the unknown and continuously create breakthroughs for the future.

One anonymous quote sums up the realities of entrepreneurs:

"Anyone [can be an entrepreneur] who wants to experience the deep, dark canyons of uncertainty and
ambiguity; and who wants to walk the breathtaking highlands of success. But I caution, do not plan to
walk the latter, until you have experienced the former."

The terms entrepreneur and small-business owner sometimes are used interchangeable. Although some
situations encompass both terms, it is important to note the the difference in the titles.

SMALL BUSINESSES are independently owned and operated, are not dominant in their fields, and usually
do not engage in many new or innovative practices. They may never grow large, and the owners may
prefer a more stable and less aggressive approach to running these businesses; in other words, they
manage their businesses by expecting stable sales, profits, and growth. Because small firms include
those purchased as already established businesses as well as franchises, small-business owners can be
viewed as managers of small businesses. Common examples of small business around us are sari-sari
stores, beauty parlors, water refilling stations, etc.

ENTREPRENEURIAL VENTURES are those for which the entrepreneur's principal objectives are
innovation, profitability, and growth. Thus, the business is characterized by innovative strategic practices
and sustainable growth. Entrepreneurs and their financial backers are usually seeking rapid growth and
immediate profits. They may even seek the sale of their businesses if there is a potential for large capital
gains. Thus, entrepreneurs may be viewed as having a different perspective from small-business owners
on the development of their firms. An example of an entrepreneurial venture is Mang Inasal. The
business was doing so well as a venture and then later, it was sold to Jollibee because the owner of
Mang Inasal saw better capital gains if he sells it to Jollibee. Now, the entrepreneur who created Mang
Inasal is in the real estate business.

Entrepreneurship is more than the mere creation of business. Although that is certainly an important
facet, it is not the complete picture. The characteristics of seeking opportunities, taking risks beyond
security, and having the tenacity to push an idea through to reality combined into a special perspective
that permeates entrepreneurs.

The term "entrepreneurial mindset" represents the cognition and commitment to view the world with
an innovative perspective. This composes the entrepreneurial potential in every individual. This mindset
can be exhibited inside or outside an organization, in for-profit or not-for-profit enterprises, and in
business or nonbusiness activities for the purpose of bringing forth creative ideas. Thus,
entrepreneurship is an integrated concept that permeates an individual's business in an innovative
manner.

It is the mindset that has revolutionized the way business is conducted in every level and in every
country. It is clear that the world has embraced entrepreneurship and innovation, and the way we view
business will never be the same. So it is. The entrepreneurial revolution has taken hold in an economic
sense, and the entrepreneurial mindset is the dominant force.

The word entrepreneur is derived from the French entreprendre, meaning "to undertake." The
entrepreneur is one who undertakes to organize, manage, and assumes the risks of a business.
Today, an entrepreneur is an innovator or developer who recognizes and seizes opportunities; converts
those opportunities into workable/marketable ideas; adds value through time, effort, money, or skills;
assumes the risks of the competitive marketplace to implement these ideas; and realizes the rewards
from these efforts.

Here are some important points in the evolution of Entrepreneurship:

The recognition of entrepreneurs dates back to 18th century France, when an economist Richard
Cantillon associated the risk-bearing activity in the economy with the entrepreneur. The Industrial
Revolution was evolving in England during the same period, with the entrepreneur playing a visible role
in risk taking and the transformation of resources (this was the time of inventions).

The association of entrepreneurship and economics have long been the accepted norm. In fact, until the
1950s, the majority of definitions and references to entrepreneurship had come from economists. For
example, the aforementioned Cantillon (1725), the French economist Jean Baptiste Say (1803), and
twentieth-century economist Joseph Schumpeter(1934) all wrote about entrepreneurship and its impact
on economic development. Since that time, researchers have continued to try to describe or define
what entrepreneurship is all about. Following are some examples:

Entrepreneurship...consists in doing that are not generally done in the ordinary course of business
routine; it is essentially a phenomenon that comes under the wider aspect of leadership.

