||It has been suggested that Leadership in Entrepreneurship be merged into this article. (Discuss) Proposed since December 2016.|
Entrepreneurship has traditionally been defined as the process of designing, launching and running a new business, which typically begins as a small business, such as a startup company, offering a product, process or service for sale or hire, and the people who do so are called 'entrepreneurs'. It has been defined as the "...capacity and willingness to develop, organize, and manage a business venture along with any of its risks in order to make a profit." While definitions of entrepreneurship typically focus on the launching and running of businesses, due to the high risks involved in launching a start-up, a significant proportion of businesses have to close, due to a "...lack of funding, bad business decisions, an economic crisis -- or a combination of all of these" or due to lack of market demand. In the 2000s, the definition of "entrepreneurship" has been expanded to explain how and why some individuals (or teams) identify opportunities, evaluate them as viable, and then decide to exploit them, whereas others do not, and, in turn, how entrepreneurs use these opportunities to develop new products or services, launch new firms or even new industries and create wealth. Recent advances stress the fundamentally uncertain nature of the entrepreneurial process, because although opportunities exist their existence cannot be discovered or identified prior to their actualization into profits. What appears as a real opportunity ex ante might actually be a non-opportunity or one that cannot be actualized by entrepreneurs lacking the necessary business skills, financial or social capital.
Traditionally, an entrepreneur has been defined as "a person who starts, organizes and manages any enterprise, especially a business, usually with considerable initiative and risk". "Rather than working as an employee, an entrepreneur runs a small business and assumes all the risk and reward of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes." Entrepreneurs tend to be good at perceiving new business opportunities and they often exhibit positive biases in their perception (i.e., a bias towards finding new possibilities and seeing unmet market needs) and a pro-risk-taking attitude that makes them more likely to exploit the opportunity.
An entrepreneur is typically in control of a commercial undertaking, directing the factors of production–the human, financial and material resources–that are required to exploit a business opportunity. They act as the manager and oversee the launch and growth of an enterprise. Entrepreneurship is the process by which an individual (or team) identifies a business opportunity and acquires and deploys the necessary resources required for its exploitation. The exploitation of entrepreneurial opportunities may include actions such as developing a business plan, hiring the human resources, acquiring financial and material resources, providing leadership, and being responsible for the venture's success or failure. Economist Joseph Schumpeter (1883–1950) stated that the role of the entrepreneur in the economy is "creative destruction"–launching innovations that simultaneously destroy old industries while ushering in new industries and approaches. For Schumpeter, the changes and "dynamic disequilibrium brought on by the innovating entrepreneur ... [are] the ‘norm’ of a healthy economy."
"Entrepreneurial spirit is characterized by innovation and risk-taking." While entrepreneurship is often associated with new, small, for-profit start-ups, entrepreneurial behavior can be seen in small-, medium- and large-sized firms, new and established firms and in for-profit and not-for-profit organizations, including voluntary sector groups, charitable organizations and government. For example, in the 2000s, the field of social entrepreneurship has been identified, in which entrepreneurs combine business activities with humanitarian, environmental or community goals.
Entrepreneurship typically operates within an entrepreneurship ecosystem which often includes government programs and services that promote entrepreneurship and support entrepreneurs and start-ups; non-governmental organizations such as small business associations and organizations that offer advice and mentoring to entrepreneurs (e.g., through entrepreneurship centers or websites); small business advocacy organizations that lobby the government for increased support for entrepreneurship programs and more small business-friendly laws and regulations; entrepreneurship resources and facilities (e.g., business incubators and seed accelerators); entrepreneurship education and training programs offered by schools, colleges and universities; and financing (e.g., bank loans, venture capital financing, angel investing, and government and private foundation grants). The strongest entrepreneurship ecosystems are those found in top entrepreneurship hubs such as Silicon Valley, New York City, Boston, Singapore, and other such locations where there are clusters of leading high-tech firms, top research universities, and venture capitalists. In the 2010s, entrepreneurship can be studied in college or university as part of the disciplines of management or business administration.
- 1 History
- 2 Definition
- 3 Entrepreneurial behaviours
- 4 Psychological make-up
- 5 Communication
- 6 Educational effects
- 7 Project entrepreneurship
- 8 Financing
- 9 Predictors of success
- 10 See also
- 11 References
- 12 Further reading
Entrepreneur (i//), is a loanword from French. First used in 1723, today the term entrepreneur implies qualities of leadership, initiative, and innovation in new venture design. Economist Robert Reich has called team-building, leadership, and management ability essential qualities for the entrepreneur. Historically the study of entrepreneurship reaches back to the work in the late 17th and early 18th centuries of Richard Cantillon and Adam Smith, which was foundational to classical economics.
In the 20th century, entrepreneurship was studied by Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. The term "entrepreneurship" was coined around the 1920s, while the loan from French of the word entrepreneur dates to the 1850s. According to Schumpeter, an entrepreneur 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 offerings across markets and industries, simultaneously creating new products and new business models. Thus, creative destruction is largely responsible for long-term economic growth. The idea that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory[clarification needed] and as such continues to be debated in academic economics. An alternate description by Israel Kirzner suggests that the majority of innovations may be incremental improvements such as the replacement of paper with plastic in the construction of a drinking straw that require no special qualities.
For Schumpeter, entrepreneurship resulted in new industries and in new combinations of currently existing inputs. Schumpeter's initial example of this was the combination of a steam engine and then current wagon making technologies to produce the horseless carriage. In this case the innovation, the car, was transformational, but did not require the development of dramatic new technology. It did not immediately replace the horse-drawn carriage, but in time, incremental improvements reduced the cost and improved the technology, leading to the modern auto industry. Despite Schumpeter's early 20th-century contributions, traditional microeconomic theory did not formally consider the entrepreneur in its theoretical frameworks (instead assuming that resources would find each other through a price system). In this treatment, the entrepreneur was an implied but unspecified actor, consistent with the concept of the entrepreneur being the agent of x-efficiency.
For Schumpeter, the entrepreneur did not bear risk: the capitalist did. Schumpeter believed that the equilibrium ideal was imperfect Schumpeter (1934) demonstrated that changing environment continuously provides new information about the optimum allocation of resources to enhance profitability some individuals acquire the new information before others, recombine the resources to gain an entrepreneurial profit. Schumpeter was of the opinion that entrepreneurs shift the Production Possibility Curve to a higher level using innovations.
