Everything you need to know about the meaning and definitions of entrepreneur. An entrepreneur is someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced.
An entrepreneur supplies risk capital as a risk taker, and monitors and controls the business activities. The entrepreneur is usually a sole proprietor, a partner, or the one who owns the majority of shares in an incorporated venture.
Definitions of Entrepreneur by Famous Authors
Definitions of Entrepreneur – By Cantillon, J.B.Say, New Encyclopaedia Britannica, Joseph A. Schumpeter and Peter F. Drucker
The term ‘Entrepreneur’ is defined in different ways. However, no consensus has been arrived at a universally accepted definition of entrepreneur.
Important definitions of entrepreneur are given below:
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According to him, an entrepreneur is the agent who buys means of production at certain prices in order to combine them into a product that he going to sell at prices that are uncertain at the moment at which he commits himself to his costs.
In this definition Cantillon emphasized the function of risk taking and uncertainty bearing. The entrepreneur is designated as a dealer who purchases the means of production for combining them into marketable products.
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“The entrepreneur is the economic agent who unites all means of production, the labour force of the one and the capital or the land of the others and who finds in the value of products his results from their employment reconstitution of the entire capital that he utilizes and the value of the wages, the interest and the rent which he pays as well as profits belonging to himself.”
Thus, above definition provides than an entrepreneur is an important agent of production who gets together other factors of production. He further states that the entrepreneur shifts economic resources out of an area of lower productivity into an area of higher productivity and greater yield.
(iii) The New Encyclopaedia Britannica:
It treats an entrepreneur as an individual who bears the risk of operating a business in the face of uncertainty about the future conditions. This definition deals with uncertain future and that causes risk in the operation of a business and entrepreneur is required to bear the risk.
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He defined “entrepreneur as an individual who carries out new combines of means of production by which there occurs disequilibrium.”
He further stated that the key individuals in development are the entrepreneurs who are especially motivated and talented class of people. They foresee the potentially profitable opportunity and try to exploit it. According to him, entrepreneur is basically an innovator and innovator is one who introduces new combinations.
Innovations may occur in the following forms:
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(a) The introduction of new good-that is one which consumers are not yet familiar or of a new quality of a good.
(b) The introduction of a new method of production that one not yet tested by experience in the branch of manufacture concerned which need by no means be founded upon a discovery scientifically new and can also exist in a new way of handling a commodity commercially.
(c) The opening of a new market that is a market into which the particular branch of manufacture of the country in question has not previously entered whether or not thus market has existed before.
(d) The conquest of a new source of supply of raw materials or half manufactured goods irrespective of whether this source already exists or whether it has first to be created.
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(e) The carrying out of the new organization of any industry, like the creation of a monopoly position (for example through rectification) or the breaking up of a monopoly position.
Thus, Schumpeter postulated that dynamic disequilibrium brought on by the innovating entrepreneur, rather than equilibrium and optimization is the norm of a healthy economy and the central reality for economy theory and economic practice. Basically, entrepreneurs see change as the norm and as healthy. Usually, they do not bring about the change themselves that is; they are usually not inventors but always search for change, respond to it and exploit it as an opportunity.
(v) Peter F. Drucker:
He observed that “Entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth. Innovation indeed creates a resource.”
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According to Peter Drucker, successful entrepreneurs, whatever their individual motivation be it money, power, curiosity, or the desire for fame and recognition try to create value and to make a contribution. Still successful entrepreneurs aim high. They are not content simply to improve an alternative what already exists, or to modify it.
They try to create new and different values and new and different satisfactions to convert a material into a resource or to combine existing resources in a new and more productive configuration. And it is change that always provides opportunity for the new and different products.
In this context, Drucker mentioned the concept of systematic innovation. “Systematic innovation consists in the purposeful and organized search for changes and in the systematic analysis of the opportunities such changes and in the systematic analysis of the opportunities such changes might offer for economic or social innovation.”