Entrepreneurship, at least in all nonauthoritarian societies, constitutes a bridge between society as a

whole, especially in the non-economics aspects of that society, and the profit-oriented institutions
established to take advantage of its common endowments and to satisfy, as best they can, its economic
desires.

In...entrepreneurship, there is agreement that we are talking about a kind of behavior that includes: (1)
initiative thinking, (2) the organizing or reorganizing of social economic mechanisms to turn resources
and situations to practical account, and (3) the acceptance of risk of failure.
After reviewing the evolution of entrepreneurship and examining its varying definitions, Robert C.
Ronstadt put together a summary description:

Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by
individuals who assume the major risks in terms of equity, time, and/or career commitment of providing
value for some product or service. The product or service itself may or may nor be new or unique but
value must somehow be infused by the entrepreneur by securing and allocating the necessary skills and
resources.

Entrepreneurship as a topic for discussion and analysis was introduced by the economists of the 18th
century, and it continued to attract the interest of economists in the 19th century. In the 20th century,
the word entrepreneurship became synonymous -- or at least closely linked -- with free enterprise and
capitalism. Also, it was generally recognized that entrepreneurs serve as agents of change, provide
creative, innovative ideas for business enterprises; and help businesses grow and become profitable.

In recognizing the importance of the evolution of entrepreneurship in the 21st century, we have
developed an integrated definition that acknowledges the critical factors needed for this phenomenon:

Entrepreneurship is a dynamic process of vision, change, and creation. It requires an application of

energy and passion toward the creation and implementation of innovative ideas and creative solutions.
Essential ingredients include the willingness to take calculated risks -- in terms of time, equity, or career;
the ability to formulate an effective venture team; the creative skill to marshal needed resources; the
fundamental skill of building a solid business plan; and, finally, the vision to recognize opportunity where
others see chaos, contradiction, and confusion.
MYTHS

Throughout the years, many myths have arisen about entrepreneurship--primarily because of lack of
research on the subject. As many researchers in the field have noted, the study of entrepreneurship is
till emerging, and thus "folklore" tends to prevail until it is dispelled with contemporary research
findings. Ten of the most notable myths are as follows:

Entrepreneurs are Doers, Not Thinkers

Entrepreneurs are Born, Not Made

Entrepreneurs are Always Inventors

Entrepreneurs are Academic and Social Misfits

Entrepreneurs Must Fit the Profile

All Entrepreneurs Need is Money

All Entrepreneurs Need is Luck

Entrepreneurship is Unstructured

Most Entrepreneurial Initiatives Fail

Entrepreneurs are Extreme Risk Takers

To understand the nature of entrepreneurship and better recognize its emerging importance, it is
important to consider some of its theory development.

Theory development is what drives a field of study. Entrepreneurship theory has been developing for
the last 50 years, and it is apparent that the field is growing. We need to understand some of that
development to better appreciate the discipline of entrepreneurship. The study of the basic theories in
entrepreneurship also helps to form a foundation upon which a student can build an understanding of
the process and practice of entrepreneurship.

A theory of entrepreneurship is a verifiable and logically coherent formulation of relationships, or

underlying principles, that either explain entrepreneurship, predict entrepreneurial activity (e.g. by
characterizing conditions that are likely to lead to new profit opportunities or to the formation of new
enterprises), or provide normative guidance (that is, prescribe the right action in particular
circumstances).

