Business creation is the process of transforming an idea into a viable economic project that offers value to customers and sustains the business itself. Creating a business involves analyzing the market and assessing potential risks, and formalizing this knowledge in a document called a business plan. Proprietors take on all of the financial risk associated with starting and operating a business, while employees do not. Proprietors also have to decide whether or not they want to operate their business as a sole proprietorship (a business that is owned and operated by an individual), a partnership, or as a corporation.
Entrepreneurs are attracted to businesses that can serve a large consumer base with a competitive product or service, or create entirely new industries that expand existing markets. However, business creation is not without its costs, with start-up activities involving substantial investments in time and resources. Only about two-fifths of nascent ventures reach profitability. Policy makers face a difficult challenge in balancing the benefits of increased firm creation with the higher social costs involved.
This book examines the major theories underlying the decision to start a business and provides an in-depth analysis of the factors that influence its success or failure. It is intended to be a useful tool for scholars who wish to understand the process of entrepreneurship and its impact on society, as well as for policy analysts who emphasize the importance of programs and policies to enhance business creation.