Initially, economists made the first attempt to study the entrepreneurship concept in depth Richard Cantillon (1680-1734) considered the entrepreneur to be a risk taker who deliberately allocates resources to exploit opportunities in order to maximize the financial return. Cantillon emphasized the willingness of the entrepreneur to assume risk and to deal with uncertainty. Thus, he draws attention to the function of the entrepreneur, and distinguishes clearly between the function of the entrepreneur and the owner who provides the money. Alfred Marshall viewed the entrepreneur as a multi-tasking capitalist. He observed that in the equilibrium of a completely competitive market, there was no spot for "entrepreneurs" as an economic activity creator.
Dating back to the time of the medieval guilds in Germany, a craftsperson required special permission to operate as an entrepreneur was the small proof of competence (Kleiner Befähigungsnachweis), which restricted training of apprentices to craftspeople who held a Meister certificate. This institution was introduced in 1908 after a period of so-called freedom of trade (Gewerbefreiheit, introduced in 1871) in the German Reich. However, proof of competence was not required to start a business. In 1935 and in 1953, greater proof of competence was reintroduced (Großer Befähigungsnachweis Kuhlenbeck), which required craftspeople to obtain a Meister apprentice-training certificate before being permitted to set up a new business.
In the 2000s, "entrepreneurship" has been extended from its origins in for-profit businesses to include social entrepreneurship, in which business goals are sought alongside social, environmental or humanitarian goals, and even the concept of the political entrepreneur.[according to whom?] Entrepreneurship within an existing firm or large organization has been referred to as intrapreneurship and may include corporate ventures where large entities "spin off" subsidiary organizations.
Entrepreneurs are leaders willing to take risk and exercise initiative, taking advantage of market opportunities by planning, organizing, and deploying resources, often by innovating to create new or improving existing products or services. In the 2000s, the term "entrepreneurship" has been extended to include a specific mindset (see also entrepreneurial mindset) resulting in entrepreneurial initiatives, e.g. in the form of social entrepreneurship, political entrepreneurship, or knowledge entrepreneurship.
According to Paul Reynolds, founder 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." In recent years, entrepreneurship has been claimed as a major driver of economic growth in both the United States and Western Europe.
Entrepreneurial activities differ substantially depending on the type of organization and creativity involved. Entrepreneurship ranges in scale from solo, part-time projects to large-scale undertakings that involve a team and which may create many jobs. Many "high value" entrepreneurial ventures seek venture capital or angel funding (seed money) in order to raise capital for building and expanding the business. Many organizations exist to support would-be entrepreneurs, including specialized government agencies, business incubators (which may be for-profit, non-profit, or operated by a college or university), science parks, and Non-governmental organizations, which include a range of organizations including not-for-profits, charities, foundations and business advocacy groups (e.g., Chambers of Commerce). Beginning in 2008, an annual "Global Entrepreneurship Week" event aimed at "exposing people to the benefits of entrepreneurship" and getting them to "participate in entrepreneurial-related activities" was launched.[who?]
The term entrepreneur is defined as an individual who organizes or operates a business or businesses. Credit for coining this term generally goes to the French economist Jean-Baptiste Say. However, the Irish-French economist Richard Cantillon defined the term first in his Essai sur la Nature du Commerce en Général, or Essay on the Nature of Trade in General, a book William Stanley Jevons considered the "cradle of political economy". Cantillon used the term differently; biographer Anthony Breer noted that Cantillon saw the entrepreneur as a risk-taker while Say considered the entrepreneur a "planner". Cantillon defined the term as a person who pays a certain price for a product and resells it at an uncertain price: "making decisions about obtaining and using the resources while consequently admitting the risk of enterprise." The word first appeared in the French dictionary entitled "Dictionnaire Universel de Commerce" compiled by Jacques des Bruslons and published in 1723.
Relationship between small business and entrepreneurship
The term "entrepreneur" is often conflated with the term "small business" or used interchangeably with this term. While most entrepreneurial ventures start out as a small business, not all small businesses are entrepreneurial in the strict sense of the term. Many small businesses are sole proprietor operations consisting solely of the owner, or they have a small number of employees, and many of these small businesses offer an existing product, process or service, and they do not aim at growth. In contrast, entrepreneurial ventures offer an innovative product, process or service, and the entrepreneur typically aims to scale up the company by adding employees, seeking international sales, and so on, a process which is financed by venture capital and angel investments. Successful entrepreneurs have the ability to lead a business in a positive direction by proper planning, to adapt to changing environments and understand their own strengths and weakness.
The term ethnic entrepreneurship refers to self-employed, business owners who belong to racial or ethnic minority groups in the United States and Europe. A long tradition of academic research explores the experiences and strategies of ethnic entrepreneurs as they strive to integrate economically into mainstream US or European society. Classic cases include Jewish merchants and tradespeople in large U.S. cities in the 19th and early 20th centuries as well as Chinese and Japanese small business owners (restaurants, farmers, shop clerks) on the West Coast.
In the 2010s, ethnic entrepreneurship has been studied in the case of Cuban business owners in Miami, Indian motel owners of the U.S. and Chinese business owners in Chinatowns across the United States. While entrepreneurship offers these groups many opportunities for economic advancement, self-employment, and business ownership in the United States remain unevenly distributed along racial/ethnic lines. Despite numerous success stories of Asian entrepreneurs, a recent statistical analysis of U.S. census data shows that whites are more likely than Asians, African-Americans, and Latinos to be self-employed in high prestige, lucrative industries.
The USA-born British economist Edith Penrose has highlighted the collective nature of entrepreneurship. She mentions that in modern organizations, human resources need to be combined in order to better capture and create business opportunities. The sociologist Paul DiMaggio (1988:14) has expanded this view to say that "new institutions arise when organized actors with sufficient resources [institutional entrepreneurs] see in them an opportunity to realize interests that they value highly". The notion has been widely applied.