According to him systematic innovation means monitoring seven sources for innovative opportunity. The first four sources lie within the enterprise whether business or public service institution or within an industry or services sector. They are therefore visible primarily to people within that industry or service sector. They are basically symptoms. But they are highly reliable indicators of changes that have already happened or can be made to happen with little effort.
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These four source areas are:
(i) The unexpected success, the unexpected failure, the unexpected outside event.
(ii) The incongruity between reality as it actually is and reality as it is assumed to be or as it “ought to be.”
(iii) Innovation based on process need.
(iv) Changes in industry structure or market structures that catch everyone unawares.
The second set of sources for innovative opportunity – a set of three involves changes outside the enterprise or industry:
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(i) Demographic (population changes).
(ii) Changes in perception, mood and meaning.
(iii) New knowledge both scientific and non-scientific.
Thus, on the basis of the above definitions we can say that “Entrepreneurs are agents of change and growth in a market economy and they can act to accelerate the generation, dissemination and application of innovation ideas. Doing so, they not only ensure that efficient use is made of resources, but also expand the boundaries of economic activity. Entrepreneurs not only seek out and identify potentially profitable economic opportunities but are also willing to take risks to see it their hunches are right”.
Definitions of Entrepreneur
The term ‘Entrepreneur’ is defined in different ways. However, no consensus has been arrived at a universally accepted definition of entrepreneur.
Important definitions of entrepreneur are given below:
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Cantillon- According to him, an entrepreneur is the agent who buys means of production at certain prices in order to combine them into a product that he is going to sell at prices that are uncertain at the moment at which he commits himself to his costs.
In this definition, Cantillon emphasised the function of risk taking and uncertainty bearing. The entrepreneur is designated as a dealer who purchases the means of production or combining them into marketable products.
J. B. Say- “The entrepreneur is the economic agent who unites all means of production…. the labour force of the one and the capital or the land of the others and who finds in the value of products his results from their employment reconstitution of the entire capital that he utilises and the value of the wages, the interest and the rent which he pays as well as profits belonging to himself.”
The above definition provides that an entrepreneur is an important agent of production who gets together other factors of production. He further states that the entrepreneur shifts economic resources out of an area of lower productivity into an area of higher productivity and greater yield.
The New Encyclopaedia Britannica- It treats an entrepreneur as an individual who bears the risk of operating a business in the face of uncertainty about the future conditions. This definition deals with uncertain future and that causes risk in the operation of a business and entrepreneur is required to bear the risk.
Joseph. A. Schumpeter- He defined “entrepreneur as an individual who carries out new combines of means of production by which there occurs disequilibrium.”
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He further stated that the key individuals in development are the entrepreneurs, who are especially motivated and talented class of people. They foresee the potentially profitable opportunity and try to exploit it. According to him, entrepreneur is basically an innovator and innovator is one who introduces new combinations.
Innovations may occur in the following forms:
(a) The introduction of new good—that is one which consumers are not yet familiar or of a new quality of a good.
(b) The introduction of a new method of production that one not yet tested by experience in the branch of manufacture concerned which need by no means be founded upon a discovery scientifically new and can also exist in a new way of handling a commodity commercially.
(c) The opening of a new market that is a market into which the particular branch of manufacture of the country in question has not previously entered whether or not thus market has existed before.
(d) The conquest of a new source of supply of raw materials or half manufactured goods irrespective of whether this source already exists or whether it has first to be created.
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(e) The carrying out of the new organisation of any industry, like the creation of a monopoly position (for example through trustification) or the breaking up of a monopoly position.
Schumpeter had postulated that dynamic disequilibrium was brought in by innovation of entrepreneur rather than equilibrium and optimisation. It is the norm of a healthy economy and the central reality for economic theory and economic practice. Basically, entrepreneurs see change as the norm for healthy economy.
Usually, they do not bring about the change themselves, i.e., they are usually not inventory’s but innovators and this defines entrepreneur and entrepreneurship. It is the entrepreneur who always searches for change, responds to it and exploits it as an opportunity.