The macro view of entrepreneurship presents a broad array of factors that relate to success or failure in
contemporary entrepreneurial ventures. This array includes external processes that are sometimes
beyond the control of the individual entrepreneur, for they exhibit a strong external locus of control ( a
person with an external locus of control is more likely to believe that his or her fate is determined by
chance or outside forces that are beyond their own personal control). Three schools of entrepreneurial
thought represent a breakdown of the macro view:

Environmental School of Thought

Financial/Capital School of Thought

Displacement School of Thought

THE ENVIRONMENTAL SCHOOL OF THOUGHT

The environmental school of thought deals with the external factors that affect a potential
entrepreneur's lifestyle. These can be positive or negative forces in the molding of the entrepreneurial
desires. The focus is on institutions, values, and mores that--grouped together--form a socio-political
environmental framework that strongly influences the development of entrepreneurs. Ex: an
environmental factor that often affects the potential development of entrepreneurs is their social group.
The atmosphere of friends and relatives can influence the desire to become and entrepreneur.
THE FINANCIAL/CAPITAL SCHOOL OF THOUGHT

The financial/capital school of thought is based on the capital-seeking-process--the search for seed and
growth capital in the entire focus of this entrepreneurial emphasis. Thus, we can conclude that an
individual is influenced or pushed towards entrepreneurship by the availability and/or non-availability of
funds.

THE DISPLACEMENT SCHOOL OF THOUGHT

The displacement school of thought focuses on the negative side of group phenomena, in which
someone feels out of place--or is literally "displaced"--from the group. It holds that the group hinders a
person from advancing or eliminates certain critical factors needed for the person to advance. As a
result, the frustrated individual will be projected into an entrepreneurial pursuit out of his or her own
motivation to succeed. Three major types of displacement illustrate this school of thought:

Political displacement. Caused by factors ranging from and entire political regime that rejects free
enterprise (international environment) to governmental regulations, and policies that limit or redirect
certain industries.

Cultural displacement. Deals with social groups precluded from professional fields. Ethnic background,
religion, race, and sex are examples of factors that figure in the minority experience. This experience
turns various individuals away from standard business professions and toward entrepreneurial ventures.
Economic displacement. Concerned with the economic variations of recession and depression. Job loss,
capital shrinkage, or simply "bad times" can create the foundation for entrepreneurial pursuit, just as it
can affect venture development and reduction.

The micro view of entrepreneurship examines the factors that are specific to entrepreneurship and are
part of the internal locus of control (this is viewing events as the result of one's own action). The
potential entrepreneur has the ability to control, to direct or adjust the outcome of each major influence
in this view. Unlike the macro approach, which focuses on events from the outside looking in, the micro
approach concentrates on specifics from the inside looking out. These are the most widely recognized:

Entrepreneurial Trait School of Thought

Venture Opportunity School of Thought

Strategic Formulation School of Thought

THE ENTREPRENEURIAL TRAIT SCHOOL OF THOUGHT

This approach is grounded in the study of successful people who tend to exhibit similar characteristics
that, if copied, would increase success opportunities for the emulators. For example, achievement,
creativity, determination, and technical knowledge are four factors that usually are exhibited by
successful entrepreneurs. This reasoning promotes the belief that certain traits established and
supported early in life will lead eventually to entrepreneurial success.
THE VENTURE OPPORTUNITY SCHOOL OF THOUGHT

This focuses on the opportunity aspect of venture development. The search for idea sources, the
development of concepts, and the implementation of the venture opportunities are the important
interest areas for this school. Creativity and market awareness are viewed as essential. Also, developing
the right idea at the right time for the right market niche is the key to entrepreneurial success.

Another development from this school of thought is the corridor principle: New pathways or
opportunities will arise that lead entrepreneurs in different directions. The ability to recognize these
opportunities when they arise and to implement the necessary steps for action are key factors.
Proponents of this school of thought believe that proper preparation in the interdisciplinary business
segments will enhance an entrepreneur's ability to recognize venture opportunities.

THE STRATEGIC FORMULATION SCHOOL OF THOUGHT

The strategic formulation school of thought approach to entrepreneurial theory emphasizes the planning
process in successful venture development.

One way to view strategic formulation is as a leveraging of unique elements. Unique markets, unique
people, unique products, or unique resources are identified, used, or constructed into effective venture
formations.

Unique markets (Mountain versus mountain gap strategies), which refers to identifying major market
segments as well as interstice (in-between) markets that arise from larger markets.

