Entrepreneurship A Process Perspective (with InfoTrac)

by Baron, Robert A.; Shane, Scott A.

• ISBN13: 9780324273564
• ISBN10: 0324273568
• Edition: 1st
• Format: Hardcover
• Copyright: 2004-01-05
• Publisher: South-Western College Pub

Summary

Entrepreneurship books may, understandably, be viewed with some suspicion, as being nothing more than common sense dressed-up, and nothing unique or innovative. But Baron and Shane have attempted something new. Baron and Shane focus on the entrepreneurial process as it moves through several distinct phases: (1) generating ideas and recognizing opportunities, (2) assembling resources, (3) launching the new venture, (4) building success, and (5) harvesting the rewards. At each stage, they analyze these processes along three dimensions, examining individual, group, and societal contexts. Accessible and rich in examples, Baron and Shane gain the upper hand by fusing concepts, theory, and research with the supporting pedagogy.

Table of Contents

PART 1 Entrepreneurship: Who, What, Why?	1	(80)
Entrepreneurship: A Field---And An Activity	2	(25)
The Field of Entrepreneurship: Its Nature and Roots	4	(5)
Entrepreneurship: An Engine of Economic Growth	6	(1)
Entrepreneurship: Foundations in Other Disciplines	7	(2)
Entrepreneurship: A Process Perspective	9	(5)
Levels of Analysis: Micro Versus Macro Revisited	12	(1)
Entrepreneurship: The Intersection of Valuable Opportunities and Enterprising Individuals	13	(1)
Sources of Knowledge About Entrepreneurship: How We Know What We Know	14	(6)
Observation, Reflection, and Experimentation: Alternative Routes to Knowledge	15	(3)
Theory: Answering the Questions ``Why'' and ``How''	18	(2)
A User's Guide to This Text	20	(2)
Summary and Review of Key Points	22	(5)
Uncovering Opportunities: Understanding Entrepreneurial Opportunities and Industry Analysis	27	(26)
Sources of Opportunities: The Origins of New Ventures	29	(4)
Technological Change	30	(1)
Political and Regulatory Change	31	(1)
Social and Demographic Change	31	(2)
Forms of Opportunity: Beyond New Products and Services	33	(1)
Industries That Favor New Firms: Fertile Grounds for New Ventures	34	(6)
Knowledge Conditions	35	(1)
Demand Conditions	36	(1)
Industry Life Cycles	37	(1)
Industry Structure	38	(2)
Opportunities and New Firms	40	(6)
Why Most Opportunities Favor Established Firms	40	(2)
Opportunities That Favor New Firms	42	(2)
Danger! Pitfall Ahead! Exploiting an Incremental Innovation by Starting a Firm	44	(2)
Summary and Review of Key Points	46	(7)
Cognitive Foundations of Entrepreneurship: Creativity and Opportunity Recognition	53	(28)
The Raw Materials for Creativity and Opportunity Recognition: Mental Structures That Allow Us to Store---And Use---Information	56	(4)
Cognitive Systems for Storing---And Using---Information: Memory, Schemas, and Prototypes	56	(2)
Limited Capacity to Process Information: Why Total Rationality Is Rarer Than You Think	58	(2)
Creativity: Escaping from Mental Ruts	60	(7)
Danger! Pitfall Ahead! ``Too Much Invested to Quit'': The Potentially Devastating Effects of Sunk Costs	61	(1)
Creativity: Generating the Extraordinary	61	(1)
Concepts: Building Blocks of Creativity	62	(2)
Creativity and Human Intelligence	64	(1)
Encouraging Creativity: The Confluence Approach	65	(2)
Opportunity Recognition: A Key Step in the Entrepreneurial Process	67	(8)
Access to Information and Its Effective Use: The Core of Opportunity Recognition	68	(1)
Opportunity Recognition: Additional Insights from Cognitive Science	69	(3)
Practical Techniques for Increasing Opportunity Recognition	72	(1)
The Voice of Experience Some Thoughts on Avoiding False Alarms	73	(2)
Summary and Review of Key Points	75	(6)
PART 2 Assembling the Resources	81	(104)
Acquiring Essential Information: Why ``Look Before You Leap'' Is Truly Good Advice for Entrepreneurs	82	(25)
