bygrave & zacharakis, 2007. entrepreneurship, new york: wiley. © chapter 1 the power of...

Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©

Chapter 1

The Power of Entrepreneurship


An entrepreneur is the person who destroys the existing economic order by introducing new products and services, by introducing new methods of production, by creating new forms of organization, or by exploiting new raw materials.

Definition of entrepreneurship

Schumpeter

An entrepreneur is the person who perceives an opportunity and creates an organization to pursue it.

Simpler


Business in the US

99.5% are smallbusinesses

(with 500 or feweremployees)

24 millionbusinesses

Have only1 employee

Part-timeemployees

Full-timeemployees


2 years 10 years1 year

81 % survive

5 years

10-year survival rates of business

establishments 40 % survive

65 % survive 25 % survive


Entrepreneurship Revolution Strikes Gold

Netscape Communications:

$6 million of own money + $6 million of VC money = $2.2 billion of market capitalization on the first day of IPO

eBay:

Benchmark Capital’s investment of $5 million in eBay multiplied 1500-foldin just two years


Venture Capital Investments in Internet-related companies

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04

Nu

mb

er o

f C

om

pan

ies

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

To

tal I

nve

ste

d (

$ b

illio

n)

Number of Companies Total InvestedSource: Venture Economics

Netscape IPO1995

Amazon.com IPO1997

Yahoo IPO1996

eBay IPO1998


Changes in the Entrepreneurial Framework Conditions

Financial

Human

Infrastructure

Physical

Infrastructure R&D transfer

Government

Cultural

and Social

Norms

Education,

Professionalization

Training


Total Entrepreneurial Activity [TEA Prevalence] 2004: By Country

-5.00

10.0015.0020.0025.0030.0035.0040.0045.00

Japa

nS

love

nia

Hon

g K

ong

Bel

gium

Sw

eden

Cro

atia

Por

tuga

lH

unga

ryIta

lyF

inla

ndG

erm

any

Net

herla

nds

Spa

inD

enm

ark

Sou

th A

fric

aS

inga

pore

Gre

ece

Fra

nce

Uni

ted

Kin

gdom

Isra

elN

orw

ayIr

elan

dP

olan

dC

anad

aU

nite

d S

tate

sA

rgen

tina

Aus

tral

iaB

razi

lIc

elan

dN

ew Z

eala

ndJo

rdan

Ecu

ador

Uga

nda

Per

u

AV

ER

AG

E

#/ 1

00 A

du

lts,

18-

64 Y

ears

Old

[95

%

Co

nfi

den

ce In

terv

al]

TEA (total entrepreneurial activity) is the percent of the adult population thatare either nascent entrepreneurs or baby businesses’ owner-managers or both.It measures the overall entrepreneurial activity of a nation.


TEA (necessity) is the percent of adults who are trying to start or have started a baby business

because all other options for work are either absent or unsatisfactory.

TEA (Opportunity)/TEA (Necessity) 2004

R2 = 0.57

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

0 10,000 20,000 30,000 40,000 50,000 60,000

GDP per capita, US$

TE

A (

Op

po

rtu

nit

y)/

TE

A

(Ne

ce

ss

ity

)

TEA (opportunity) is the percent of the adult population that are trying to start or have started a

baby business to exploit a perceived opportunity.


TEA vs. GDP per Capita in PPP (2005)

R2 = 0.49

0%

5%

10%

15%

20%

25%

30%

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

GDP per Capita 2005, in Purchasing Power Parities (PPP)

Per

cen

tag

e o

f p

op

ula

tio

n b

etw

een

18-

64 y

ears

EasternEurope

EU-14Countries

MiddleIncomeCountries

VE

NZ

HU

HR LV

AR

CL

TH

BR

CN

JM

MX

ZA

USIS

CA

AU

SG

SI

ES

GR

JP

NOIE

DK

SW

UK


TEA 2004: by Age Categories and Country Income Group

0

5

10

15

20

25

low income countries middle income countries high income countries

#/ 1

00 A

du

lts,

18-

64 Y

ears

Old

18-24 years

25-34 year

35-44 years

45-54 years

55-64 years


TEA 2004: by Gender

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Japa

nSl

oven

iaH

ong

Kon

gB

elgi

umSw

eden

Cro

atia

Port

ugal

Hun

gary

Italy

Finl

and

Ger

man

yN

ethe

rland

sSp

ain

Den

mar

kSo

uth

Afr

ica

Sing

apor

eG

reec

eFr

ance

Uni

ted

Kin

gdom Isra

elN

orw

ayIre

land

Pola

ndC

anad

aU

nite

d St

ates

Arg

entin

aA

ustr

alia

Bra

zil

Icel

and

New

Zea

land

Jord

anEc

uado

rU

gand

aPe

ru

AVE

RA

GE

#/

10

0 A

du

lts

, 1

8-6

4 Y

ea

rs O

ld Women

Men


TEA 2004: Education by Country Income Group

(GDP per capita)

0% 20% 40% 60% 80% 100%

low incomecountries >$10,000

middle incomecountries

high incomecountries >$25,000

up to some secondary secondary degree post secondary


Informal Investment and Classic Venture CapitalPercent of GDP

0.00

0.50

1.00

1.50

2.00

2.50

3.00

H

unga

ry

Fin

land

Norw

ay

Por

tuga

l

Slo

veni

a

Fr

ance

I

rela

nd UK

J

apan

Ita

ly

Bel

gium

Swed

en

Aust

ralia

Sout

h Af

rica

Hong

Kon

g

S

pain

USA

G

erm

any

Net

herla

nds

D

enm

ark

Cana

da

Is

rael

Swi

tzer

land

Si

ngap

ore

Pola

nd

G

reec

e N

ew Z

eala

ndInfo

rmal

in

vest

men

t an

d c

lass

icve

ntu

re c

apit

al a

s p

erce

nt

of

GD

P

Classic venture capital

Informal investment


21ST CENTURY ECONOMIES:

ANGLO-SAXON OR SOCIAL MODELS?

Anglo-Saxon

EconomicSystems

Anglo-Saxon economic systems have a high prevalence rate of high-expectationentrepreneurial activity.

bygrave & zacharakis, 2007. entrepreneurship, new york: wiley. © chapter 1 the power of...

Documents

new york

bygrave zacharakis

new products

new forms of organization

new methods of production

new raw materials

simpler slide

ebay ipo