Unique people (Great chef strategies), which refers to the skills or special talents of one or more
individuals around whom the venture is built.

Unique products (Better widget strategies), which refers to innovations that encompass new or existing
markets.
Unique resources (Water well strategies), which refers to the ability to gather or harness special
resources (land, labor, capital, raw materials) over the long term.

Another way to examine the activities involved in entrepreneurship is through

a process approach. Although numerous methods are available, only two of them will
be presented.

INTEGRATIVE APPROACH

A more integrative picture of the entrepreneurial process is provided by Morris,

Lewis, and Sexton (see figure below). This model is built around the concepts of input
to the entrepreneurial process and outcomes from the entrepreneurial process.

Researchers Jonathan Levie and Benyamin B. Lichtenstein developed a dynamic state

model that depicts ventures being dependent on their environment for survival. A
dynamic state is a network of relationships and systems that convert opportunity
tension into value for a venture's customers, generating new resources that maintain
the dynamic state.

This model is a more process-oriented view that incorporates an array of individual,

organizational, and environmental elements.

The dynamic states model is more optimistic for entrepreneurs suggesting that
smaller and newer firms have more flexibility in making ongoing changes. Thus, it may
be easier for new ventures to create a high degree of interdependence between
themselves and their environment, enabling entrepreneurs to organize for the
current and anticipated demands of the market.
If past generations dreamed of the prestige and perks that come with the executive
suit of a major corporation, the dream of the millennial generation (also known as
Generation Y) appears quite different. They believe that career success will require
them to be more nimble, independent, and entrepreneurial than past generations.

Here are some facts which resulted from conducted researches:

• Only 13% of millennials said their career goals involves climbing the corporate
ladder to become a CEO or president.
• By contrast, only 2/3 (67%) said their goal involves starting their onw business.
• Millions of individuals younger than 35 are actively trying to start businesses.
• 1/3 of new entrepreneurs are younger than 30.
• Large numbers of 18- to 30-year-olds study entrepreneurship in business
schools.
• Major universities are devoting more resources to entrepreneurship.
• The success stories of your entrepreneurs are increasing!

Frank Carney, one of the founders of Pizza Hut, Inc, once described entrepreneurs as the cornerstone of
the American enterprise system and the self-renewing agents for our economic environment.

Entrepreneurs--normally defined as "risk takers" in new-venture creations--are uniquely optimistic, hard-

driving, committed individuals who derive great satisfaction from being independent.

Starting a new business requires more than just an idea; it requires a special person, an entrepreneur,
who combines sound judgement and planning with risk taking to ensure the success of his or her own
business.

• Entrepreneurs driven by an intense commitment and determined perseverance, work very hard.

• They are optimists who see the cup as half full rather than half empty.

• They strive for integrity.

• They burn with the competitive desire to excel.

• They use failure as a tool for learning.

• They have enough confidence in themselves to believe that they personally can make a major
difference in the final outcome of their ventures
The substantial failure rate of new ventures attests to the difficulty of entrepreneurship. Inexperience
and incompetent management are the main reasons for failure.

But what are the factors for success? Do they apply to all components of entrepreneurship?

Opportunity orientation is the constant awareness of opportunities that exist in everyday life. Successful
entrepreneurs start with the opportunity and let their understanding of it guide other important
decisions. They are goal-oriented in their pursuit of opportunities.

Setting high but attainable goals enables them to focus their energies, to selectively sort out
opportunities, and to know when to say "no."

Their goal orientation also helps them to define priorities and provides them with measures of how well
they are performing.

Effective entrepreneurs often are described as quick learners. Unlike many people, however, they also
have a strong desire to know how well they are doing and how they might improve their performance.

In attempting to to make these determinations, they actively seek out and use feedback.

Feedback is also central to their learning from mistakes and setbacks.

Successful entrepreneurs are not gamblers--they are calculated risk takers. When they decide to
participate in a venture, they do so in a very calculated, carefully thought-out manner.