Peter F. Drucker- He observed that “Entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth. Innovation, indeed creates a resource.”
According to Peter Drucker, successful entrepreneurs, whatever their individual motivation be it money, power, curiosity or the desire for fame and recognition, try to create value and to make a contribution. Still, successful entrepreneurs aim high. They are not content simply to improve an alternative what already exists or to modify it.
They try to create new and different values and new and different satisfactions to convert a material into a resource or to combine existing resources in a new and more productive configuration and it is change that always provides opportunity for the new and different products.
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Here Drucker has mentioned the concept of systematic innovation. “Systematic innovation consists in the purposeful and organised search for changes and in the systematic analysis of the opportunities such changes might offer for economic or social innovation.”
According to him, systematic innovation means monitoring seven sources for innovative opportunity. The first four sources lie within the enterprise whether business or public service institution or within an industry or service sector. They are, therefore, visible primarily to people within that industry or service sector. They are basically symptoms but they are highly reliable indicators of change that have already happened or can be made to happen with little effort.
These four source areas are:
(i) The unexpected success, the unexpected failure, the unexpected outside event.
(ii) The incongruity between reality as it actually is and reality as it is assumed to be or as it “ought to be.”
(iii) Innovation based on process need.
(iv) Changes in industry structure or market structure that catch everyone unawares.
The second set of sources for innovative opportunity—a set of three involves change outside the enterprise or industry- (i) Demographic (population changes), (ii) Changes in perception, mood and meaning, (iii) New knowledge both scientific and non-scientific.
Thus, on the basis of the above definitions, we can say that “Entrepreneurs are agents of change and growth in a market economy and they can act to accelerate the generation, dissemination and application of innovative ideas.
Doing so, they not only ensure that efficient use is made of resources but also expand the boundaries of economic activity. Entrepreneurs not only seek out and identify potentially profitable economic opportunities but are also willing to take risks to see if their hunches are right.”
Definitions of Entrepreneur – According to Oxford Dictionary, International Encyclopedia, Schumpeter, Adam Smith, Peter F. Drucker, Richard Cantillon and W.B. Gartner
Before the concept of entrepreneurship is explored, it is important to, first, understand the meaning of ‘entrepreneur’ and also know who can be an entrepreneur.
An entrepreneur is someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced. An entrepreneur supplies risk capital as a risk taker, and monitors and controls the business activities. The entrepreneur is usually a sole proprietor, a partner, or the one who owns the majority of shares in an incorporated venture.
If one desires to be an entrepreneur, the given equation is what describes what an entrepreneur actually is-
Entrepreneur + Capital = Products + Customers = Business.
Definitions:
Let us now consider some definitions to understand who an entrepreneur is:
(i) According to Oxford Dictionary an entrepreneur is “A person who sets up a business or businesses, taking on financial risks in the hope of profit”
(ii) According to the International Encyclopedia, an entrepreneur is “An individual who bears the risk of operating a business in the face of uncertainty about the future conditions”.
(iii) Schumpeter’s Definition:
“The entrepreneur, in an advanced economy is an individual who introduces something new in the economy – a method of production not yet tested by experience in the branch of manufacturing, a product with which consumers are not yet familiar, a new source of raw material or of new markets and the like”.
(iv) Adam Smith’s Definition:
“The entrepreneur is an individual, who forms an organization for commercial purpose. She/he is proprietary capitalist, a supplier of capital and at the same time a manager who intervenes between the labour and the consumer”. “Entrepreneur is an employer, master, merchant but explicitly considered as a capitalist”
(v) Peter F. Drucker’s Views on Entrepreneur:
“An entrepreneur is the one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the specific tool of entrepreneurs, the means by which they exploit changes as an opportunity for a different business or different service”.
