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Chapter 3

Chapter 3 Notes


Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird
Chapter
3

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Chapter 3 Understanding Entrepreneurship, Small Business, and New
Venture Creation Notes
The Links among Small Business, New Venture Creation, and Entrepreneurship
Small Business
x defining a “small” business can by a bit tricky as various measures might be used, including the number of people the business
employs, the companys sales revenue, the size of the investment required, or the type of ownership structure the business has
x Industry Canada is the main federal government agency responsible for small business, and when it reports small business
statistics, the government relies on two distinct sources of information, both provided by Statistics Canada: the Business Register
(which tracks businesses), and the Labour Force Survey (which tracks individuals)
x to be included, a business must have at least 1 paid employee, annual sales revenue of $30 000 or more, or be incorporated
x a goods-producing business is considered small if it has fewer than 100 employees, which a service-producing business is
considered small if it has fewer than 50 employees
x the Labour Force Survey uses information from individuals to make estimates of employment and unemployment levels
x small business : an owner-managed business with less than 100 employees
The New Venture/Firm
x various criteria can also be used to determine when a new firm comes into existence, but three of the most common are when it
was formed, whether it was incorporated, and if it sold goods and/or services
x a business is considered to be new if it has become operational within the previous 12 moths, if it adopts any of the main
organizational forms (proprietorship, partnership, corporation, or co-operative), and if it sells goods or services
x new venture/firm : a recently formed commercial organization that provides goods and/or services for sale
Entrepreneurship
x entrepreneurship : the process of indentifying an opportunity in the marketplace and accessing the resources needed to
capitalize on it
x entrepreneurs : people who recognize and seize opportunities
x entrepreneurship occurs in a wide range of contexts: not just in small or new firms, but also in old firms, in large firms, in firms
that grow slowly, in firms that grow rapidly, in non-profit organizations, and in the public sector
x people who exhibit entrepreneurial characteristics and create something new within an existing large firm or organization are
called intrapreneurs
x a key difference between intrapreneurs and entrepreneurs is that intrapreneurs typically don’t have to concern themselves with
getting the resources needed to bring the new product to market since their employer provide the resources
The Role of Small and New Businesses in the Canadian Economy
Small Businesses
x 98% of all businesses in Canada are small
x 97.6% of the 1 048 286 employer businesses are small, 2.1% are medium-sized, and 0.3% are large
x when small business are further subdivided, the majority of businesses (57%) have fewer than five employees
x private sector : part of economy that is made up of companies and organizations that aren’t owned or controlled by government
x according to Industry Canada, small businesses account for over two-thirds of employment in four industries: non-institutional
health care (90%), the construction industry (77%), other services (73%), and accommodation and food (69%)
x over the past decade, the annual contribution to GDP of small businesses has been valued at 25%--less than the sector’s
contribution to employment but significant nonetheless
New Ventures
x new firms are not only main source of job creation, they are also responsible for the vast majority of new products and services
x most of the growth in firms occurred in the services-producing sector, with the number of firms in high-knowledge industries
such as high-technology and biotechnology nearly doubling
x in goods-producing sector, number of firms in high-knowledge industries also grew at a much faster pace than in other industries
The Entrepreneurial Process
The Entrepreneur
x while the idea that people are “born” entrepreneurs is popular, nothing could be further from the truth
x in fact, entrepreneurial characteristics have been found to be widely distributed in the population
x the two main things that entrepreneurs need to do are to identify an opportunity and access resources
Identifying Opportunities
Idea Generation
x generating ideas involves abandoning assumptions about how things work and how they ought to be, seeing what others do not
x if the prospective new or improved product, process, or service can be profitably produced and is attractive relative to other
potential venture ideas, it might present an opportunity
Screening
x the more of the following characteristics that an idea has, the greater the opportunity it presents
¾ the idea creates or adds value for the customer
¾ the idea provides a competitive advantage that can be sustained
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