They do everything possible to get the odds in their favor, and they often avoid taking unnecessary risks.

These strategies include getting others to share inherent financial and business risks with them--for
example, by persuading partners and investors to put up money, creditors to offer special terms, and
suppliers to advance merchandise.
Entrepreneurial passion is a fundamental emotional experience for entrepreneurs. Researcher Melissa
S. Cardon has devoted much of her efforts on examining this element of the entrepreneurial mind-
set. She has found that entrepreneurial passion is an expression constructed by the entrepreneur to
provide a coherent understanding to an emotional experience of intense arousal and energy
mobilization involving an entrepreneur and his or her venture.

Moreover, entrepreneurial passion is characterized by a discrete emotion that is quite intense being
described as an underlying force that fuels our strongest emotions, or the intensity felt when engaging in
activities that are of deep interest, or the energy that enables entrepreneurs to achieve peak
performance.

Thus, entrepreneurial passion is recognized as a fundamental component of the entrepreneurial mind-

set.

Starting or buying a new business involves risk. The higher the rewards, the greater the risks
entrepreneurs usually face. This is why entrepreneurs tend to evaluate risk very carefully.

In an attempt to describe the risk-taking activity of entrepreneurs, researchers developed a typology of

entrepreneurial styles.
The model above illustrates these classifications in terms of the financial risk endured when a new
venture is undertaken. In the model, the financial risk is measured against the level of profit motive (the
desire for monetary gain or return from the venture), coupled with the type of activity seeking refers to
other activities associated with entrepreneurship, such as independence or the work of the venture
itself. The thrust of this theory argues that entrepreneur vary with regard to the relationship between
risk and financial return. This typology highlights the need to explore within economic theory the styles
of entrepreneurial motivations that deviate from the styles most characteristic of the rational person.

"If different entrepreneurial styles exist, then not every person who founds a new business enterprise
does so by seeking to minimize financial risk and maximize financial return. Models of organization
formation would thus have to be adjusted for differences among those who form organizations." Thus,
not all entrepreneurs are driven solely by monetary gain, and the level of financial risk cannot be
completely explained by profit opportunity. Entrepreneurial risk is a complex issue that requires far
more than a simple economic risk-versus-return explanation.

It should be noted that "people who successfully innovate and start businesses come in all shapes and
sizes. But they do have a few things others do not. In the deepest sense, they are willing to accept risk
for what they believe in. They have the ability to cope with a professional life riddled by ambiguity, a
consistent lack of clarity. Most have a drive to put their imprint on whatever they are creating. And
while unbridled ego can be a destructive thing, try to find an entrepreneur whose ego isn't wrapped up
in the enterprise."

Entrepreneurs face a number of different types of risk.

FINANCIAL RISK

In most new ventures, the individual puts a significant portion of his or her savings or other resources at
stake, which creates a serious financial risk. This money or these resources will, in all likelihood, be lost if
the venture fails. The entrepreneur may also be required to sign personally on company obligations that
far exceed his or her personal net worth. The entrepreneur is thus exposed to personal
bankruptcy. Most people are unwilling to risk their savings, house, property, and salary to start a new
business.

CAREER RISK

A question frequently raised by would-be entrepreneurs is whether they will be able to find a job or go
back to their old job, should their venture fail. This career risk is a major concern to managers who have
a secure organizational job with a high salary and a good benefit package.
 FAMILY & SOCIAL RISK

Starting a new venture requires much of the entrepreneur's energy and time, which can in turn create a
family and social risk. Consequently, his or her other commitments may suffer. Entrepreneurs who
are married, and especially those with children, expose their families to the risks of an incomplete
family experience and the possibility of permanent emotional scars. In addition, old friends may vanish
eventually because of missed get-togethers.