A feminist entrepreneur is an individual who applies feminist values and approaches through entrepreneurship, with the goal of improving the quality of life and wellbeing of girls and women. Many are doing so by creating ‘for women, by women’ enterprises.’ Feminist entrepreneurs are motivated to enter commercial markets by desire to create wealth and social change, based on the ethics of cooperation, equality, and mutual respect.
The entrepreneur is commonly seen as an innovator — a designer of new ideas and business processes. Management skill and strong team building abilities are often perceived as essential leadership attributes for successful entrepreneurs. Political economist Robert Reich considers leadership, management ability, and team-building to be essential qualities of an entrepreneur.
Uncertainty Perception and Risk-taking
Theorists Frank Knight and Peter Drucker defined entrepreneurship in terms of risk-taking. The entrepreneur is willing to put his or her career and financial security on the line and take risks in the name of an idea, spending time as well as capital on an uncertain venture. However, entrepreneurs often do not believe that they have taken an enormous amount of risks, because they do not perceive the level of uncertainty to be as high as other people do. Knight classified three types of uncertainty:
- Risk, which is measurable statistically (such as the probability of drawing a red color ball from a jar containing 5 red balls and 5 white balls)
- Ambiguity, which is hard to measure statistically (such as the probability of drawing a red ball from a jar containing 5 red balls but an unknown number of white balls)
- True uncertainty or Knightian uncertainty, which is impossible to estimate or predict statistically (such as the probability of drawing a red ball from a jar whose contents are entirely unknown)
Entrepreneurship is often associated with true uncertainty, particularly when it involves the creation of a novel good or service, for a market that did not previously exist, rather than when a venture creates an incremental improvement to an existing product or service. A 2014 study at ETH Zürich found that compared with typical managers, entrepreneurs showed higher decision-making efficiency, and a stronger activation in regions of frontopolar cortex (FPC) previously associated with explorative choice.
Strategies that entrepreneurs may use include:
- Innovation of new products, services or processes
- Continuous process improvement (CPI)
- Use of technology
- Use of business intelligence
- Using a frugal approach
- Development of future products and services
- Optimized talent management
Designing individual/opportunity nexus
According to Shane and Venkataraman, entrepreneurship comprises both "enterprising individuals" and "entrepreneurial opportunities", and researchers should study the nature of the individuals who identify opportunities when others do not, the opportunities themselves and the nexus between individuals and opportunities. On the other hand, Reynolds et al. argue that individuals are motivated to engage in entrepreneurial endeavors driven mainly by necessity or opportunity, that is, individuals pursue entrepreneurship primarily owing to survival needs, or because, they identify business opportunities that satisfy their need for achievement. For example, higher economic inequality tends to increase entrepreneurship rates at the individual level. However, most of it is often based on necessity rather than opportunity.
Opportunity perception and biases
The ability of entrepreneurs to innovate relates to innate traits, including extroversion and a proclivity for risk-taking. According to Joseph Schumpeter, the capabilities of innovating, introducing new technologies, increasing efficiency and productivity, or generating new products or services, are characteristic qualities of entrepreneurs. Also, many scholars maintain that entrepreneurship is a matter of genes, and that it is not everyone who can be an entrepreneur. Some people may be able to use [weasel words] "an innate ability" or quasi-statistical sense to gauge public opinion and market demand for new products or services. Entrepreneurs tend to have the ability to see unmet market needs and underserved markets. While some entrepreneurs assume they can sense and figure out what others are thinking, the mass media plays a crucial role in shaping views and demand. Ramoglou argues that entrepreneurs are not that distinctive and that it is essentially poor conceptualizations of "non-entrepreneurs" that maintain laudatory portraits of "entrepreneurs" as exceptional innovators or leaders  Entrepreneurs are often overconfident, exhibit illusion of control, when they are opening/expanding business or new products/services.
Differences in entrepreneurial organizations often partially reflect their founders' heterogenous identities. Fauchart and Gruber have classified entrepreneurs into three main types: Darwinians, Communitarians, and Missionaries. These types of entrepreneurs diverge in fundamental ways in their self-views, social motivations, and patterns of new firm creation.
Links to sea piracy
Research from 2014 found links between entrepreneurship and historical sea piracy. In this context, the claim is made for a non-moral approach to looking at the history of piracy as a source of inspiration for entrepreneurship education as well as for research in entrepreneurship and business model generation.
Stanford University economist Edward Lazear found in a 2005 study that variety in education and work experience was the most important trait that distinguished entrepreneurs from non-entrepreneurs A 2013 study by Uschi Backes-Gellner of the University of Zurich and Petra Moog of the University of Siegen in Germany found that a diverse social network was also important in distinguishing students that would go on to become entrepreneurs
Studies show that the psychological propensities for male and female entrepreneurs are more similar than different. Empirical studies suggest that female entrepreneurs possess strong negotiating skills and consensus-forming abilities. Asa Hansson, who looked at empirical evidence from Sweden, found that the probability of becoming self-employed decreases with age for women, but increases with age for men. She also found that marriage increased the probability of a person becoming an entrepreneur.
Jesper Sørensen wrote that significant influences on the decision to become an entrepreneur are workplace peers and social composition. Sørensen discovered a correlation between working with former entrepreneurs and how often these individuals become entrepreneurs themselves, compared to those who did not work with entrepreneurs. Social composition can influence entrepreneurialism in peers by demonstrating the possibility for success, stimulating a "He can do it, why can't I?" attitude. As Sørensen stated, "When you meet others who have gone out on their own, it doesn't seem that crazy."
Entrepreneurs may also be driven to entrepreneurship by past experiences. If they have faced multiple work stoppages or have been unemployed in the past the probability of them becoming an entrepreneur increases Per Cattell's personality framework, both personality traits and attitudes are thoroughly investigated by psychologists. However, in case of entrepreneurship research, these notions are employed by academics too, but vaguely. According to Cattell, personality is a system that is related to the environment. He further adds that the system seeks explanation to the complex transactions conducted by both - traits and attitudes. This is because both of them bring about change and growth in a person. Personality is that which informs what an individual will do when faced with a given situation. A person's response is triggered by his/her personality and the situation that is faced.
