ENTREPRENEURSHIP AND SMALL BUSINESS IN CANADA

Bygrave, Entrepreneurship, Canadian Edition, © 2015 John Wiley & Sons Canada, Ltd.

• New businesses are created every day • An entrepreneur is the person who destroys the existing economic order by introducing new products and services, by introducing new methods of production, by creating new forms of organization, or by exploiting new raw materials (Definition by Schumpeter) • An entrepreneur is everyone who starts a new business (Definition in this book)

ENTREPRENEURSHIP AND SMALL BUSINESS IN CANADA

Learning Objective 1.1 Describe entrepreneurship and small business in Canada.• In 2011, there were 1.1 million or so employer owned businesses in Canada, of which approximately 98 percent were small businesses • Approximately 55 percent of employer owned businesses in Canada have one to four employees • About 77% of new ventures survive for at least one year, but only 36% of new ventures survive their first five years.

Entrepreneurial Revolution • On November 1, 1999, Chevron, Goodyear Tire and Rubber Company, Sears Roebuck, and Union Carbide were removed from the Dow Jones Industrial Average (DJIA) and replaced by Intel, Microsoft, Home Depot, and SBC Communications • Intel and Microsoft became the first two companies traded on the NASDAQ exchange to be listed in the DJIA • Other entrepreneurial companies: FedEx, Southwest Airlines, lululemon, Apple, WestJet, 3Com, Dell • The late 1970s and early 1980s were miraculous years for entrepreneurial ventures in the computer industry.• No new product or service has transformed the global economy more or been adopted as quickly by such a large percentage of the population than the Web.

Web: Three Revolutions Converge

• In 1989 Tim Berners Lee wrote a proposal to develop software that resulted in the World Wide Web • The three revolutions were in Digital Technology, Information Technology (IT), and Entrepreneurship • WWW was released in 1992 • On April 30th 1993, CERN’s directors made a declaration that WWW technology would be freely usable by anyone • By December 1994 the Web was growing at approximately 1% a day—with a doubling period of less than 10 weeks • By 2009 the number of users was approaching 1.7 billion, which was almost 25 percent of the entire population of the world

Entrepreneurship Revolution Strikes Gold Chapter 1 (Entrepreneurship, 1st Canadian Edition 1e William Bygrave, Andrew Zacharakis, Sean Wise) (Instructor Manual with Case Notes) 1 / 4

Bygrave, Entrepreneurship, Canadian Edition, © 2015 John Wiley & Sons Canada, Ltd.• Netscape’s billion-dollar IPO set the technological, social, and financial tone of the Internet age • By 2010 venture capital backed companies accounted for approximately 11 percent of jobs in the U.S.A. and 21 percent of its GDP • The period 1996 through 2000 was a golden era for classic venture capitalists and the entrepreneurial companies they invested in • Benchmark Capital’s investment of $5 million in eBay multiplied 1500-fold in just two years

Creative Destruction • Old industries, such as print newspapers, were slow to recognize that their business models were endangered by the Web; some shut down completely

CAUSES OF THE ENTREPRENEURIAL REVOLUTION

Learning Objective 1.2 Outline the causes of the entrepreneurial revolution.• In the 1930s, 1940s, 1950s, and 1960s; entrepreneurship did not grow very much; this was due to the Depression, World War II, and the post-war boom of big business.• Since the end of the 1960s, entrepreneurship has grown; social, cultural, and political changes in the economy in the 1970s helped to reignite entrepreneurship

Changes in the Entrepreneurial Framework Conditions • Cultural and Social Norms – the generation that came of age had no memory of the hardships their parents experienced; they grew up during a time when the economy was doing well so were not concerned about job security; many were rebelling against large corporations; and they were better educated than their parents so starting a business was a credible career.• Government – the government bailed out companies; reduced capital gains tax, instigated investing activity • R&D Transfer – organizations are allowed to patent federally sponsored research; tax incentives encourage research and development • Physical Infrastructure – web related changes; the web has allowed small businesses to level the playing field against big businesses • Human Infrastructure – numerous entrepreneurship experts gladly help people who are starting or growing companies • Education, Training, and Professionalization – most colleges and universities have at least one entrepreneurship course • Financial – today there is an abundance of help

Churning and Economic Growth • Businesses are dying and being created constantly – this is a healthy process

• Examples of churning: PC industry and airlines industry

• Many lose their jobs as a result of churning, but new businesses create new jobs.

