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Principles of Management

7.8 Trends in Entrepreneurship and Small-Business Ownership

Principles of Management7.8 Trends in Entrepreneurship and Small-Business Ownership
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Table of contents
  1. Preface
  2. 1 Managing and Performing
    1. Introduction
    2. 1.1 What Do Managers Do?
    3. 1.2 The Roles Managers Play
    4. 1.3 Major Characteristics of the Manager's Job
    5. Key Terms
    6. Summary of Learning Outcomes
    7. Chapter Review Questions
    8. Management Skills Application Exercises
    9. Managerial Decision Exercises
    10. Critical Thinking Case
  3. 2 Managerial Decision-Making
    1. Introduction
    2. 2.1 Overview of Managerial Decision-Making
    3. 2.2 How the Brain Processes Information to Make Decisions: Reflective and Reactive Systems
    4. 2.3 Programmed and Nonprogrammed Decisions
    5. 2.4 Barriers to Effective Decision-Making
    6. 2.5 Improving the Quality of Decision-Making
    7. 2.6 Group Decision-Making
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  4. 3 The History of Management
    1. Introduction
    2. 3.1 The Early Origins of Management
    3. 3.2 The Italian Renaissance
    4. 3.3 The Industrial Revolution
    5. 3.4 Taylor-Made Management
    6. 3.5 Administrative and Bureaucratic Management
    7. 3.6 Human Relations Movement
    8. 3.7 Contingency and System Management
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Managerial Decision Exercises
  5. 4 External and Internal Organizational Environments and Corporate Culture
    1. Introduction
    2. 4.1 The Organization's External Environment
    3. 4.2 External Environments and Industries
    4. 4.3 Organizational Designs and Structures
    5. 4.4 The Internal Organization and External Environments
    6. 4.5 Corporate Cultures
    7. 4.6 Organizing for Change in the 21st Century
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  6. 5 Ethics, Corporate Responsibility, and Sustainability
    1. Introduction
    2. 5.1 Ethics and Business Ethics Defined
    3. 5.2 Dimensions of Ethics: The Individual Level
    4. 5.3 Ethical Principles and Responsible Decision-Making
    5. 5.4 Leadership: Ethics at the Organizational Level
    6. 5.5 Ethics, Corporate Culture, and Compliance
    7. 5.6 Corporate Social Responsibility (CSR)
    8. 5.7 Ethics around the Globe
    9. 5.8 Emerging Trends in Ethics, CSR, and Compliance
    10. Key Terms
    11. Summary of Learning Outcomes
    12. Chapter Review Questions
    13. Management Skills Application Exercises
    14. Managerial Decision Exercises
    15. Critical Thinking Case
  7. 6 International Management
    1. Introduction
    2. 6.1 Importance of International Management
    3. 6.2 Hofstede's Cultural Framework
    4. 6.3 The GLOBE Framework
    5. 6.4 Cultural Stereotyping and Social Institutions
    6. 6.5 Cross-Cultural Assignments
    7. 6.6 Strategies for Expanding Globally
    8. 6.7 The Necessity of Global Markets
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  8. 7 Entrepreneurship
    1. Introduction
    2. 7.1 Entrepreneurship
    3. 7.2 Characteristics of Successful Entrepreneurs
    4. 7.3 Small Business
    5. 7.4 Start Your Own Business
    6. 7.5 Managing a Small Business
    7. 7.6 The Large Impact of Small Business
    8. 7.7 The Small Business Administration
    9. 7.8 Trends in Entrepreneurship and Small-Business Ownership
    10. Key Terms
    11. Summary of Learning Outcomes
    12. Chapter Review Questions
    13. Management Skills Application Exercises
    14. Managerial Decision Exercises
    15. Critical Thinking Case
  9. 8 Strategic Analysis: Understanding a Firm’s Competitive Environment
    1. Introduction
    2. 8.1 Gaining Advantages by Understanding the Competitive Environment
    3. 8.2 Using SWOT for Strategic Analysis
    4. 8.3 A Firm's External Macro Environment: PESTEL
    5. 8.4 A Firm's Micro Environment: Porter's Five Forces
    6. 8.5 The Internal Environment
    7. 8.6 Competition, Strategy, and Competitive Advantage
    8. 8.7 Strategic Positioning
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  10. 9 The Strategic Management Process: Achieving and Sustaining Competitive Advantage
    1. Introduction
    2. 9.1 Strategic Management
    3. 9.2 Firm Vision and Mission
    4. 9.3 The Role of Strategic Analysis in Formulating a Strategy
    5. 9.4 Strategic Objectives and Levels of Strategy
    6. 9.5 Planning Firm Actions to Implement Strategies
    7. 9.6 Measuring and Evaluating Strategic Performance