Innovative entrepreneurs may be more likely to experience what psychologist Mihaly Csikszentmihalyi calls flow. "Flow" occurs when an individual forgets about the outside world due to being thoroughly engaged in a process or activity. Csikszentmihalyi suggested that breakthrough innovations tend to occur at the hands of individuals in that state. Other research has concluded that a strong internal motivation is a vital ingredient for breakthrough innovation. Flow can be compared to Maria Montessori's concept of normalization, a state that includes a child's capacity for joyful and lengthy periods of intense concentration. Csikszentmihalyi acknowledged that Montessori's prepared environment offers children opportunities to achieve flow. Thus quality and type of early education may influence entrepreneurial capability.
Research on high risk settings such as oil platforms, investment banking, medical surgery, aircraft piloting and nuclear powerplants has related distrust to failure avoidance. When non-routine strategies are needed, distrusting persons perform better, while when routine strategies are needed trusting persons perform better. This research was extended to entrepreneurial firms by Gudmundsson and Lechner. They argued that in entrepreneurial firms the threat of failure is ever present resembling non-routine situations in high risk settings. They found that the firms of distrusting entrepreneurs were more likely to survive than the firms of optimistic or overconfident entrepreneurs. The reasons were that distrusting entrepreneurs would emphasize failure avoidance through sensible task selection, and more analysis. Kets de Vries has pointed out that distrusting entrepreneurs are more alert about their external environment. He concluded that distrusting entrepreneurs are less likely to discount negative events, and are more likely to engage control mechanisms. Similarly Gudmundsson and Lechner found that distrust leads to higher precaution and therefore increases chances of entrepreneurial firm survival.
Researchers Schoon and Duckworth completed a study in 2012 that could potentially help identify who may become an entrepreneur at an early age. They determined that the best measures to identify a young entrepreneur are family and social status, parental role modeling, entrepreneurial competencies at age 10, academic attainment at age 10, generalized self-efficacy, social skills, entrepreneurial intention, and experience of unemployment.
Entrepreneurs need to practice effective communication both within their firm and with external partners and investors, in order to launch and growth a venture and enable it to survive. An entrepreneur needs a communication system that links the staff of her firm and connects the firm to outside firms and clients. Entrepreneurs should be charismatic leaders, so they can communicate a vision effectively to their team and help to create a strong team. Communicating a vision to followers may be well the most important act of the transformational leader. Compelling visions provide employees with a sense of purpose and encourage commitment. According to Baum et al. Kouzes and Posner  the vision must be communicated through written statements and through in-person communication. Entrepreneurial leaders must speak and listen to effectively articulate their vision to others.
Communication is pivotal in the role of entrepreneurship, because it enables leaders to convince potential investors, partners and employees about the feasibility of a venture. Entrepreneurs need to communicate effectively to shareholders.Nonverbal elements in speech such as the tone of voice, the look in the sender's eyes, body language, hand gestures, and state of emotions are also important communication tools. The Communication Accommodation Theory posits that throughout communication, people will attempt to accommodate or adjust their method of speaking to others. Face Negotiation Theory describes how people from different cultures manage conflict negotiation in order to maintain "face". Hugh Rank's "intensify and downplay" communications model can be used by entrepreneurs who are developing a new product or service. Rank argues that entrepreneurs need to be able to intensify the advantages of their new product or service and downplay the disadvantages, in order to persuade others to support their venture.
Michelacci and Schivardi a pair of researchers who believe that identifying and comparing the relationships between an entrepreneur's earnings and education level would determine the rate and level of success. Their study focused on two education levels, college degree and post-graduate degree. While Michelacci and Schivardi do not specifically determine characteristics or traits for successful entrepreneurs, they do believe that there is a direct relationship between education and success, noting that having a college degree does contribute to advancement in the workforce.
Michelacci and Schivardi state there has been a rise in the number of self-employed people with a baccalaureate degree. However, their findings also show that those who are self-employed and possess a graduate degree has remained consistent throughout time at about 33 percent. They briefly mention those famous entrepreneurs, like Steve Jobs and Mark Zuckerberg who were college dropouts, but they call these cases all but exceptional, as it is a pattern that many entrepreneurs view formal education as costly, mainly because of the time that needs to be spent on it. Michelacci and Schivardi believe that in order for an individual to reach full success they need to have education beyond high school. Their research shows that the higher the education level the greater the success. The reason is that college gives people additional skills that can be used within their business and to operate on a higher level than someone who only "runs" it.
Project entrepreneurs are individuals who are engaged in the repeated assembly or creation of temporary organizations. These are organizations that have limited livespans which are devoted to producing a singular objective or goal and get disbanded rapidly when the project ends. Industries where project-based enterprises are widespread include: sound recording, film production, software development, television production, new media and construction. What makes project-entrepreneurs distinctive from a theoretical standpoint is that they have to "rewire" these temporary ventures and modify them to suit the needs of new project opportunities that emerge. A project entrepreneur who used a certain approach and team for one project may have to modify the business model and/or team for a subsequent project.
Project entrepreneurs are exposed repeatedly to problems and tasks typical of the entrepreneurial process. Indeed, project-entrepreneurs face two critical challenges that invariably characterize the creation of a new venture: locating the right opportunity to launch the project venture and assembling the most appropriate team to exploit that opportunity effectively. Resolving the first challenge requires project-entrepreneurs to access an extensive range of information needed to seize new investment opportunities. Resolving the second challenge requires assembling a collaborative team that has to fit well with the particular challenges of the project, and has to function almost immediately to reduce the risk that performance might be adversely affected.
Another type of project entrepreneurship involves entrepreneurs working with business students to get analytical work done on their ideas.
Entrepreneurs may attempt to "bootstrap-finance" their start-up rather than seeking external investors. One of the reasons that some entrepreneurs prefer to "bootstrap" is that obtaining equity financing requires the entrepreneur to provide ownership shares to the investors. If the start-up becomes successful later on, these early equity financing deals could provide a windfall for the investors and a huge loss for the entrepreneur. As well, if investors have a significant stake in the company, they may be able to exert influence on company strategy, CEO choice, and other important decisions. This is often problematic since the investor and the founder might have different incentives regarding the long term goal of the company. An investor will generally aim for a profitable exit and therefor promotes a high-evaluation IPO in order to sell their shares. Whereas the entrepreneur might have philanthropic intentions as their main driving force. Soft values like this might not go well with the short-term pressure on yearly and quarterly profits that publicly traded companies often experience from their owners.
