Impact of Entrepreneurial Firms in Today's Economy: GEM and Gazelles

Impact of Entrepreneurial Firms in Today's Economy

4.1 Global Entrepreneurship Monitor (GEM) by Babson College

Provides an annual assessment of the entrepreneurial environment of 42 countries.

Entrepreneurs lead to growth by:

• Entering and expanding existing markets
• Creating entirely new markets by offering innovative products
• Increasing diversity and fostering minority participation in the economy

4.2 The Most Impacting: The Gazelles (High Tech Growth Firm)

A “Gazelle” (high growth companies) is a business establishment with at least 20% sales growth in each year for five years, starting with a base of at least $100,000 in annual sales.

• Gazelles as leaders in innovation
• Produce twice as many product innovations per employee as do larger firms
• Have been responsible for 55% of the innovations in 362 different industries and 95% of all radical innovations (i.e. breakthrough)
• Obtain more patents per sales dollar than do larger firms

4.3 Mythology Associated with Gazelles

• Gazelles are the goal of all entrepreneurs
• Gazelles obtain venture capital
• Gazelles are high-tech
• Gazelles are global

4.4 Entrepreneurial Firm Impact and Trend

Entrepreneurial components of the U.S. Economy:

1. Large firms have increased profitability by returning to their “core competencies through restructuring and downsizing
2. New entrepreneurial companies have been blossoming in new technologies and new markets
3. Thousands of smaller firms established by women, minorities, and immigrants have strengthened the economy

Entrepreneurial firms make two indispensable contributions to an economy:

1. They are an integral part of the renewal process that pervades and defines market economies
2. They are the essential mechanism by which millions enter the economic and social mainstream of society

The Entrepreneurial Process

“Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach, and leadership balanced” (Timmons, 1999: 27)

Main features of Timmons’ model:

• It is opportunity driven
• It is driven by a lead entrepreneur and an entrepreneurial team
• It is resource parsimonious and creative
• It depends on the fit and balance among resources and needs
• It is integrated and holistic

The process starts with opportunity, not strategy, resources or planning

Opportunity recognition results from creativity, which is shared by the entrepreneur and the entrepreneurial team

Creativity results from collision between academic learning and real world practice

Value Creation results from integration of opportunity and efficient use of resources

Combination of people, opportunity and resources coming together at a particular time may determine the chance for success

Phases detailed:

1. Entrepreneurial Interest
2. Generate Business Ideas—Opportunity Identification
3. Opportunity Evaluation/Assessment
4. Develop and Refine the Concept
5. Determine the Resources Required
6. Acquire the Necessary Financing/Partners
7. Develop the Business Plan
8. Implement and Manage
9. Harvest the Venture—Growth/Exit Strategy