Entrepreneurship 11th Edition Hisrich Solutions Manual

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESd. Most managers of firms need to take anentrepreneurial mind-set so their firmscan successfully adapt to changes.e. To develop this mindset individuals mustattempt to make sense of opportunities,constantly question “dominant logic,”and revisit what they think is true aboutmarkets and firms.G. Cognitive Adaptability1. To be good at effectuation, individuals mustdevelop a cognitive adaptability.a. Cognitive adaptability describes theextent to which entrepreneurs aredynamic, flexible, self-regulating, andengaged in the process of generatingmultiple decision frameworks focused onsensing and processing changes in theirenvironments and then acting on them.b. It is reflected in an entrepreneur’smetacognitive awareness, that is, theability to reflect upon, understand, andcontrol one’s thinking and learning.c. Learn to be more cognitive by askingquestions in four areas:K EYT ER MIn the Press: Jim Clark is a serialentrepreneur, having founded SiliconGraphics, Netscape, and another six or sostartups. In an interview, he was askedwhat traits he thought an entrepreneurshould have. His answer: discontent andanxiety. You have to not be happy with theway things are and you have to be afraidthat someone else will solve the problembefore you do. (Copeland, Michael V.,Malik, Om, & Schonfeld, Erick “Do This,Get Rich” Business 2.0, May 2005, pg. 78)Entrepreneur in Action: Only a collegestudent, Mark Zuckerberg createdThefacebook.com. Although it has muchfewer members than comparable sitessuch as Myspace.com, college studentslike the fact that the members are all theirpeers and not just random people and thatit offers ways to set up personalinteractions on their own campus. (Malik,Om “Scoring a Hit with the Student Body”Business 2.0, June 2005, pg. 76)Entrepreneurial mind-setInvolves the ability to rapidly sense, act,and mobilize, even under uncertainconditionsLearning Objective 05To develop the notion thatentrepreneurs cognitively adapt.K EYT ER MCognitive adaptabilityDescribes the extent to whichentrepreneurs are dynamic, flexible,self-regulating, and engaged in theprocess of generating multiple decisionframeworks focused on sensing andprocessing changes in theirenvironments and then acting on themTable 1.1 Mike Haynie’s “Measure ofAdaptive Cognition”How cognitively adaptable are you? Trythe survey in Table 1.1 and compareyourself to classmates or colleagues.i. Comprehension questions are1-7Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESdesigned to increase entrepreneurs’understanding of the nature of theenvironment before they begin toaddress an entrepreneurial challenge,whether it be a change in theenvironment or the assessment of apotential opportunity.ii. Connection tasks are designed tostimulate the entrepreneur to thinkabout the current situation in terms ofsimilarities to and differences fromsituations previously faced andsolved.iii. Strategic tasks prompt entrepreneursto think about which strategies areappropriate for solving the problem(and why) or pursuing theopportunity (and how).iv. Reflection tasks stimulateentrepreneurs to think about theirunderstanding and feelings as theyprogress through the process. Theyprompt entrepreneurs to generatetheir own feedback (create a feedbackloop in their solution process) toprovide the opportunity to change.General comprehension questions mayinclude: What is this market all about?What is this technology all about? Whatdo we want to achieve by creating thisnew firm? What are the key elements toeffectively pursue this opportunity?K EYT ER MComprehension questionsQuestions designed to increaseentrepreneurs’ understanding of thenature of the environmentK EYT ER MConnection tasks questions may include:How is this new environment similar toothers in which I have operated? How is itdifferent? How is this new organizationsimilar to the established organizations Ihave managed? How is it different?Connection tasksTasks designed to stimulateentrepreneurs to think about the currentsituation in terms of similarities to anddifferences from situations previouslyfaced and solvedK EYT ER MThe entrepreneur may ask strategic tasksquestions such as: What changes tostrategic position, organizational structure,and culture will help us manage ournewness? How can the implementation ofthis strategy be made feasible?Strategic tasksTasks designed to stimulateentrepreneurs to think about whichstrategies are appropriate for solving theproblem (and why) or pursing theopportunity (and how)K EYT ER MReflection tasks questions anentrepreneur may ask include: Whatdifficulties will we have in convincing ourstakeholders? Is there a better way toimplement our