One consensus definition of bootstrapping sees it as "a collection of methods used to minimize the amount of outside debt and equity financing needed from banks and investors". Most commonly, entrepreneurs engaging in bootstrapping incur personal credit-card debt, but they may utilize a wide variety of methods. While bootstrapping involves increased risk for entrepreneurs, the absence of any other stakeholder gives the entrepreneur more freedom to develop the company. Many successful companies - including Dell Computer and Facebook - started by bootstrapping.
Types of bootstrapping include:
- Owner financing
- Sweat equity
- Minimization of accounts payable (e.g., delaying bill payment)
- Joint utilization
- Minimizing inventory
- Subsidy finance
- Personal debt
||This section includes a list of references, related reading or external links, but its sources remain unclear because it lacks inline citations. (July 2014) (Learn how and when to remove this template message)|
Many businesses need more capital than can be provided by the owners themselves, and in this case, a range of options is available including:
- Angel investors
- Venture capital investors.
- Hedge funds
- Alternative asset management
- Line of credit or other loans
Some of these sources provide not only funds, but also financial oversight, accountability for carrying out tasks and meeting milestones, and in the case of angel investors and venture capital, business contacts, mentoring and experience. Many external financing sources provide financing in return for an equity stake in an entrepreneur's company.
Effect of taxes
Entrepreneurs are faced with liquidity constraints and often lack the necessary credit needed to borrow large amounts of money to finance their venture. Because of this, many studies have been done on the effects of taxes on entrepreneurs. The studies fall into two camps: the first camp finds that taxes help and the second argues that taxes hurt entrepreneurship.
Cesaire Assah Meh found that corporate taxes create an incentive to become an entrepreneur to avoid double taxation. Donald Bruce and John Deskins found literature suggesting that a higher corporate tax rate may reduce a state's share of entrepreneurs. They also found that states with an inheritance or estate tax tend to have lower entrepreneurship rates when using a tax-based measure. But another study found that states with a more progressive personal income tax have a higher percentage of sole proprietors in their workforce. Ultimately, many studies find that the effect of taxes on the probability of becoming an entrepreneur is small. Donald Bruce and Mohammed Mohsin found that it would take a 50 percentage point drop in the top tax rate to produce a one percent change in entrepreneurial activity 
Predictors of success
Factors that may predict entrepreneurial success include the following:
- Establishing strategies for the firm, including growth and survival strategies
- Maintaining the human resources (recruiting and retaining talented employees and executives)
- Ensuring the availability of required materials (e.g., raw resources used in manufacturing, computer chips, etc.)
- Using that the firm has one or more unique competitive advantages
- Ensuring good organizational design, sound governance and organizational coordination
- Congruency with the culture of the society 
- Business-to-business (B2B) or business-to-consumer (B2C) models can be used
- High growth market
- Target customers or markets that are untapped or missed by others
- Growing industry
- High technology impact on the industry
- High capital intensity
- Small average incumbent firm size
- Large, gender-diverse and racially diverse team with a range of talents, rather than an individual entrepreneur
- Graduate degrees
- Management experience prior to start-up
- Work experience in the start-up industry
- Employed full-time prior to new venture, as opposed to unemployed
- Prior entrepreneurial experience
- Full-time involvement in the new venture
- Motivated by a range of goals, not just profit
- Number and diversity of team members' social ties and breadth of their business networks
- Written business plan
- Focus on a unified, connected product line or service line
- Competition based on a dimension other than price (e.g., quality or service)
- Early, frequent, intense and well-targeted marketing
- Tight financial controls
- Sufficient start-up and growth capital
- Corporation model, not sole proprietorship
- Wealth can enable an entrepreneur to cover start-up costs and deal with cash flow challenges
- Dominant race, ethnicity, or gender in a socially stratified culture 
- W., A. (2015-01-25). "The Economist explains: What disruptive innovation means". The Economist. Retrieved 2015-06-26.
- AK Yetisen; LR Volpatti; AF Coskun; S Cho; E Kamrani; H Butt; A Khademhosseini; SH Yun (2015). "Entrepreneurship". Lab Chip. 15 (18): 3638–60. doi:10.1039/c5lc00577a. PMID 26245815.
- "Business Dictionary definition.". Business Dictionary.
- Belicove, Mikal E. (2 August 2012). "How to Properly Close Your Business".
- Scott, S.; Venkatraman, S. (2000). "The promise of entrepreneurship as a field of research". Academy of Management Review. 25: 217–226.
- Brush, C.; et al. (2003). "Doctoral education in the field of entrepreneurship". Journal of Management. 29 (3): 309–331. doi:10.1016/s0149-2063(03)00014-x.
- Ramoglou, S.; Tsang, E.W.K.; et al. (2016). "A realist perspective of entrepreneurship: Opportunities as propensities". Academy of Management Review. 41 (3): 409–434. doi:10.5465/amr.2014.0281.
- "the definition of entrepreneurship".
- Staff, Investopedia (1 May 2006). "Entrepreneur".
- S.X. Zhang; J. Cueto (2015). "The Study of Bias in Entrepreneurship". Entrepreneurship Theory and Practice: n/a. doi:10.1111/etap.12212.
- Black, Ervin L.; Burton, F. Greg; Wood, David A.; Zimbelman, Aaron F. (August 2010). "Entrepreneurial success: differing perceptions of entrepreneurs and venture capitalists". The International Journal of Entrepreneurship and Innovation. 11 (3): 189–198. doi:10.5367/000000010792217272. Retrieved 28 July 2016.
- Hisrich, Robert D. (2011). Entrepreneurship. McGraw-Hill Education. ISBN 978-0-07062-017-9.
- "Entrepreneurial Ambition - Innovation Provincial Rankings - How Canada Performs".
- Clifford, Catherine. "Why everyone will have to become an entrepreneur". entrepreneur.com. Retrieved 8 May 2016.
- "Venture Investment - Regional Aggregate Data". National Venture Capital Association and PricewaterhouseCoopers. Retrieved 23 April 2016.
- Muljadi, Paul (ed.). Entrepreneurship. Paul Muljadi.
- Crainer, Stuart; Dearlove, Des (2000). Generation Entrepreneur. FT Press. p. 202.