Market Information: Determining What Your Customers Really Want	84	(5)
Direct Techniques for Gathering Market Information: Surveys, Perceptual Mapping, and Focus Groups	85	(3)
Indirect Techniques for Gathering Market Information: The Entrepreneur as Sherlock Holmes	88	(1)
Government Policies and Regulations: How They Affect New Ventures	89	(4)
Taxes: An Important Consideration for Entrepreneurs	90	(1)
Government Policy: Increasingly Favorable to New Ventures	91	(2)
Government Regulations: What Every Entrepreneur Should Know	93	(4)
Danger! Pitfall Ahead! When Good Ideas Fail: The Costs of Ignoring the Rules	96	(1)
Interpreting Information: Potential Pitfalls for Decision-Making Groups	97	(5)
Accepting ``Early Favorites'': Or, Why the Initial Majority Usually Wins	97	(1)
Group Polarization: Why Groups Often Do Go off the Deep End	98	(1)
Groupthink: When Too Much Cohesion Among Group Members Is a Dangerous Thing	98	(1)
Ignoring Unshared Information	99	(1)
Improving Group Decisions: Techniques for Countering the Pitfalls	100	(1)
The Voice of Experience Know Your Market---And Your Competitive Edge---Before You Start!	101	(1)
Summary and Review of Key Points	102	(5)
Assembling The Team: Acquiring and Utilizing Essential Human Resources	107	(26)
Similarity Versus Complementarity: ``Know Thyself'' Revisited	109	(4)
Self-Assessment: Knowing What You Have Helps Determine What You Need	110	(3)
Choosing Cofounders: Maximizing the New Venture's Human Resources	113	(5)
Impression Management: The Fine Art of Looking Good---And How to Recognize It	113	(2)
Deception: Beyond Impression Management	115	(2)
Danger! Pitfall Ahead! The Partner Who Wasn't What He Claimed: When Social Perception Fails	117	(1)
Utilizing the New Venture's Human Resources: Building Strong Working Relationships Among the Founding Team	118	(6)
Roles: The Clearer the Better	118	(1)
Perceived Fairness: An Elusive But Essential Component	119	(1)
The Voice of Experience Why Your Family Should Be Part of the Team---Or at Least Fully On Board	120	(2)
Effective Communication	122	(2)
Expanding the New Venture's Human Resources: Beyond the Founding Team	124	(3)
Obtaining Excellent Employees: The Key Role of Social Networks	124	(1)
Is Bigger Necessarily Better? Number of Employees as a Factor in New Venture Growth	125	(1)
Should New Ventures Hire Temporary or Permanent Employees? Commitment Versus Cost	126	(1)
Summary and Review of Key Points	127	(6)
Financing New Ventures	133	(30)
Why Is It so Difficult to Raise Money? The Problems of Uncertainty and Information Asymmetry	135	(5)
Information Asymmetry Problems	135	(2)
Uncertainty Problems	137	(1)
Solutions to Venture Finance Problems	137	(3)
Amounts and Sources of Capital: How Much and What Type Do You Need?	140	(11)
Amount of Start-Up Capital	140	(1)
Estimating Financial Needs: Start-Up Costs, Proforma Financial Statements, Cash Flow Statements, and Breakeven Analysis	141	(4)
Danger! Pitfall Ahead! The Hazards of Raising Too Little Money	145	(1)
Types of Capital: Debt Versus Equity	146	(1)
Sources of Capital	147	(4)
The Structure of Venture Finance	151	(4)
The Equity Financing Process	151	(1)
Staging of Investment	152	(1)
The Cost of Capital	152	(3)
Social Capital and the Behavioral Side of Venture Finance	155	(2)
Social Ties and the Process of Raising Money	155	(1)
Behaviors and Actions That Encourage Investors	155	(2)
Summary and Review of Key Points	157	(6)
Writing an Effective Business Plan: Crafting a Road Map to Success	163	(22)
Why Write a Business Plan? The Benefits of Clear-Cut Goals	165	(2)
Components of a Business Plan: Basic Requirements	167	(11)
The Executive Summary	168	(2)
Background, Product, and Purpose	170	(1)
Market Analysis	171	(1)
Development, Production, and Location	172	(1)
The Management Team	172	(1)
