Ch. 7 - Enterprises & Entrepreneurs

Free Enterprise

• The freedom to start a business

• Doesn’t require much legislation (control)

How easy is it to start a business in Canada?

• It’s pretty easy to start a business in Canada

• Canada is the 2nd easiest place on earth to start a business

Are most Canadian enterprises big or small?

Most Canadian enterprises are small.

Small Sized Business

Less than 100 Employees

Medium Sized Business

100-499 Employees

Large Sized Businesses

500+ Employees

Small, Medium, Enterprises (SME)

An acronym used to describe small and medium sized businesses.

Why do businesses fail?

• A human endevor

• It’s complicated and difficult

• It’s unpredictable and risky

Entrepreneurs

The people who are motivated to take the time, to incur the costs and risks and make the effort to make something happen.

• It’s not a job description. It’s a temperament and personality type.

Entre (French)

To enter (A situation)

Prendre (French)

To take (Initiative)

Enterprise

A project or undertaking that requires energy and effort and whose outcome is uncertain

Entrepreneurship

The willingness or the motivation to take initiative, and to accept the risk or failure in return for suitable gratification or reward.

What are the 3 psychological characteristics of entrepreneurs?

1. Need for Achievement

2. Risk-Taking Propensity

3. Tolerance of Ambiguity

Need for Achievement

• A desire to achieve challenging goals

Risk-Taking Propensity

A belief in one’s own abiltiy to influence affairs

Tolerance of Ambiguity

A willingness to tolerate some uncertainty

The Theory of NEEDS

1. Need for Power (nPow)

2. Need for Affiliation (nAFF)

3. Need for Achievement (nAch)

The Theory of NEEDS - Need for Power (nPow)

• People who need power are more motivated to have authority and be influential. They aim for careers that offer status and prestige.

• More motivated, need to be in power, wants to influence others

The Theory of NEEDS - Need for Affiliation (nAff)

• People with a need for affiliation need to have friendly relationships and are motivated by the interaction with others.

• Want positive interactions, want to feel like they have a purpose want to make a positive impact.

The Theory of NEEDS - Need for Achievement (nAch)

• People with a need for achievement are motivated by a sense of personal achievement. They like to set and attain challenging goals for themselves, and accomplish tasks.

• Those who are goal setters, those who like to challenge themselves.

What do the theory of needs affect?

• Personality

• Behaviour

• Life (Career choices)

The Theory of NEEDS - Achievement-Motivated People

• They find that the sense of achievement is much more important in comparison to financial/material reward.

• Accomplishment of goals provides greater personal satisfaction in comparison to praise/recognition.

• Security or status are prime motivators.

Locus of Control Theory

• Created by Julian Rotter (1916-2014)

• Refers to the extent to which someone believes that they can control the events that happen to them.

• Everyone falls between INTERNAL vs. EXTERNAL

Internal Locus of Control (LoC)

• The belief that the outcomes in life are based on the person’s behaviour and actions.

• Their actions & behaviours will then affect their fate.

• People who have a high nAff also tends to have a high LoC —> taking responsibility for successes/failures, learning from them, and trying again.

External Locus of Control (LoC)

• Te belief that the outcomes in life are based on external factors, it’s out of the person’s control.

Risk Tolerance

• A tendency to regard new/unknown situations as exciting and possibly desirable.

• Based on how comfortable someone is with trying new things, and tolerance of the unknown.

Risk Aversion

• A tendency of looking at an unknown/new situation as threatening.

• When you experience a bad thing, you think of all of the possibilities.

Calculated Risk

• A business undertaken after the adv. and disadv. have been considered and the probability of various outcomes have been calculated.

What type of inheritance do people who grow up in an entrepreneurial family have?

• Entrepreneurial Inheritance

• Vocational Inheritance

• Economic Inheritance

Entrepreneurial Inheritance

• The entrepreneurial mindset, characteristics, and values gained from an entrepreneurial parent.

Vocational Inheritance

• An individuals tendency to gain skills, and job/work related skills and aptitudes from their parents.

Economic Inheritance

The tendency for children of entrepreneurs to inherit the financial capital of their parents and their desire to start a business.

Economic Migrants

Someone who moves from one country to another to improve their economic well-being and their families.

Entrepreneurs - Demographic Attributes

• Immigrants are both pulled and pushed into entrepreneurial careers.

• Pulled (due to psychological characteristics)

• Pushed (due to economic circumstances)

Why are older people (aged 50+) more likely to own businesses?

Because they have more:

• Capital

• Contacts

• Credibility

• Confidence