- Schumpeter, Joseph Alois (1976). Capitalism, Socialism and Democracy. Routledge. ISBN 978-0-415-10762-4.
- Schumpeter, Joseph Alois (1934). The Theory of Economic Development: An Inquiry Into Profits, Capital, Credit, Interest, and the Business Cycle. Transaction Publishers. ISBN 978-0-87855-698-4.
- Landstrom, H. (31 December 2007). Pioneers in Entrepreneurship and Small Business Research. Springer. ISBN 978-0-387-23633-9.
- Cantillon, Richard (1755). Essai sur la nature du commerce en général. London: MacMillan.
- Stevenson, H.; Jarillo, J. (26 May 2007). Cuervo, Álvaro; Ribeiro, Domingo; Roig, Salvador, eds. A Paradigm of Entrepreneurship: Entrepreneurial Management, in. Entrepreneurship: Concepts, Theory and Perspective. Springer Science Business Media. pp. 5–. ISBN 978-3-540-48543-8.
- • Landström, H. & SpringerLink 2005, Pioneers in entrepreneurship and small business research, Springer Science+Business Media, New York, N.Y.
- Marshall, Alfred; Guillebaud, C. W. (1961). Principles of Economics. 9th (variorum) Ed. Macmillan.
- Rostam-Afschar, D. (2013) "Entry regulation and entrepreneurship: a natural experiment in German craftsmanship" (PDF; 495 kB)
- Shane, Scott Andrew (2000). A General Theory of Entrepreneurship: The Individual-opportunity Nexus. Edward Elgar Publishing. ISBN 978-1-78100-799-0.
- Deakins & Freel 2012.
- Johnson, D. P. M. (2005). "A Glossary of Political Economy Terms, 2005". Auburn University. Archived from the original on 20 July 2014.
- Paul D. Reynolds (30 September 2007). Entrepreneurship in the United States: The Future Is Now. Springer. ISBN 978-0-387-45671-3.
- Mark Van Osnabrugge; Robert J. Robinson (2000). Angel Investing. John Wiley & Sons. ISBN 0-7879-5202-8.
- Brewer, Anthony (1992). Richard Cantillon: Pioneer of Economic Theory. Routledge. ISBN 978-0-415-07577-0.
- William Stanley Jevons (January 1881). Richard Cantillon and the Nationality of Political Economy. Contemporary Review. The Contemporary Review Company. pp. 333–360.
- Navale,, Ashok Bhanudas (October 2013). "Developing Entrepreneur Skills for Corporate Work" (PDF). Research Directions. 1 (4). ISSN 2321-5488.
- Driessen, Martyn P.; Zwart, Peter S. (2010). "The role of the entrepreneur in small business success: the Entrepreneurship Scan" (PDF).
- "Out Of Print : Ethnic Enterprise in America: Business and Welfare Among Chinese, Japanese, and Blacks : Ivan Light - University of California Press". www.ucpress.edu. Retrieved 2016-01-16.
- Chaudhary, Ali R. (2015-06-01). "Racialized Incorporation: The Effects of Race and Generational Status on Self-Employment and Industry-Sector Prestige in the United States". International Migration Review. 49 (2): 318–354. doi:10.1111/imre.12087. ISSN 1747-7379.
- Penrose, Edith T. (1959). The Theory of the Growth of the Firm . New York: John Wiley.
- DiMaggio, P. 1988 'Interest and agency in institutional theory'. In Institutional patterns and culture, L. Zucker (ed.), Cambridge, MA: Ballinger Publishing Company: 3-22.
- Levy, D., and M. Scully 2007 'The institutional entrepreneur as modern prince: The strategic face of power in contested fields'. Organization Studies 28(07) 971—991.
- Khan, F., K. Munir, and H. Willmott 2007 'A Dark Side of Institutional Entrepreneurship: Soccer Balls, Child Labour and Postcolonial Impoverishment'. Organization Studies 28/7: 1055—1077.
- Hardy, C., and S. Maguire: "Entrepreneurship" in Handbook of organizational institutionalism. R. Greenwood, C. Oliver, K. Sahlin-Andersson and R. Suddaby (eds).
- Almeida, J., de Paula, N., Pessali, H. 'Institutional entrepreneurship in building the Brazilian market of functional yogurts.' British Food Journal, vol. 116, p. 2-15, 2014.
- Orser, Barbara; Elliott, Catherine (2015-03-25). Feminine Capital: Unlocking the Power of Women Entrepreneurs. Stanford Business Books. p. 214. ISBN 9780804783798.
- Barbara J. Orser; Catherine Elliott; Joanne Leck (2011-11-08). "Feminist attributes and entrepreneurial identity". Gender in Management: an International Journal. 26 (8): 561–589. doi:10.1108/17542411111183884. ISSN 1754-2413.
- Orser, Barbara, and Joanne Leck. "Physician as feminist entrepreneur: The gendered nature of venture creation and the Shirley E. Greenberg Women’s Health Centre." Women entrepreneurs and the global environment for growth (2010): 284-302.
- "Karren Brady Net Worth". 10 January 2014.
- Investopedia; Investopedia.com; access date.
- Prive, Tanya (19 December 2012). "Top 10 Qualities That Make A Great Leader". Forbes. Retrieved 1 August 2013.
- Cantillon, Richard (1755). Essai sur la Nature du Commerce en Général.
- Drucker, Peter F. (1985). Innovation and Entrepreneurship. attributes the coining and defining of "entrepreneur" to Jean-Baptiste Say in his A Treatise on Political Economy; (1834).
- Knight, Frank Hyneman (2005). Risk, Uncertainty and Profit. Cosimo, Inc. ISBN 978-1-59605-242-0.
- Laureiro-Martínez, Daniella; Canessa, Nicola; Brusoni, Stefano; Zollo, Maurizio; Hare, Todd; Alemanno, Federica; Cappa, Stefano F. (22 January 2014). "Frontopolar cortex and decision-making efficiency: comparing brain activity of experts with different professional background during an exploration-exploitation task". Frontiers in Human Neuroscience. 7: 927. doi:10.3389/fnhum.2013.00927.
- "Decoding Right Strategies for Entrepreneurship".
