Chapter 7 - Enterprises an Entrepreneurs

Question 1

Canada’s economy depends upon…

Answer 1

millions of (mostly small) business enterprises

Question 2

The majority of Canadian businesses involve a…

Answer 2

single person, working alone

Question 3

The majority of Canadian businesses…

Answer 3

have employees less than five

Question 4

Many small businesses…

Answer 4

• provide majority of private sector jobs

- create more new medium-sized or large businesses

Question 5

The Canadian business environment is…

Answer 5

dynamic. Many new businesses are created each year and many others disappear. An average of 20,000 net new businesses are created every year

Question 6

Despite the high chance of failure..

Answer 6

thousands of Canadians remain motivated to Start new enterprises

Question 7

In studies of entrepreneurial characteristics, three
psychological attributes are widely regarded as
hallmarks of the entrepreneurial personality.
These attributes are:

Answer 7

1) A desire to achieve challenging goals;
2) A belief in one’s own ability to influence affairs;
3) A willingness to tolerate some uncertainty;

Question 8

Need Theory

Answer 8

In 1961, in che influential book “The Achieving Society”, American psychologist David McClelland laid out
the theory of needs. McClelland suggested that people are driven by one of three motivational needs.
They are; the need for power, the need for affiliation, and the need for achievement. In the short-hand of
academic psychologists, these are commonly referred to as; nPow, nAff, and nAch, respectively.

Question 9

Need for power (nPow)

Answer 9

Same people are motivated by power, They like co have authority and they
need to be influential. nPow produces a need to lead, People with a high need for power will choose
careers that offer status and prestige, They will be attracted to be senior managers in a large corporation,
senior officers in the military or security organizations, or politicians. In these types of jobs they can command great resources, and wield a great deal of influence.

Question 10

Need for affiliation (n Aff):

Answer 10

Some people need to have friendly relationships. They are motivated by
interaction with others. nAff produces the need to be liked and held in good regard. People with this
motivation will choose careers chat involve working with others and being team players. They will choose
jebs thac invelye helping or caring. Individuals wich a high nAff might werk as ceachers, health care werkers (docters and nurses), social workers, coaches, religious leaders, ar business related jobs that involve

working iin tears.

Question 11

Need for achievement (nAch):

Answer 11

Some people are motivated by a sense of personal achievement.
These people like to set, and attain, challenging goals for themselves. nAch produces people who need to
accomplish tasks. People with this type of motivation will choose careers that involve personal achievement, or mastering a task or situation. They might become athletes, intellectuals and scholars, or entrepreneurs and business owners.

Question 12

Research
consistently shows that entrepreneurs, and people who show other entrepreneurial behaviours, have a very high need for achievement. In subsequent research, McClelland found a number of other characteristics and attitudes of achievement-motivated people

Answer 12

In subsequent research, McClelland found a number of other characteristics and attitudes of achievement-motivated people:
- the sense of achievement is mare important than material or financial reward;
- the accomplishment of the task gives greater personal satisfaction than
receiving praise or recognition;
- financial reward is regarded as a measurement of success, not an end in itself;
- neither security nor status are prime motivators.

Question 13

A second behaviour frequently observed in entrepreneurs is “internal locus of control”.

Answer 13

• Locus of control refers to the extent to which a
  someone believes that they can control
  the events that affect them. -Everyone falls
  somewhere on a continuum between having an “internal” versus an “external” locus of control. -Internals believe the outcomes in life are influenced by their own behaviour.
  They believe that their actions and efforts
  help to shape their fate. Entrepreneurial
  people are “internals”.
• Externals believe that their life is determined by fate, luck, or powerful outside forces. They believe that one person cannot control the various uncertain factors of life.

Question 14

Relationship between high need for achievement and internal locus of control

Answer 14

• Research has shown that people with a high need for achievement also tend to have an internal locus
  of control.”
• An individual with an internal locus of control takes responsibility for his or her successes
  and failures, attributing outcomes to his or her own ability and effort.
• In contrast, an individual with an
  external locus of control will equate the outcome to the ease or difficulty of the task, luck, or being in
  the right place ac the right time.

Question 15

What is risk? What is risk aversive vs risk tolerance?