(vi) Richard Cantillon’s Definition:
“A person who pays certain price for a product to resell it at an uncertain price thereby making decision about obtaining and using resources while assuming the risk of enterprise”.
(vii) According to W.B. Gartner in the Year 1985:
Entrepreneur is a person who started a new business where there was none before.
For John Mackey, Co-CEO of Whole Foods, Healthy food has always been his passion. He built his company in a unique way. He wrote a book about it, called “Conscious Capitalism”. He is a great entrepreneur who showed the world a new and better way to do business. He made his passion business and did it with pleasure.
Definitions of Entrepreneur
The term ‘entrepreneur’ first of all appeared in the French language. In the early 16th century it was applied to persons engaged in military expeditions. It was extended to cover construction and other civil engineering activities in the 17th century. It was only in the 18th century that the word was used to refer to economic activities. Richard Cantillon, a French banker, applied the word entrepreneur to mean a person who bears uncertainty and risk.
According to Cantillon, “an entrepreneur is the agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future“. He gave example of a farmer who pays out contractual incomes to the landlord and the labourers and sells the agricultural produce at uncertain prices. Similarly, a merchant makes certain payments in expectation of uncertain receipts. Under this view, an entrepreneur is the person who assumes incalculable and non-insurable risks.
J.B. Say, a French economist, has defined an entrepreneur as the economic agent who unites all means of production—land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit.
Thus, Say makes a clear distinction between the capitalist and the entrepreneur. A capitalist simply provides finance whereas an entrepreneur is an organiser who combines various factors of production to produce a socially viable product. To play his role successfully, an entrepreneur needs the art of superintendence and administration. According to Say, an entrepreneur shifts economic resources out of an area of lower into an area of higher productivity and greater yield.
According to Joseph Schumpeter, an entrepreneur is an innovator who brings economic development through new combinations of factors of production. Schumpeter also made a distinction between an innovator and inventor. An inventor discovers new materials and methods while an innovator utilises these discoveries to make new combinations.
To conclude, an entrepreneur is someone who recognises an opportunity, raises the resources required to exploit that opportunity and assumes the risk associated with executing the plans. An entrepreneur can, therefore, be defined as an individual or a group of individuals who tries to create something new, who organises production and undertakes risk involved in the establishment and operation of a business enterprise.
Definitions of Entrepreneur – According to Cantillion and Schumpeter
An entrepreneur is defined as a person who innovates, organizes, operates, and assumes the risk for a new business venture. The term entrepreneur has been derived from old French entrependre, which means to undertake. A venture is a business enterprise involving risk in expectation of gain.
The above definition of entrepreneur has four components, which highlight the facets of an entrepreneur. Firstly, an entrepreneur innovates, i.e. comes up with a new concept, product or service. Secondly, an entrepreneur organizes a new business venture, i.e. initiates or starts a new business enterprise. Thirdly, an entrepreneur operates, i.e. runs a new business venture and strives hard to sustain and grow it. Fourthly, an entrepreneur assumes the risk, i.e. takes the responsibility of the (positive or negative) outcomes of a business enterprise.
“Whatever the type, everyone is an entrepreneur only when he actually carries out new combinations, and loses that character as soon as he has built up his business, when he settles down to running it as other people run their business”.
In contrast to this view, Cantillion (1755) described the entrepreneur as a rational decision-maker “who assumed the risk and provided the management of the firm”. Thus, in this view the entrepreneur’s role encompasses the activity of managing the firm after having started it. In this book, we would support this view, as the entrepreneur’s role is critical not only in the survival, but also the growth of the new venture.
“And what have they done – they have not accumulated any kind of goods, they have created no original means of production, but have employed existing means of production differently, more appropriately, more advantageously. They have carried out new combinations! They are the entrepreneurs. And their profit, the surplus to which no liability corresponds, is the entrepreneurial profit”.