GLOBAL ENTREPRENEURSHIP MONITOR (GEM)

Learning Objective 1.3 Describe what the Global Entrepreneurship Monitor (GEM) is and 2 / 4

Bygrave, Entrepreneurship, Canadian Edition, © 2015 John Wiley & Sons Canada, Ltd.outline the principal findings from GEM.• The Global Entrepreneurship Monitor (GEM) was conceived in 1997 to study the economic impact and the determinants of national-level entrepreneurial activity

PRINCIPAL FINDINGS FROM GEM

Activity • Total Entrepreneurial Activity (TEA) is a key indicator of GEM. It measures the percentage of adults (aged 18–64) in an economy who are nascent and new entrepreneurs.(see Table 1.1) • The highest average TEA rates were found in sub-Saharan Africa and Latin America/Caribbean.

Necessity- and Opportunity-Driven Entrepreneurs • Necessity-driven entrepreneurs are those who are pushed into starting businesses because they have no other work options and need a source of income.• Opportunity-motivated entrepreneurs are those entering this activity primarily to pursue an opportunity.

Age Distribution • The highest entrepreneurship rates generally occur among 25 to 34 year olds (Figure 1.6)

Gender Differences • Greater involvement in entrepreneurship among men than women in most economies.• The ratio of female to male entrepreneurs is higher in the case of necessity based entrepreneurship (Figure 1.7)

Growth Expectations and Job Creation • Out of every 10 early-stage entrepreneurs, seven expected some job creation. However, expectations of high growth are rare among nascent and new entrepreneurs.• Only 14% of all those involved in startup attempts expect to create 20 or more jobs

TWENTY-FIRST CENTURY ECONOMIES: ANGLO -SAXON OR SOCIAL MODELS?

Learning Objective 1.4 Compare the Anglo-Saxon economic system and the social model.• A group of nations with so-called Anglo-Saxon economic systems has a high prevalence rate of high-expectation entrepreneurial activity • Social model is prevalent in continental Europe

CONCLUSION

• Entrepreneurial activity in North America now accounts for much of the prosperity and competitiveness in the global economy • Among the big developed nations, the U.S. sets the entrepreneurial benchmark • Entrepreneurship is very important for national economies 3 / 4

Bygrave, Entrepreneurship, Canadian Edition, © 2015 John Wiley & Sons Canada, Ltd.Case Teaching Notes Alison Barnard Bill Bygrave October 20, 2006

Positioning the Alison Barnard case Alison Barnard, 27, after a couple of years working for several employers, has chosen entrepreneurship as her career. She is implementing a business plan that she wrote in an MBA class. Her business, In●jean●ius, is a boutique jeans and t-shirt store in Boston’s North End. Her business concept is all about fit: matching the woman with the jeans that fit her best. The store has been open six months and sales are far exceeding projections. The case includes choosing a career; Alison’s attributes, gathering resources to start her business; financing from family and friends; dealing with landlords, vendors, customers, and even shoplifters; training employees; and time management.

The case should be positioned early in a new ventures course immediately after the Malincho case.(Available from Harvard Business School Press or European Case Clearing House.)

Location: Boston (North End)

Date: 2005-2006

Industry: Jeans and t-shirt boutique

Age of entrepreneur: 27

Topics: Entrepreneurship as a career choice, finding and shaping an opportunity, retailing, getting work experience, networking, bootstrapping, 4F financing, fashion denim, off-the-shelf fit jeans with excellent fit, training employees, delegating, and shoplifting.

Alison Barnard This case is positioned near the beginning of a new ventures course so it is worthwhile to spend

some time discussing Alison. Start with the following question:

“Has Alison got the right stuff to be an entrepreneur?”

Here are some of her attributes:

• Determined • Passionate

• About shopping
• Fashion jeans
• Her new venture

• Enthusiastic • Ambitious • Experienced

• She worked part-time for an upscale boutique.
• After writing her business plan and earning her MBA, she worked for not much pay

and no benefits as a manager of a boutique to get experience.• Hard working • Courageous

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