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  11. 10 Organizational Structure and Change
    1. Introduction
    2. 10.1 Organizational Structures and Design
    3. 10.2 Organizational Change
    4. 10.3 Managing Change
    5. Key Terms
    6. Summary of Learning Outcomes
    7. Chapter Review Questions
    8. Management Skills Application Exercises
    9. Managerial Decision Exercises
    10. Critical Thinking Case
  12. 11 Human Resource Management
    1. Introduction
    2. 11.1 An Introduction to Human Resource Management
    3. 11.2 Human Resource Management and Compliance
    4. 11.3 Performance Management
    5. 11.4 Influencing Employee Performance and Motivation
    6. 11.5 Building an Organization for the Future
    7. 11.6 Talent Development and Succession Planning
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  13. 12 Diversity in Organizations
    1. Introduction
    2. 12.1 An Introduction to Workplace Diversity
    3. 12.2 Diversity and the Workforce
    4. 12.3 Diversity and Its Impact on Companies
    5. 12.4 Challenges of Diversity
    6. 12.5 Key Diversity Theories
    7. 12.6 Benefits and Challenges of Workplace Diversity
    8. 12.7 Recommendations for Managing Diversity
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  14. 13 Leadership
    1. Introduction
    2. 13.1 The Nature of Leadership
    3. 13.2 The Leadership Process
    4. 13.3 Leader Emergence
    5. 13.4 The Trait Approach to Leadership
    6. 13.5 Behavioral Approaches to Leadership
    7. 13.6 Situational (Contingency) Approaches to Leadership
    8. 13.7 Substitutes for and Neutralizers of Leadership
    9. 13.8 Transformational, Visionary, and Charismatic Leadership
    10. 13.9 Leadership Needs in the 21st Century
    11. Key Terms
    12. Summary of Learning Outcomes
    13. Chapter Review Questions
    14. Management Skills Application Exercises
    15. Managerial Decision Exercises
    16. Critical Thinking Case
  15. 14 Work Motivation for Performance
    1. Introduction
    2. 14.1 Motivation: Direction and Intensity
    3. 14.2 Content Theories of Motivation
    4. 14.3 Process Theories of Motivation
    5. 14.4 Recent Research on Motivation Theories
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Management Skills Application Exercises
    10. Managerial Decision Exercises
    11. Critical Thinking Case
  16. 15 Managing Teams
    1. Introduction
    2. 15.1 Teamwork in the Workplace
    3. 15.2 Team Development Over Time
    4. 15.3 Things to Consider When Managing Teams
    5. 15.4 Opportunities and Challenges to Team Building
    6. 15.5 Team Diversity
    7. 15.6 Multicultural Teams
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  17. 16 Managerial Communication
    1. Introduction
    2. 16.1 The Process of Managerial Communication
    3. 16.2 Types of Communications in Organizations
    4. 16.3 Factors Affecting Communications and the Roles of Managers
    5. 16.4 Managerial Communication and Corporate Reputation
    6. 16.5 The Major Channels of Management Communication Are Talking, Listening, Reading, and Writing
    7. Key Terms
    8. Summary of Learning Outcomes
    9. Chapter Review Questions
    10. Management Skills Application Exercises
    11. Managerial Decision Exercises
    12. Critical Thinking Case
  18. 17 Organizational Planning and Controlling
    1. Introduction
    2. 17.1 Is Planning Important
    3. 17.2 The Planning Process
    4. 17.3 Types of Plans
    5. 17.4 Goals or Outcome Statements
    6. 17.5 Formal Organizational Planning in Practice
    7. 17.6 Employees' Responses to Planning
    8. 17.7 Management by Objectives: A Planning and Control Technique
    9. 17.8 The Control- and Involvement-Oriented Approaches to Planning and Controlling
    10. Key Terms
    11. Summary of Learning Outcomes
    12. Chapter Review Questions
    13. Management Skills Application Exercises
    14. Managerial Decision Exercises
    15. Critical Thinking Case
  19. 18 Management of Technology and Innovation
    1. Introduction
    2. 18.1 MTI—Its Importance Now and In the Future
    3. 18.2 Developing Technology and Innovation
    4. 18.3 External Sources of Technology and Innovation
    5. 18.4 Internal Sources of Technology and Innovation
    6. 18.5 Management Entrepreneurship Skills for Technology and Innovation
    7. 18.6 Skills Needed for MTI
    8. 18.7 Managing Now for Future Technology and Innovation
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  20. References
  21. Index
  1. What trends are shaping entrepreneurship and small-business ownership?