- Shane, S. (2000). "THE PROMISE OF ENTREPRENEURSHIP AS A FIELD OF RESEARCH.". Academy of Management Review. 25 (1): 217–226. doi:10.5465/AMR.2000.2791611.
- Reynolds PD, Hay M, Bygrave WD et al. (2002) Global Entrepreneurship Monitor: 2002 Global Executive Report. Kansas City, MO: Kauffman Foundation.
- Xavier-Oliveira et al. (1 July 2015). What motivates entrepreneurial entry under economic inequality? The role of human and financial capital. Human Relations 68(7): 1183-1207, Sage.
- "The basic characteristics of a successful entrepreneur".
- Shane, S.; Nicolaou, N. (2013). "The genetics of entrepreneurial performance". International Small Business Journal. 31 (5): 473–495. doi:10.1177/0266242613485767.
- Miller 2005, p. 278.
- Scheufele & Moy 1999[page needed].
- Ramoglou, S. (2013). "Who is a 'non-entrepreneur'? Taking the 'others' of entrepreneurship seriously". International Small Business Journal. 31 (4): 432–453. doi:10.1177/0266242611425838.
- Gartner, William B. (2001). "Is There an Elephant in Entrepreneurship? Blind Assumptions in Theory Development; Business research" (PDF). Entrepreneurship Theory and Practice. 25 (4): 27–39. Archived from the original (PDF) on 2012-08-09.
- Fauchart, E; Gruber, M. (2011). "Darwinians, Communitarians, and Missionaries: The Role of Founder Identify in Entrepreneurship". Academy of Management Journal. 54 (5): 935–957. doi:10.5465/amj.2009.0211.
- Lawrence, D. (2014) Disruptors are just pirates on the high seas of capitalism. The Globe and Mail Special on Business Education, 5 November 2014. Available at http://www.theglobeandmail.com/report-on-business/careers/business-education/disruptors-are-just-pirates-on-the-high-seas-of-capitalism/article21443149/
- Roth, S (2014). "Booties, bounties, business models: a map to the next red oceans". International Journal of Entrepreneurship and Small Business. 22 (4): 439–448. doi:10.1504/ijesb.2014.064272.
- Roth, S (2014). "The eye-patch of the beholder". International Journal of Entrepreneurship and Small Business. 22 (4): 399–407. doi:10.1504/ijesb.2014.064271.
- Lazear, Edward (2005). "Entrepreneurship" (PDF). 23 (4). Journal of Labor Economics. Retrieved 24 February 2015.
- Backes-Ge1llner, Uschi; Moog, Petra (December 2013). "The disposition to become an entrepreneur and the jacks-of-all-trades in social and human capital". The Journal of Socio-Economics. The Journal of Socio-Economics. 47: 55–72. doi:10.1016/j.socec.2013.08.008. Retrieved 24 February 2015.
- Baer, Drake (19 February 2015). "Scientists have discovered a personality difference between entrepreneurs and employees". Retrieved 25 February 2015.
- Hanssan, Asa (2012). "Tax policy and entrepreneurship: empirical evidence from Sweden". Small Business Economics.
- Sørensen, J.; Nanda, R. (July 2010). "Workplace Peers and Entrepreneurship" (PDF). Management Science. 56 (7): 1116–1126. doi:10.1287/mnsc.1100.1179. Retrieved 30 June 2013.
- "Peers Influence Decision to Become an Entrepreneur". Stanford Graduate School of Business; News. 1 September 2009. Retrieved 30 June 2013.
- ENTREPRENEURIAL BEHAVIOR, Retrieved 17 December 2014.
- Csikszentmihalyi, Mihaly (13 October 2009). Flow. HarperCollins. ISBN 978-0-06-187672-1.
- Christensen, Clayton; Johnson, Curtis W.; Horn, Michael B. (14 May 2008). Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns. McGraw Hill Professional. ISBN 978-0-07-164174-6.
- Montessori, Maria (1967). The Absorbent Mind. New York: Holt, Rinehart and Winston.
- Rathunde, Kevin; Csikszentmihalyi, Mihaly (May 2005). "Middle School Students' Motivation and Quality of Experience: A Comparison of Montessori and Traditional School Environments". American Journal of Education. 111 (3): 341–371. doi:10.1086/428885.
- Conchie, S. M. & Donald, I. J. (2007). The functions and development of safety-specific trust and distrust. Safety Science, 46(1) 92-103.
- Gudmundsson, S.V. and Lechner, C. (2013) Cognitive Biases, Organization, and Entrepreneurial Firm Survival. European Management Journal, 31(3), 278–294
- Kets de Vries, M. (2003). The entrepreneur on the couch. INSEAD Quarterly, 5, 17–19.
- Schoon, Ingrid; Duckworth, Kathryn (2012). "Who becomes an entrepreneur? Early life experiences as predictors of entrepreneurship.". Developmental Psychology. 48 (6): 1719–1726. doi:10.1037/a0029168.
- Hackman, M.Z.; Johnson, C.E. (2009). Leadership: A communication perspective (5th ed.). Long Grove, IL: Waveland.
- Baum, Robert J.; Locke, Edwin A.; Kirkpatrick, Shelley A. (1998). "A longitudinal study of the relation of vision and vision communication to venture growth in entrepreneurial firms.". Journal of Applied Psychology. 83 (1): 43–54. doi:10.1037/0021-9010.83.1.43.
- Kouzes, J.M; Posner, B.Z. (1987). The leadership challenge: How to get extraordinary things done in organizations. San Francisco: Jossey-Bass.
- Locke, E.A.; Kirkpatrick, S.; Wheeler , J.K; Schneider, J; Niles, K.; Goldstein, H; Welsh, K; Chah, D.O. (1991). The essence of leadership. New York: Lexington Books.
- Clarke, J.; Cornelissen, J (2011). "Language, communication, and socially situated cognition in entrepreneurship. Academy Of Management Review". Academy of Management Review. 36 (4): 776–778. doi:10.5465/AMR.2011.65554783.
- Euler, M; Vollmar, B. H.; Kraus, S. (2011). "Communication matters--Network constellations in entrepreneurship.". International Journal of Economics and Business Research. 3 (3): 283–301. doi:10.1504/ijebr.2011.040021.