According to Schumpeter, innovations—the carrying out of new combinations—can be categorized into five groups:
i. Introduction of a new good or of a new quality of a good,
ii. Introduction of a new method of production which is unproven,
iii. Opening up of a new market,
iv. Conquest of a new source of supply of raw materials or part-manufactured goods, and
v. Carrying out of a new organization of industry.
In the early sixteenth century, entrepreneurs were thought of as Frenchmen who undertook to lead military expeditions. The term was broadened by 1700 A.D. to include contractors who undertook to build for the military- roads, bridges, harbors, fortifications, and the like. At that time, French economists also used the word entrepreneur to describe people who bore risk and uncertainty in order to make innovations.
Richard Cantillon was the first to define an entrepreneur as the “agent who buys means of production at certain prices in order to combine them into a new product”. Joseph Schumpeter in 1934 defined an entrepreneur as an innovator, who develops untried technology. According to David McClelland (1961), an entrepreneur is an energetic, moderate risk-taker; while according to Peter Drucker (1970), an entrepreneur maximizes opportunities.
Definitions of Entrepreneur – By Schumpeter and Peter Drucker
The word, entrepreneur is derived from the French word “entreprendre,” which means “to undertake.” Thus, it started as a concept to refer someone who undertakes to identify, organize, and manage a business while assuming the risks and uncertainty of business.
Peter Drucker, the noted author and Management Guru describes an entrepreneur as a person who is willing to risk his capital and other resources in new business venture, from which he expects substantial rewards if not immediately, then in the foreseeable future.
Entrepreneur either creates a new business or revives the existing business by pooling resources to capitalize on a new opportunity. He is the owner and or operator of a business who is directly responsible for bearing the risk while riding high on his creativity, innate talent and set of skills.
Many a time entrepreneurs are regarded as managers, who grab opportunities to create a utility or novelty through a change.
This change can be introduced through the following ways:
1. Through a new product,
2. A new process/ method of production,
3. Entry in to a new market, or
4. Even a new supply of resources with intent to bring a rewarding change both for the end consumers as well as for an entrepreneur.
Entrepreneurs turn obstacles in to opportunities by figuring out the workable plan to realize their vision. The world adopted new ways of doing the business when Thomas Aliva Edison, one of the earliest inventors in America, invented various life changing inventions like electric bulb, phonographs and motion picture camera in nineteenth century.
Edison early career as a telegrapher also instrumentally contributed to invention in the field of telecommunication technology. Little did the world know that a century later, another American Inventor, Steve Jobs, Co-founder, chairman and CEO of Apple Inc. would again storm the technology world with his iconic inventions?
Pioneering the work in the dynamic fields of Personal Computers, Phones, Tablets and Digital publishing, Steve resurrected the way, today we work, live and communicate with each other. Even after his early demise from the mortal world in 2011, Steve continues to inspire millions of people around the world to pursue their entrepreneurial dreams passionately.
However despite the opportunities and passion to create and bring a change, entrepreneurs also need an ecosystem to operate, contest and succeed. Entrepreneurship thrives typically’ in an entrepreneurial ecosystem where Government, financial institution, integrated markets and technology hold impetus for its acceleration.
In particular, robust financial institutions and Government have to assume the role of a facilitator than merely being a controller, to harness a conducive and sustainable environment to strengthen entrepreneurship in an economy.
Some of the World’s leading entrepreneurial ecosystems are concentrated in locations like Silicon Valley, New York City, Singapore, and Berlin, while being proliferated with high tech firms, research centers and venture capitalists. Underpinning the need of the hour even in India, Honorable Prime Minister, Shri. Narendra Modi has devised notable schemes like Startup India and Stand up India to bolster the entrepreneurial derive among citizens.
When nurtured comprehensively, entrepreneurship offers self-employment, contribution towards national GDP meanwhile capitalizing on the innovative, creative talent and to outdo spirit of people.
Definition of Entrepreneur:
Schumpeter (1965), defined entrepreneurs as, “individuals who exploit market opportunity through technical and/or organizational innovation.”