Entrepreneurship has changed since the heady days of the late 1990s, when starting a dot-com while still in college seemed a quick route to riches and stock options. Much entrepreneurial opportunity comes from major changes in demographics, society, and technology, and at present there is a confluence of all three. A major demographic group is moving into a significantly different stage in life, and minorities are increasing their business ownership in remarkable numbers. We have created a society in which we expect to have our problems taken care of, and the technological revolution stands ready with already-developed solutions. Evolving social and demographic trends, combined with the challenge of operating in a fast-paced technology-dominated business climate, are changing the face of entrepreneurship and small-business ownership.

Into the Future: Start-ups Drive the Economy

Did new business ventures drive the economic recovery from the 2001–2002 and 2007–2009 to recessions, and are they continuing to make significant contributions to the U.S. economy? The economists who review Department of Labor employment surveys and SBA statistics think so. “Small business drives the American economy,” says Dr. Chad Moutray, former chief economist for the SBA’s Office of Advocacy. “Main Street provides the jobs and spurs our economic growth. American entrepreneurs are creative and productive.” Numbers alone do not tell the whole story, however. Are these newly self-employed workers profiting from their ventures, or are they just biding their time during a period of unemployment?

U.S. small businesses employed 57.9 million people in 2016, representing nearly 48 percent of the workforce. The number of net new jobs added to the economy was 1.4 million.24

The highest rate of growth is coming from women-owned firms, which continues to rise at rates higher than the national average—and with even stronger growth rates since the recession. There were an estimated 11.6 million women-owned businesses employing nearly 9 million people in 2016, generating more than $1.7 trillion in revenue.25

Between 2007 and 2017, women-owned firms increased by 114 percent, compared to a 44 percent increase among all businesses. This means that growth rates for women-owned businesses are 2.5 times faster than the national average. Employment growth was also stronger than national rates. Women-owned businesses increased 27 percent over the past 20 years, while overall business employment has increased by 13 percent since 2007.26

These trends show that more workers are striking out on their own and earning money doing it. It has become very clear that encouraging small-business activity leads to continued strong overall economic growth.

Changing Demographics Create Entrepreneurial Diversity

The mantra, “60 is the new 40,” describes today’s Baby Boomers who indulge in much less knitting and golf in their retirement years. The AARP predicts that silver-haired entrepreneurs will continue to rise in the coming years. According to a recent study by the Kauffman Foundation, Baby Boomers are twice as likely as Millennials to start a new business. In fact, close to 25 percent of all new entrepreneurs fall between the ages of 55 and 64.27 This has created a ripple effect in the way we work. Boomers have accelerated the growing acceptance of working from home, adding to the millions of U.S. workers already showing up to work in their slippers. In addition, the ongoing corporate brain drain could mean that small businesses will be able to tap into the expertise of seasoned free agents at less-than-corporate prices—and that seniors themselves will become independent consultants to businesses of all sizes.28

The growing numbers of Baby Boomer entrepreneurs has prompted some forward-thinking companies to recognize business opportunities in technology. At one time there was a concern that the aging of the population would create a drag on the economy. Conventional wisdom says that the early parenthood years are the big spending years. As we age, we spend less and, because Boomers are such a big demographic group, this was going to create a long-term economic decline. Not true, it now appears. The Boomer generation has built sizable wealth, and they are not afraid to spend it to make their lives more comfortable.