PSYCHIC RISK

The psychic risk may be the greatest risk to the well-being of the entrepreneur. Money can be replaced;
a new house can be built; spouse, children, and friends usually can adapt. But some entrepreneurs who
have suffered financial catastrophes have been unable to bounce back, at least not immediately. The
psychological impact has proven to be too severe for them.
Some of the most common entrepreneurial goals are independence, wealth, and work
satisfaction. Research studies of entrepreneurs show that those who achieve these goals often pay a
high price. A majority of entrepreneurs surveyed had back problems, indigestion, insomnia, or
headaches. To achieve their goals, however, these entrepreneurs were willing to tolerate these effects of
stress. The rewards justified the costs.

What is entrepreneurial stress?

In general, stress can be viewed as a function of discrepancies between a person's expectations and
ability to meet demands, as well as discrepancies between the individual's expectations and
personality. If a person is unable to fulfill role demands, stress occurs. When entrepreneurs' work
demands and expectations exceed their abilities to perform as venture initiators, they are likely to
experience stress.

One researcher has pointed out how entrepreneurial roles and operating environments can lead to
stress. Initiating and managing a business requires taking significant risk, These risks may be described
as financial, career, family, social, or psychic. Entrepreneurs must also engage in constant
communication activities--interacting with relevant external constituencies such as customers, suppliers,
regulators, and accountants--which can be stressful.

Lacking the depth of resources, entrepreneurs must bear the cost if their mistakes while playing a
multitude of roles, such as salesperson, recruiter, spokesperson, and negotiator. These simultaneous
demands can lead to role overload. Owning and operating a business requires a large commitment of
time and energy, as noted previously, often at the expense of family and social activities. Finally,
entrepreneurs often work alone or with a small number of employees and therefore lack the support
from colleagues that may be available to managers in large corporation.

In addition to roles and environment experienced by entrepreneurs, stress can result from basic
personality structure. Referred to as type A behavior, this personality structure describes people who
are impatient, demanding, and overbearing. These individuals gravitate toward heavy workloads and
find themselves completely immersed in their business demands. Some of the distinguishing
characteristics associated with type A personalities are as follows:

• Chronic and severe sense of time urgency - for instance, type A people become particularly
frustrated in traffic jams.

• Constant involvement in multiple projects subject to deadlines - Type A people take delight in
the feeling of being swamped with work.

• Neglect all aspects of life except work - these workaholics live to work rather than work to live.

• A tendency to take on excessive responsibility - often combined with the feeling that "only I am
capable of taking care of this matter."

• Explosiveness of speech and a tendency to speak faster than most people - Type A people are
prone to ranting and swearing when upset.

Thus, to better understand stress, entrepreneurs need to be aware of their particular personality as well
as the roles and operating environments that differentiate their business pursuit.
SOURCES OF STRESS

• Loneliness

• Immersion in business

• People problems

• Need to achieve

HOW TO DEAL WITH STRESS?

• Networking - one way to relieve the loneliness of running a business is to share experiences by
networking with other business owners. The objectivity gained from hearing about the triumphs
and errors of others is itself therapeutic.

• Getting away from it all - the best antidote to immersion in business, report many
entrepreneurs, is a holiday.

• Communicating with employees - entrepreneurs are in close contact with employees can readily
assess the concerns of their staffs. The personal touches often unavailable in large corporations-
-such as company-wide outings, flexible hours, and small loans to tide workers over until payday-
-are possible here. In such settings, employees often are more productive than their
counterparts in large organizations and may experience less stress due to personal touches that
are applied.

• Finding satisfaction outside the company - countering the obsessive need to achieve can be
difficult, because the entrepreneur's personality is inextricably woven into the company
fabric. Entrepreneurs need to get away from the business occasionally and become more
passionate about life itself; they need to gain new perspectives.

• Delegating - implementation of coping mechanisms requires implementation time. To gain this

time, the entrepreneur has to delegate tasks. Entrepreneurs find delegation difficult, because
they think they have to be at the business all of the time and be involved in every aspect of the
operation. But if time is to be used for alleviation of stress, appropriate delegatees must be
found and trained.

• Exercising regularly.