ENTR 301: Principled

Entrepreneurship & The

Free Enterprise System

Russell S. Sobel, Ph.D.Professor of Economics and Entrepreneurship

Baker School of BusinessThe Citadel

ENTR 301 Outline Level

◼ Section I: Entrepreneurship & Economic Theory

• Part 1: What is the Definition of an “Entrepreneur”

What is Entrepreneurship?

Defining entrepreneurship is harder than you might think….

For each of the following decide if you would consider them an ‘entrepreneur’…

Elon MuskFounder (and generally designer/CEO) of Tesla, SpaceX, and The Boring Company

Jennifer and Jordan Olsen

Jennifer and Jordan Olsen, purchased the Subway franchise in Kaysville, Utah they worked at when they were young from a prior owner

Abner Doubleday

◼ Abner Doubleday - invented the game known as baseball in Cooperstown, New York, during the summer of 1839.

◼ He was also a US Army major general who fired the first shot in defense of Fort Sumter in the Civil War.

Edward Teach “Blackbeard”

◼ He owned and commanded four ships with over 300 men (employees) he recruited and went on risky adventures some of which were profitable others not, all governed by a set of ship rules (constitution) he drafted.

This book is all about the economics of pirates!

Making Sense of it All…

Defining Entrepreneurship

There are a variety of definitions, these are the dimensions on which they differ:

◼ Originality of idea / discovery

◼ For profit business sector or not?

◼ Degree of control over decisions & resources

◼ Degree of involvement in daily operations

◼ Residual claimant? (keeps the profit or suffers the loss)

◼ Risk-taking (personally? financially?)

◼ Motivation: personal vs. profit

Narrow Definition:

◼ An entrepreneur is an innovator who introduces new, often disruptive, combinations of resources (goods, services, methods of production, etc.) into the marketplace embodied in a new for-profit business venture they control and for which they have secured funding.

Elon MuskFounder (and generally designer/CEO) of Telsa, SpaceX, and The Boring Company

Chuck Hull

◼ Inventor of 3D printing, founder of 3D systems (now headquartered in Rock Hill, SC)

Josh Springer◼ Invented, secured

venture funding and created his own company

Candido Jacuzzi

◼ Italian immigrant farmer invented it to help his son, family still owns the business he started

Invention vs. Innovation

1. Not all inventions are good business ideas.

2. Not all business ideas are new inventions.

3. Improvements in production methodsalso count as entrepreneurship.

Invention vs. Innovation:

James Spangler & William Hoover

◼ James Spangler – invented modern upright electric vacuum cleaner (he was a department store janitor).

◼ William Hoover – cousin who bought the patent and started the business that successfully produced and sold the product worldwide.

Ray Kroc & Henry Ford:

New ‘Revolutionary’ Business Models◼ Ray Kroc – milkshake mixer salesman who invented franchising

based on Richard and Maurice McDonald’s restaurant.

◼ Henry Ford – invents assembly line

for producing automobiles

Moving along…

◼ Virtually everyone would count the ones above as true ‘entrepreneurs’… Their actions fall within the ‘narrow’ definition.

◼ Now let’s move to other cases and definitions on which not everyone agrees is entrepreneurship…

Traditional Definition:

◼ An entrepreneur is someone who organizes, manages, and assumes the risks of a business or enterprise.

◼ This includes all of the prior ones and expands the concept to include…

Franchise Owners

Jennifer and Jordan Olsen, purchased the Subway franchise in Kaysville, Utah they worked at when they were young from a prior owner

Patricia Williams and her daughters own and operate several McDonald restaurants in the Los Angeles Area

And Other Traditional Business Owners

Such As…

John LaVerne(Citadel Class

of 1991)

Broad Definition

◼ An entrepreneur is someone who discovers or recognizes (previously unnoticed or unexploited) opportunities and acts on them—they are an agent of change.

◼ These include opportunities outside the for-profit ‘business’ sector (e.g., social, military, legal, political).

Academic Entrepreneurs

Military Entrepreneurs / Battle Strategy

From This:To This:

Social Entrepreneurs

Shanon Marcus McAlister

Culinary Entrepreneurs

◼ Sean Brock – Pioneering chef, bestselling cookbook author, winner of numerous culinary awards, chef at several restaurants including Husk “Best New Restaurant in America” in 2011.

Sports Entrepreneurs

◼ Walter Camp, first successful forward pass in football in 1876 Yale-Princeton game.

◼ The referee 'tossed a coin to make his decision and allowed the touchdown to stand'

Unproductive Entrepreneurs

◼ Productive vs. Unproductive Entrepreneurship (based upon social effects of the outcome – production vs. plunder)

Political Entrepreneurs

Gerrymandering – Gov. Elbridge Gerry (1812)

Illinois NC

Legal Entrepreneurs

◼ Thomas R. Michael, attorney who invented Medical Monitoring Damages “Ford F-150 law” Bower v. Westinghouse (1999)

Other Terms & Confusing Cases

Intrapreneurship

◼ Intrapreneurship – defined as entrepreneurship within an existing firm or organization

Intrapreneurs

◼ Post-its: (accidentally) invented internally by Spencer Silver and Arthur Fry at 3M, who fought over a dozen years to get it on the market through the company.

Lifestyle vs. Gazelle

◼ Lifestyle Entrepreneurs: People who start businesses to achieve personal freedom and/or have flexibility in their personal schedules. Goal isn’t to grow or expand.

VS.

◼ Gazelle Entrepreneurs: Try for rapid growth to become major companies – USUALLY HAVE EXIT STRATEGY

Chad Walldorf – Serial Entrepreneur

Chad Walldorf founded Sticky Fingers with his friends here in Charleston, sold it and has stared many more since then.

Serial Entrepreneurs – open multiple businesses in a row (success or failure)

Financial Risk Taker?

◼ Investors, Bankers, Shareholders, Venture Capitalists who provide funding or ownership? – Generally not considered entrepreneurship

Self-employment / Independent

Contractor

Self-employment / Independent

Contractor

◼ Working for one’s self - Earns income by conducting profitable operations not wages/salaries and is responsible for paying own payroll taxes (“1099 income” / Schedule C).

◼ May not be their main job

◼ Entrepreneurship? debatable…

Self-employment / Independent

Contractor

◼ Data on ‘self-employment’ are a poor measure of entrepreneurship because it is higher in rural or economically depressed areas with bad business climates

Necessity-based Entrepreneurship

◼ “Necessity based entrepreneurship” is a similar term and is measured in some global indexes for countries versus ‘opportunity’ entrepreneurship

Bigger Question?

◼ Whatever your definition, what traits do these people have?

◼ What can you learn that can help you be more entrepreneurial no matter what job future you have?

◼ How do you recognize opportunities, act on them, incentivize and manage others – how to lead creation or change