Minorities are also adding to the entrepreneurial mix. As we saw in Exhibit 7.4, minority groups and women are increasing business ownership at a much faster rate than the national average, reflecting their confidence in the U.S. economy. These overwhelming increases in minority business ownership paralleled the demand for U.S. Small Business Administration loan products. Loans to minority business owners in fiscal year 2017 set a record—more than $9.5 billion, or 31 percent, of SBA’s total loan portfolio.29

The latest Kauffman Foundation Index of Startup Activity found that immigrants and Latinos have swelled the growing numbers of self-employed Americans in recent years, increasing the diversity of the country’s entrepreneurial class. Overall, minority-owned businesses increased 38 percent. The SBA notes that the number of Hispanic-owned businesses has increased more than 46 percent between 2007 and 2012.30

An image contains 2 smaller, side by side images; and at the bottom reads, Rodan and Fields, redefine.
Exhibit 7.6 The popularity of home businesses such as Rodan+Fields, eBay, and other e-commerce sites has given rise to a new kind of entrepreneur: the “mompreneur.” Typically ex-corporate professionals, these web-driven women launch home businesses specializing in the sale of antiques, jewelry, thrift-store fashions, and other items. Aided by digital photography, wireless technology, and friendly postal workers, these savvy moms are one of the fastest-growing segments of entrepreneurs building successful businesses on the web. Why are many professional women leaving the workplace to start entrepreneurial ventures online? (Credit: Amanda nobles/ Flickr/ Attribution 2.0 Generic (CC BY 2.0))

How Far Will You Go to Get Rich?

With enough intelligence and determination, people can get rich almost anywhere in the United States. Whether you own chains of dry cleaners in Queens, car dealerships in Chicago, or oil wells in West Texas, fortunes have been made in every state in the Union. There are some places, however, where the chances of creating wealth are much greater than others. That is the reason why people who hope to strike it rich move to places such as Manhattan or Palo Alto. It’s not because the cost of living is low or the quality of life as a struggling entrepreneur is fun. Whether starting a software or soft-drink company, entrepreneurs tend to follow the money

But not all companies follow the herd. Guild Education, founded in 2015 by Rachel Carlson and Brittany Stich at Stanford University, left San Francisco due to the high cost of living that could slow down the company’s growth. “We have a lot of women who are executives and department heads here, starting with myself and my cofounder,” CEO Rachel Carlson said. “So when we left, we deliberately chose a place where you can have a family.”31 Guild Education’s mission is to help large employers offer college education and tuition reimbursement as a benefit to the 64 million working-age adults who lack a college degree.

Since moving to Denver, Guild Education has raised another $21 million in venture capital, bringing the total funding to $31.5 million with a company valuation of $125 million.32 The company headquarters in Denver is next door to a Montessori school and employs 58 employees. “We were joking that we’re the polar opposite of Apple,” said Carlson. “Remember when the new ‘mothership’ came out? Every single parent noticed that it had a huge gym but not a day care.”

According to PwC’s quarterly venture capital study, “MoneyTree Report,” the top regions in the United States for venture-backed deals in the third quarter of 2017 were San Francisco ($4.1 billion), New York Metro ($4.2 billion), Silicon Valley (Bay Area $2.2 billion), and New England ($1.8 billion). 33

In 2017, equity financing in U.S. start-ups rose for the third straight quarter, reaching $19 billion, according to the PwC/CB Insights “MoneyTree Report Q3 2017.” “Financing was boosted by a large number of mega-rounds,” says Tom Ciccolella, Partner, U.S. Ventures Leader at PwC.34 Twenty-six mega-rounds of $100 million in companies such as WeWork, 23andMe, Fanatics, and NAUTO contributed to the strong activity levels in the first three quarters of 2017. The top five U.S. industry sectors with the most deals and funding were Internet, Healthcare, Mobile and Telecommunications, Software (Non-Internet/Mobile), and Consumer Products.

Concept Check

  1. What significant trends are occurring in the small-business arena?
  2. How is entrepreneurial diversity impacting small business and the economy?
  3. How do ethics impact decision-making with small-business owners?
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