strategy? How will weknow success if we see it?Reflection tasksTasks designed to stimulateentrepreneurs to think about theirunderstanding and feelings as theyprogress through the entrepreneurialprocess1-8Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESd. Entrepreneurs able to increase cognitiveadaptability are better able to adapt tonew situations, be creative, andcommunicate their reasons behind aparticular response.III.THE INTENTION TO ACTENTREPRENEURIALLYA. Entrepreneurial action is most often intentionalas they intend to pursue certain opportunities,enter new markets, and offer new products.B. Individuals have stronger intentions to act whentaking action is perceived to be feasible anddesirable. Entrepreneurial intentions can beexplained the same way.C. Entrepreneurial self-efficacy refers to theconviction that one can successfully execute thebehavior required.1. People who believe they have the capacity toperform tend to do the task well (high selfefficacy).2. Self-efficacy affects the person’s choice ofaction and the amount of effort exerted.D. Perceived desirability refers to an individual’sattitude toward entrepreneurial action – theDiscussion point: Ask how many in theclassroom intend to be entrepreneurs atsome point in their life. Probably all willagree. Then ask how confident they arethat they will succeed – use a scale of 1 to10. Why? For those with lower scores, askwhat they might do to be able to increasetheir confidence.Entrepreneur in Action: Paul Newman iscertainly a man who could throw a lot ofmoney at whatever entrepreneurialventure he chose to form. However, whenhe finally got his Newman’s Own saladdressings started, he outfitted his officewith furniture from his pool area, in storageas the season was over. When thebusiness was still successful the followingspring, he kept the pool furniture andallowed his wife to buy new for their home.(From the book Shameless Exploitation inPursuit of the Common Good by PaulNewman and A. E. Hotchner 2003 asquoted in “Newman’s Own Story” TimeNovember 71,1006144,00.html)K EYT ER MEntrepreneurial intentionsThe motivational factors that influenceindividuals to pursue entrepreneurialoutcomesK EYT ER MEntrepreneurial self-efficacyThe conviction that one can successfullyexecute the entrepreneurial processK EYT ER MPerceived desirabilityThe degree to which an individual has afavorable or unfavorable evaluation ofthe potential entrepreneurial outcomes1-9Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESdegree to which she or he has a favorable orunfavorable evaluation of the potentialentrepreneurial outcomes.IV.For example, creative actions are not likelyto emerge unless they produce personalrewards perceived as more desirable thanfamiliar behaviors.ENTREPRENEUR BACKGROUNDAND CHARACTERISITCSA. Education1. Education is important in the upbringing ofthe entrepreneur. Its importance is reflectednot only in the level of education obtainedbut also in the fact that it plays a major rolein helping entrepreneurs to cope with theproblem they confront.For example, entrepreneurs cite aneducational need in the areas of finance,strategic planning, marketing (particularlydistribution), and management. The abilityto communicate clearly is also important.2. Even general education is valuable because itfacilitates the integration and accumulationof new knowledge.a. A broad base of knowledge allows forthe discovery or generation of potentialopportunities and assists adaptability.b. It provides to the entrepreneurknowledge, skills, and problem solvingabilities that are transferable acrossmany different situations.B. Age1. Entrepreneurial age refers to the age of theentrepreneur reflected in his or her1-10Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESexperience.2. In terms of chronological age, mostentrepreneurs initiate their entrepreneurialcareers between the age of 22 and 45.Discussion point: Ask students to rankthemselves on the characteristicsmentioned in this section. Discuss in smallgroups, the areas where they are weaker,and their action plan to improve?C. Work History1. Work history can influence the decision tolaunch a new entrepreneurial venture, but italso plays a role in the growth and eventualsuccess of the new venture.2. Experience in the areas of financing, productand service development, manufacturing,development of distribution channels, andpreparation of a marketing plan, areparticularly important.3. As the venture becomes established andstarts growing, managerial experience andskills become increasingly important.4. Most entrepreneurs indicate that their mostsignificant venture was not their first one.5. Previous startup experience can provideentrepreneurs with expertise in running anindependent business