Answer 15

• Risk occurs when you don’t know how things will work out
• People see risk in new situations or in the unknown. When you don’t know what will happen in a given situation, this is a risk. Individuals who are risk averse see new or unknown situations as threatening. Risk tolerant people see new or previously unknown situations as interesting, exciting

and possibly desirable.

Question 16

Are entrepreneurs risk aversive or risk tolerant?

Answer 16

• McClelland observed that entrepreneurs exhibit moderate risk-taking propensities. - Subsequent studies have supported this tendency in entrepreneurs.
• Being risk tolerant is mot the same as risk-seeking, or boing
  careless of the consequences. - Entrepreneurial personalities
  are not gamblers. - Because individuals with entrepreneurial
  personalities have a need for achievement, they enter into
  situations only when they have reasonable expectation of
  success.
• Because they have an internal locus of control they
  will manage their effort and behaviour to influence events
  positively. - Entrepreneurs take calculated risks.
• A calculated risk is an enterprise undertaken only after the advantages and disadvantages have been carefully considered.
• An entrepreneur will attempt to calculate the probability of various outcomes occurring, and also consider the effects of the best or worse cases

Question 17

Entrepreneurs often share a number of demographic traits. What are they?

Answer 17

• Research consistently shows that an individual with a parent who runs their own business or is self-employed is much mere likely to run their own business than the general population.
• It has been
  suggested that 80% of Canadian small business owners came from a background of family business.
• Immigrants, and the children of immigrants, are thought to make excellent entrepreneurs.
• They have organized themselves, often at great social
  and emotional case, to pack up their lives and belongings, and leave their homelands.

Question 18

The research suggests that individuals who grow up with an entrepreneurial family will receive three
types of inheritance.

Answer 18

• Entrepreneurial inheritance: comprises the characteristics and values that are acquired
  from exposure to an entrepreneurial parent.
• Children will learn to value hard work. They will inherit the
  psychological characteristics of self-reliance and the need to accomplish goals.
• Vocational inheritance: This means that kids will
  observe and learn work- or job-related skills from their parents.
• A shop owner may employ her children after school or
  over the summer to help run the shop. As a result they will learn about selling, customer service and inventory management.
• A third reason why children follow their parents is that entrepreneurial families may be more willing to
  provide financial capital. This is known as economic inheritance.
• An entrepreneur generally needs
  money to get his or her enterprise off the ground. The availability of capital — perhaps on better terms
  than is available from a bank - may be critical to an individual’s decision to start their own business.
• More than half of Canadian businesses are owned by people over the age of 50.
• Anyone can start a business but in reality is that it takes capital, contacts, and credibility - as well as confidence - to start most businesses,

Question 19

Immigrants are both “pulled” and “pushed” into entrepreneurial careers. Describe what this means.

Answer 19

• The act of immigrating requires
  great self-confidence, a willingness to take reasonable risks to achieve a desired goal, and a high need to
  achieve that goal. - Each of these is a highly entrepreneurial attribute. Thus, immigrants may be “pulled”
  into an entrepreneurial career by their psychological make-up and personality.
• At the same time, immigrants often lack the social networks, the contacts, and the experience and track
  record in Canada to secure paid employment working for another. - Thus, no matter how clever or well
  educated they may be, immigrants may be “pushed” into starting their own enterprise.

Question 20

What do you need to start a business?

Answer 20

• Businesses need capital. In the absence of family money, the new enterprise
  owner will need to have acquired savings, probably through a decade or two of paid employment, before striking out on his or her own. Research suggests that roughly two-thirds of new enterprises were financed primarily by the entrepreneur’s personal savings.
• Entrepreneurs need contacts. The new enterprise owner will need co know suppliers of raw materials, transportation and delivery companies, providers of hardware and software support, legal advisers,
  bankers, and accountants. Once again, these sorts of contacts typically come from a decade or two in an
  industry, getting to know and trust the people you work with.
• Entrepreneurs need credibility. A proven track record in an industry is the best means of securing the help and co-operation of the contacts mentioned above, as well as securing the confidence of potential
  customers in the entrepreneur’s target market.
• For an achievement oriented, confident young person with an entrepreneurial personality, a few years of
  paid employment may be a necessary -Investment in shaping the adds of lacer success, in his or her favour