Financial Plans and Projections	173	(1)
Critical Risks: Describing What Might Go Wrong	174	(1)
Reaping the Rewards: Harvest and Exit	175	(1)
Scheduling and Milestones	175	(1)
Appendices	176	(1)
A Note on the Intangibles	176	(1)
Danger! Pitfall Ahead! The Seven Deadly Sins for New Venture Business Plans	177	(1)
Making an Effective Business Plan Presentation: The Ball Is Definitely in Your Court	178	(3)
Summary and Review of Key Points	181	(4)
PART 3 Launching the New Venture	185	(106)
The Legal Form of New Ventures---And the Legal Environment in Which They Operate	186	(27)
The Legal Forms New Ventures Can Take	187	(8)
Sole Proprietorship: One Company, One Owner	188	(1)
Partnerships: Different Forms, Different Benefits	189	(3)
Corporations: Limited Liability, But at a Cost	192	(1)
The S Corporation	193	(1)
The Limited Liability Company (LLC)	193	(1)
The Joint Venture	194	(1)
The Professional Corporation	194	(1)
The Legal Environment of New Ventures: Some Basics	195	(4)
New Ventures and the Law	195	(2)
Danger! Pitfall Ahead! What Can Happen When Entrepreneurs Are Ignorant of the Law	197	(1)
Business Contracts: Their Essential Components	197	(1)
Basic Elements of a Contract	197	(1)
Obligations Under Contracts	198	(1)
Franchising	199	(8)
Types of Franchising	200	(1)
The Benefits of Becoming a Franchisee	200	(2)
Drawbacks of Becoming a Franchisee	202	(2)
Legal Aspects of Franchising	204	(1)
The Future Shape of Franchising	205	(2)
Summary and Review of Key Points	207	(6)
Market in a New Firm	213	(26)
Assessing the Market	215	(7)
Starting with a Real Need	215	(2)
Assessing Customer Preferences and the Market for New Products and Services	217	(3)
Conjoint Analysis: Determining Which Dimensions Are Most Important	220	(2)
Market Dynamics	222	(2)
Knowing Your Market: The Importance of Market Size and Market Growth	222	(1)
Timing the Market: The S-Curve Story	222	(2)
Achieving Market Acceptance	224	(6)
Adoption Patterns: Understanding Which Customers Adopt When	224	(2)
Moving from Early Adopters to the Early Majority	226	(1)
Focus: Choosing the Right Customers to Target First	227	(1)
Dominant Design: Product Convergence and Its Effect on New Ventures	227	(1)
Technical Standards: Getting Customers to Adopt Your Design as the Market Standard	228	(1)
Danger! Pitfall Ahead! Stymied by the Dominant Design: The Story of Electric Vehicles	229	(1)
The Marketing Process in a New Company	230	(3)
Personal Selling: The Central Component of Entrepreneurial Marketing	230	(1)
Pricing New Products: The Role of Cost Structure and Supply and Demand	231	(2)
Summary and Review of Key Points	233	(6)
Strategy: Planning for Competitive Advantages	239	(28)
Competitive Advantage: An Essential Ingredient	241	(1)
Strategy: Protecting Profits from the Exploitation of Opportunity	242	(7)
Secrecy: Keeping Others from Learning About or Understanding How to Exploit the Opportunity	243	(2)
Danger! Pitfall Ahead! Arrow's Paradox: The Problem of Disclosure	245	(1)
Establishing Barriers to Imitation	246	(2)
The Voice of Experience Establishing Competitive Advantage: Recognize Your Strengths	248	(1)
Franchising or Licensing? The Choice of Organizational Form	249	(6)
Minimizing the Cost of Exploiting the Opportunity	250	(1)
Accelerating the Pace to Market	251	(1)
Making Use of the Best Capabilities	251	(1)
Managing Information Problems in Organizing	252	(3)
Managing Information Asymmetry and Uncertainty in the Pursuit of Opportunity	255	(6)
Growth from Small Scale	256	(2)
Forming Alliances and Partnerships with Established Firms	258	(1)
Legitimating the Opportunity and the New Venture	259	(2)
Summary and Review of Key Points	261	(6)
Intellectual Property: Protecting Your Ideas	267	(24)
Capturing the Profits from New Products and Services	269	(6)
The Product Development Process	269	(1)