as well as benchmarksfor judging the relevance of information.K EYT ER MEntrepreneur in Action: Beth Cross tookon the established cowboy boot marketand in just more than 10 years has salesof 80 million and owns nearly 17% of thewestern wear market. How did she do it?Here’s her four rules for success:1. Find the market’s blind spot. Theboot market hadn’t really changed inyears and wasn’t taking advantage ofthe latest technologies.2. Make friends in high places. Crosswas able to get a high level Reebokexecutive on her board.3. Pay less, charge more. Cross wasable to outsource most of her laborand was able to charge more for herpatented technologies.4. Create your own demand. As astartup she had no marketing budgetand took the boots to horse showsand rodeos in her car.(Copeland, Michael V. “These BootsReally Were Made for Walking” Business2.0, October 2004 pg. s2 archive/2004/10/01/8186646/index.htm)Work historyThe past work experience of anindividual1-11Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESV.ROLE MODELS AND SUPPORTSYSTEMSA. One of the most important factors influencingentrepreneurs in their career path is their choiceof a role model.1. Role models can be parents, relatives, orsuccessful entrepreneurs in the community.2. Role models can also serve in a supportivecapacity as mentors during and after the newventure is launched.a. This support system is most crucialduring the startup phase.b. It is important that an entrepreneurestablish connections and eventuallynetworks early in the venture formationprocess.3. As contacts expand, they form a networkwith density (extensiveness of ties betweentwo individuals) and centrality (the totaldistance of the entrepreneur to all otherindividuals.)a. The strength of ties between theentrepreneur and any individual isdependent on the frequency, level, andreciprocity of the relationship.b. An informal network for moral andprofessional support benefits theentrepreneur.Discussion point: Poll the class to seehow many have parents or other relativesthat are role models. Are there other rolemodels they use as well?K EYT ER MRole modelsIndividuals whose example anentrepreneur can aspire to and copy1-12Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESB. Moral-Support Network1. It is important for the entrepreneur toestablish a moral-support network of familyand friends – a cheering squad.2. Most entrepreneurs indicate that theirspouses are their biggest supporters.3. Friends can provide advice that is morehonest than that received from others; theyalso provide encouragement, understanding,and assistance.4. Relatives can also be sources of moralsupport, particularly if they are alsoentrepreneurs.C. Professional-Support Network1. The entrepreneur also needs advice andcounsel which can be obtained frommembers of a professional-support network.2. Most entrepreneurs indicate that they havementors.a. The mentor is a coach, sounding board,and advocate.b. The individual selected needs to be anexpert in the field.c. An entrepreneur can initiate the “mentorfinding process” by identifying andcontacting a number of experts.d. The mentor should be periodicallyK EYT ER MMoral-support networkIndividuals who give psychologicalsupport to an entrepreneurDiscussion point: Have any studentsbegun their support networks? Who dothey now know that could be included in asupport network?K EYT ER MProfessional-support networkIndividuals who help the entrepreneur inbusiness activities1-13Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESapprised of the progress of the businessso that a relationship can graduallydevelop.3. Another source of advice is a network ofbusiness associates.a. Self-employed individuals who haveexperience in starting a business are goodsources.b. Clients and buyers are also important asthey provide word-of-mouth advertising.4. Suppliers are good components of theprofessional-support network—they providegood information on trends in the industry.5. Trade associations can help keep the newventure competitive, as they keep up withnew developments and can provide overallindustry data.6. Affiliations with individuals developed inhobbies, sporting events, civic involvements,and school alumni groups are excellentsources of referrals, advice, and information.D. Entrepreneurial activity is embedded in networksof interpersonal relationships. These networksoffer:1. Access to resources2. Assistance in discovering and exploiting newopportunities3. Opportunities to exchange goods and1-14Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTESservices4. Perceived feasibility that strengthensentrepreneurial intentionsVI.SUSTAINABLEENTREPRENEURSHIPA. Entrepreneurial action can help us both sustainand develop.B. Sustainable entrepreneurship