- Giles, H; Wiemann, J.M (1987). Language, social comparison and power. The handbook of communication science. pp. 350–384.
- Ting-Toomey, S (1985). Toward a theory of conflict and culture in communication. Culture & Organizational processes. pp. 71–86.
- Rank, H (1976). Teaching about public persuasion. National Council of Teachers of English.
- Michelacci, Claudio (24 June 2015). "Are They All Like Bill, Mark, and Steve? The Education Premium for Entrepreneurs" (PDF). EIEF. Retrieved 27 November 2015.
- Ferriani, S., Cattani, G., C. Baden-Fuller (2009) "The Relational Antecedents of Project-Entrepreneurship: Network Centrality, Team Composition and Project Performance", Research Policy, 2009, 38 (10): 1545–1558.
- Faulkner, R. R.; Anderson, A. B. (1987). "Short-term projects and emergent careers: evidence from Hollywood". American Journal of Sociology. 92 (4): 879–909. doi:10.1086/228586.
- DeFillippi, R., & Spring, S. 2004 Project entrepreneurs for project-based enterprises: Extension or complement to project management competencies? Projects and Profits, 4(2): 50-57.
- Ebbena, Jay; Johnson, Alec (2006). "Bootstrapping in small firms: An empirical analysis of change over time". Journal of Business Venturing (published November 2006). 21 (6): 851–865. doi:10.1016/j.jbusvent.2005.06.007. Retrieved 2014-07-29.
Bootstrapping has taken on many definitions in the literature, but there has been some recent consensus that it is a collection of methods used to minimize the amount of outside debt and equity financing needed from banks and investors (Winborg and Landstrom, 2001 and Harrison and Mason, 1997).
- "Ten Successful Companies That Started by Bootstrapping". Richtopia. Retrieved 21 May 2016.
- Narayanan, V. K.; Colarelli O'Connor, Gina (15 March 2010). Encyclopedia of Technology and Innovation Management. John Wiley & Sons. p. 60. ISBN 978-1-4051-6049-0.
- Boundless (2017-01-05). "Financing Company Operations". Boundless.
- Meh, Cesaire Assah (2002). "Entrepreneurial Risk, Credit Constraints, and the Corporate Income Tax: A Quantitative Exploration". Bank of Canada, Working Papers 2002-21.
- Bruce, Donald and John Deskins (2012). "Can state tax policies be used to promote entrepreneurial activity?". Small Business Economics.
- Asoni, Andrea and Tino Sanandaji (2012). "Taxation and the quality of entrepreneurship". J Econ.
- Bruce, Donald and Mohammed Mohsin (2006). "Tax Policy and Entrepreneurship: New Time Series Evidence". Small Business Economics.
- D.S Adegbenro I.C.T Poytechnic Lecture on EED 126, 2015">Entrepreneurship Lecture( EED 126) in D.S adegbenro Polytechnic, on 1 July 2015. Nigeria
- Scott A. Shane (1 October 2008). "7". The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By. Yale University Press. ISBN 0-300-15006-7.
- Perry-Rivers, P. (October 2014). "Stratification, Economic Adversity, and Entrepreneurial Launch: The Converse Effect of Resource Position on Entrepreneurial Strategy". Entrepreneurship Theory & Practice. 40 (3): n/a. doi:10.1111/etap.12137.
|Wikibooks has a book on the topic of: Entrepreneurship|
- Blackburn, Robert (2008). "Small Business and Entrepreneurship". doi:10.4135/9781446263433. ISBN 9781412934374.
- Bowman, Erik (July 2011). Entrepreneur Training Manual, Third Edition: Certified Entrepreneur Workbook. Guanzi Institute Press. ISBN 978-0-9837862-9-0.
- Deakins, D.; Freel, M. S. (2009). "Entrepreneurial activity, the economy and the importance of small firms". Entrepreneurship and small firms. McGraw-Hill Education. ISBN 978-0-07-712162-4.
- Dana, Leo Paul 2010, "Nunavik, Arctic Quebec: Where Co-operatives Supplement Entrepreneurship," Global Business and Economics Review 12 (1/2), January 2010, pp. 42–71.
- Duening, Thomas N.; Hisrich, Robert A.; Lechter, Michael A. (21 October 2009). Technology Entrepreneurship: Creating, Capturing, and Protecting Value. Academic Press. ISBN 978-0-08-092288-1.
- Entrepreneurship Resources: http://www.entrepreneurship.org/
- Entrepreneurship Lesson Plan http://www.econedlink.org/teacher-lesson/228s
- Foo, M.D. (2011). "Emotions and entrepreneurial opportunity evaluation". Entrepreneurship Theory and Practice. 35 (2): 375–393.
- James W. Halloran. (2014). Your Small Business Adventure: Finding Your Niche and Growing a Successful Business. ALA/Huron Street Press. ISBN 978-1-937589-44-8.
- Leitão, João; Baptista, Rui (10 June 2009). Public Policies for Fostering Entrepreneurship: A European Perspective. Springer Science Business Media. ISBN 978-1-4419-0249-8.
- Lundstrom, Anders; Stevenson, Lois A. (30 March 2005). Entrepreneurship Policy: Theory and Practice. Springer. ISBN 978-0-387-24140-1.
- Minniti, M.; Moren, L. (2010). "Entrepreneurial types and economic growth". Journal of Business Venturing. 25 (3): 305–314. doi:10.1016/j.jbusvent.2008.10.002.
- Shane, S.; Venkataraman, S. (2000). "The Promise of Entrepreneurship as A Field of Research". Academy of Management Review. 25 (1): 217–226. doi:10.5465/amr.2000.2791611. JSTOR 259271.
- Shane, S. (2013). "The genetics of entrepreneurial performance". International Small Business Journal. 31 (5): 473–495. doi:10.1177/0266242613485767.
- Zahra, Shaker A. (2009). "A typology of social entrepreneurs: Motives, search processes and ethical challenges". Journal of Business Venturing. 24 (5): 519–532. doi:10.1016/j.jbusvent.2008.04.007.
- Zhang, S.X.; Cueto, J. (2015). "The Study of Bias in Entrepreneurship". Entrepreneurship Theory and Practice: n/a. doi:10.1111/etap.12212.