Economic views of the Entrepreneurial Activity

Entrepreneurship-Meaning-and-DefinitionEntrepreneurship in all its forms fosters job creation and economic development in the United States as well as around the world. Historically, however, in the period from 1977 until 2013, in the United States, a span of 46 years, according to an article in Time Magazine dated May 23, 2016 the number of new start-up businesses per 100,000 people has fallen from 257 businesses to 129, a drop of 50%.

Verne Harnish in his book “Scaling Up; How a Few Companies Make it… and Why the Rest Don’t (2014)”, speaks to the difficulty of an entrepreneurial company attempting to achieve success as it moves through it’s development cycle. In addition to the traditional shortages of primary resources of time, people, and money, the complexity of this challenge comes from inexperience in leadership, scalable infrastructure, and the market dynamics. This author points out that out of 28 Million firms in the United States, 96% create annual revenues less than $1 million and among the remaining 4% only .015%, 17,000 companies, achieve a size greater than $50 million.

Venture capital and angel investor companies provide equity financing for companies at varying stages of their growth. Entrepreneurial start up companies that have exciting technology and see large market share opportunities will find some “early stage” investment from these equity companies. As entrepreneurial companies grow and demonstrate value, “later stage” investments see more involvement from the financing companies. The investment firms tend to see an enormous number of business plans from budding companies, but fund very few. In the startup phase, new firms often have no revenue and are spending early money to get started. There will be an influx of investment dollars for those successful companies that find rapid growth.

As the number of employees grows in the entrepreneurial company there is a multiplier effect of the talent and creative intelligence pool. Wiseman and McKeown in their book “Multipliers; How the best leaders make Everyone Smarter (2010)”, by optimizing and attracting talent that brings out the best thinking. These authors point out that the multiplier executive creates and intense and vibrant culture that contains opportunity for the people to stretch and share in the ownership where their energy is seen as adding to their firm value.

The success of entrepreneurial and intrapreneurial companies is founded on their ability to innovate and bring new ideas into reality. Another key source of innovation lies in academic institution’s focus on entrepreneurial and innovation techniques within their engineering and business school curriculums. Innovation is also a significant academic focus like the “D” school innovation program at Stanford University. Training undergraduate students with contests and challenges is a way of creating stimulus to new ideas from students.

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3 Responses to Economic views of the Entrepreneurial Activity

  1. avatar 강남룸 says:

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    • avatar Ron Lesniak says:

      Thanks for your comment on my recent website post. I have a real passion for entrepreneurism as I was a serial entrepreneur and was successful in selling my most successful startup. I would love to remain in touch. Thanks for visiting the site. There will be more coming soon.

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