is focused onpreserving nature, life support and community inthe pursuit of perceived opportunities to bringfuture products and services into existence forgain.C. Those with greater knowledge of the naturalenvironment are more likely to notice changes inthat environment that form opportunity beliefsthan those with less knowledge.D. It has long been accepted that entrepreneurs cangenerate economic wealth for themselves, buttheir impact on development can be far greater.1. Entrepreneurs can generate gains for othersthat are economic, environmental, and social,including employment opportunities, andrevenues for the government.2. The environmental gain generated for otherscould be reduced air pollution, improveddrinking-water quality, and other enhancedliving conditions.Based on the McMullen-Shepherd model,we know that entrepreneurial action isdriven by knowledge and motivation.Learning Objective 06To introduce sustainableentrepreneurship as a means ofsustaining the natural environment andcommunities and developing gains forothersK EYT ER MSustainable entrepreneurshipEntrepreneurship focused on preservingnature, life support, and community(sustainability) in the pursuit ofperceived opportunities to bring futureproducts, processes, and services intoexistence for gain (entrepreneurialaction) where gain is broadly construedto include economic and noneconomicbenefits to individuals, the economy,and society (development)1-15Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetCHAPTER OUTLINE AND TEACHING NOTES3. The social gains include improved childsurvival rates, longer life expectancy,superior education, equal opportunity, and soon.4. It is not just the natural environment that canbe sustained, communities also need to bepreserved.ETHICSAn Organization’s Code ofEthicsVII. IN REVIEW: SUMMARYSee “Learning Objectives Revisited” below.1-16Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 – The Entrepreneurial Mind-SetLEARNING OBJECTIVES REVISITEDLearning Objective 01: To introduce the concept of entrepreneurship and explain theprocess of entrepreneurial action. Entrepreneurial actions begin at the nexus of a lucrative opportunity and anenterprising individual. An entrepreneurial opportunity could stem from introducing an existing productin a new market or by creating a new product for an existing market. Since opportunities exist in high uncertainty, entrepreneurs must use theirjudgment to decide whether to act or not. The McMullen-Shepherd model explains how knowledge and motivationinfluence two stages of entrepreneurial action To be an entrepreneur is to act on the possibility that one has identified anopportunity worth pursuing and it involves entrepreneurial thinking.Learning Objective 02: To describe how structural similarities enable entrepreneurs to makecreative mental leaps. Forming opportunity beliefs often requires creative mental leaps, which arelaunched from one’s existing knowledge. The creative mental leap could be from knowledge about a new technology to anew market that could benefit from its introduction. The entrepreneurial challenge lies in making mental leaps based on structuralsimilarities.Learning Objective 03: To highlight bricolage as a source of entrepreneurs’resourcefulness. Entrepreneurs lacking resources seek them from others to provide the slacknecessary to experiment and generate entrepreneurial opportunities and engagein bricolage.Learning Objective 04: To introduce effectuation as a way expert entrepreneurs sometimesthink. Two major ways to think about tasks: causally and effectually.1-17Copyright McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-HillEducation.

Chapter 01 – The Entrepreneurial Mind-Set Causal thinking is starting with the desired outcome in mind and then focusingon the means to achieving that outcome. More often, entrepreneurs think effectually, that is, by looking at what they have– their means – and selecting among possible outcomes.Learning Objective 05: To develop the notion that entrepreneurs cognitively adapt. Cognitive flexibility helps the entrepreneur when dealing with uncertainty andcan be measured and learned. By asking questions related to comprehension, connection, strategy, andreflection, entrepreneurs can maintain awareness of their thought process and indoing so develop greater cognitive adaptability.Learning Objective 06: To introduce sustainable entrepreneurship a

entrepreneurship and explain the process of entrepreneurial action. Y Entrepreneurial opportunities Those situations in which new goods, services, raw materials and organizing methods can be introduced and sold at greater than their cost of production. eation of new Figure 1.1 “Entrepreneurial Action” The McMullen-Shepherd model. M