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Unit 9: Entrepreneurship and Interpersonal Communication

9.1 Entrepreneurship Notes

Entrepreneurship is the act of being an entrepreneur, which can be defined as “one who
undertakes innovations, finance and business acumen in an effort to transform innovations
into economic goods”. This may result in new organizations or may be part of revitalizing
mature organizations in response to a perceived opportunity. The most obvious form of
entrepreneurship is that of starting new businesses (referred as Startup Company); however,
in recent years, the term has been extended to include social and political forms of entrepreneurial
activity. When entrepreneurship is describing activities within a firm or large organization it
is referred to as intra-preneurship and may include corporate venturing, when large entities
spin-off organizations. According to Paul Reynolds, entrepreneurship scholar and creator of
the Global Entrepreneurship Monitor, “by the time they reach their retirement years, half of
all working men in the United States probably have a period of self-employment of one or
more years; one in four may have engaged in self-employment for six or more years. Participating
in a new business creation is a common activity among U.S. workers over the course of their
careers.” And in recent years has been documented by scholars such as David Audretsch to
be a major driver of economic growth in both the United States and Western Europe.
Entrepreneurial activities are substantially different depending on the type of organization
and creativity involved. Entrepreneurship ranges in scale from solo projects (even involving
the entrepreneur only part-time) to major undertakings creating many job opportunities. Many
“high value” entrepreneurial ventures seek venture capital or angel funding (seed money) in
order to raise capital to build the business. Angel investors generally seek annualized returns
of 20–30% and more, as well as extensive involvement in the business. Many kinds of organizations
now exist to support would-be entrepreneurs including specialized government agencies, business
incubators, science parks, and some NGOs. In more recent times, the term entrepreneurship
has been extended to include elements not related necessarily to business formation activity
such as conceptualizations of entrepreneurship as a specific mindset (see alsoentrepreneurial
mindset) resulting in entrepreneurial initiatives e.g., in the form of social entrepreneurship,
political entrepreneurship, or knowledge entrepreneurship have emerged.

Notes The entrepreneur is a factor in microeconomics, and the study of entrepreneurship
reaches back to the work of Richard Cantillon and Adam Smith in the late 17th
and early 18th centuries, but was largely ignored theoretically until the late 19th
and early 20th centuries and empirically until a profound resurgence in business
and economics in the last 40 years.

In the 20th century, the understanding of entrepreneurship owes much to the work of economist
Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig
von Mises and Friedrich von Hayek. In Schumpeter, an entrepreneur is a person who is
willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship
employs what Schumpeter called “the gale of creative destruction” to replace in whole or in
part inferior innovations across markets and industries, simultaneously creating new products
including new business models. In this way, creative destruction is largely responsible for the
dynamism of industries and long-run economic growth. The supposition that entrepreneurship
leads to economic growth is an interpretation of the residual inendogenous growth theory and
as such is hotly debated in academic economics. An alternate description posited by Israel
Kirzner suggests that the majority of innovations may be much more incremental improvements
such as the replacement of paper with plastic in the construction of a drinking straw.

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