New Firm Advantages at Product Development	270	(2)
Ease of Imitating Entrepreneurs' Intellectual Property	272	(2)
Danger! Pitfall Ahead! Nondisclosure and Noncompete Agreements	274	(1)
Legal Forms of Intellectual Property Protection	275	(6)
Patents	275	(2)
Trade Secrets	277	(2)
Trademarks	279	(1)
Copyrights	280	(1)
Nonlegal Forms of Intellectual Property Protection	281	(5)
Learning Curves, Lead Time, and the First-Mover Advantage	282	(2)
Complementary Assets	284	(2)
Summary and Review of Key Points	286	(5)
PART 4 Running the Business: Building Lasting Success	291	(56)
Essential Skills for Entrepreneurs: Enhancing Social Competence, Creating Trust, Managing Conflict, Exerting Influence, and Dealing with Stress	292	(27)
Getting Along Well with Others: Building Social Competence	294	(3)
The Nature of Social Skills	294	(1)
The Impact of Social Competence on Entrepreneurs	295	(2)
Working Effectively with Others: Building Trust and Managing Conflict	297	(8)
The Voice of Experience Why People Skills Really Matter	298	(1)
Building Cooperation: The Key Role of Trust	298	(3)
Managing Conflict: Heading Off Trouble at the Pass	301	(3)
Danger! Pitfall Ahead! How to Create an Affective Conflict When There Is None	304	(1)
Influencing Others: From Persuasion to Vision	305	(3)
Tactics of Influence: Which Ones Are Most Common?	305	(1)
Other Tactics of Influence: From Ingratiation to the Foot-in-the-Door	306	(2)
Managing Stress: How Entrepreneurs Can Survive to Enjoy the Fruits of Their Labor	308	(5)
Stress: Its Nature and Causes	308	(2)
The Adverse Effects of Stress	310	(1)
Personal Techniques for Managing Stress	311	(2)
Summary and Review of Key Points	313	(6)
Building the New Venture's Human Resources: Recruiting, Motivating, and Retaining High-Performing Employees	319	(28)
Recruiting and Selecting High-Performing Employees	321	(5)
The Search for High-Performing Employees: Knowing What You Need and Where to Look	321	(1)
Selection: Techniques for Choosing the ``Cream of the Crop''	322	(4)
Motivating Employees: Maximizing the Value of the New Venture's Human Resources	326	(7)
Reaching for the Moon---Or at Least, the Next Level Up: The Key Role of Goals---And Vision	326	(2)
Tying Rewards to Performance: The Role of Expectancies	328	(2)
Fairness: An Essential Ingredient in Motivation	330	(1)
Danger! Pitfall Ahead! Employee Theft: Evening the Score with an Unfair Employer	331	(1)
Designing Jobs to Make Them Motivating	332	(1)
Retaining High-Performing Employees	333	(6)
Reward Systems: Linking Pay and Performance	333	(2)
Building Employee Commitment	335	(1)
Overcoming the ``Control Barrier'': A Note on the Necessity of ``Letting Go''	336	(1)
The Voice of Experience The Four Pillars of New Venture Success	337	(2)
Summary and Review of Key Points	339	(8)
PART 5 Harvesting the Rewards	347	(26)
Exit Strategies for Entrepreneurs: When---And How---To Harvest the Rewards	348	(25)
Exit Strategies: The Major Forms	350	(9)
Sale or Transfer to Insiders: Succession, Leveraged Buyouts, and Employee Stock Ownership Plans	351	(2)
Sale to Outsiders: When Valuation Becomes Crucial	353	(1)
Determining the Value of a Business: A Little Art, a Little Science	354	(3)
Taking a Company Public: The Lure of IPOs	357	(2)
Negotiation: The Universal Process	359	(6)
Negotiation: Its Basic Nature	359	(1)
The Voice of Experience The Multiple Benefits of an Appropriate Exit Strategy	360	(1)
Tactics of Negotiation: Procedures for Reducing an Opponent's Aspirations	360	(4)
Danger! Pitfall Ahead! The Costs of Negotiating to Win: Watch Out for the ``Ankle-Biters''!	364	(1)
Exit Strategies and the Life Span: Different Needs---And Goals---At Different Times of Life	365	(3)
Summary and Review of Key Points	368	(5)
Appendix 1 Case Studies	373	(24)
Appendix 2 Video Case Library	397	(18)
Glossary	415	(6)
Name Index	421	(4)
Subject Index	425