Schumpeter describes the entrepreneur as the bearer of the mechanism for change and economic development, and entrepreneurship as the undertaking of new ideas and new combinations, that is innovations.
According to Peter Drucker “An Entrepreneur always searches for a change, responds to it and always exploits it”
Webster definition of entrepreneur “the one, who organizes, manages and assumes risks of a business or an enterprise”.
Definitions of Entrepreneur – By A.H. Cole, Pathak and Robert Ronstadt
Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk taking appropriate to the opportunity and through the communicative and management skill to mobilize human, financial, and managerial and material resources necessary to bring project to fruition.
Entrepreneurship means the function of seeing investment and production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique and commodities, discovering new sources of raw materials, and selecting top managers for day-to-day operations of the enterprise.
A.H. Cole defined entrepreneurship as the purposeful activity of an individual or a group-associated individuals undertaken to initiate, maintain or aggrandize a profit oriented business unit for the production or distribution of economic goals and services. According to Frederick Harbinson, entrepreneurship is the skill to build an organization.
Pathak regarded the term entrepreneurship as co-extensive with setting up and managing a small scale unit. This involves a wide range of areas needing a series of decisions that can be broadly grouped into three categories – Decisions related to-
1) Perception of an opportunity,
2) Organization of an industrial unit, and
3) Running of the industrial unit as a profitable, going, and growing concern.
Robert Ronstadt presented the essence of entrepreneurship in the following way – Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by individuals who assume major risks in terms of equity, time, and/or career commitment of providing value for some product or service.
The product or service itself may not be new or unique but the value must be. Thus, entrepreneurship can be described as a purposeful activity of an individual or a group of individuals undertaken to initiate, maintain or aggrandize a profit-oriented business unit for the production or distribution of goods and services.
Definitions of Entrepreneur
Entrepreneur is a person who has already started or is in the process of starting an enterprise. He is an action oriented and highly motivated individual, who takes risks to achieve goals. Entrepreneurs are the people who have the abilities to see and evaluate business opportunities, to gather necessary resources, to take advantages of them and initiate appropriate action to ensure success.
J.B. Say, a French economist, has defined entrepreneur as the economic agent who unites all means of production-land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market, he pays rent of land, wages to labour, interest on capital and what remains is his profit.
According to Webster dictionary, an entrepreneur is defined as an individual who forecasts future demand for products or services and arranges a business enterprise to respond to their demands.
According to Joseph Schumpeter, an entrepreneur is an innovator who brings economic development through new combinations of factors of production.
Entrepreneurs are business leaders and not simple owners of capital. They are men of vision, drive and talent, who spot out opportunities and promptly group them for exploitation. To conclude, an entrepreneur is the person who takes risks, unites various factors of production and carries out innovations.
The main characteristic of an entrepreneur is that he is not paid like an employee. In fact, he is the owner of the organisation and he pays himself by keeping the profit of the Organisation. He himself decides the path along which the organisation is to be run to achieve the desired goal.
Entrepreneur is the sole proprietor in case of individual ownership. However, in case of partnership, he is one of the partners. An entrepreneur is a calculated risk taker and an opportunity seeker.
Definitions of Entrepreneur – With Introduction, Evolution of the Term Entrepreneur and Meaning
In a developing economy entrepreneurial development is of immense importance. Two major problems faced by the developing countries are unemployment and under employment. Unemployment is a situation where the individuals do not get any jobs and thereby earn nothing.
It reduces the standard of living of the people and affects the economic growth of the country. On the other hand, underemployment is a situation where individuals are employed on jobs which are below their educational standard. Entrepreneurship is an effective remedy for unemployment as well as underemployment.
An entrepreneur is a person who organises and operates a business concern for the purpose of making profit. He is a specially talented person having the qualities of skill, initiative and an insight of innovation to achieve high goals. He looks for opportunities, identifies and seizes them for making economic gains.
Entrepreneurs play a vital role in the economic development of a country. The economic progress of a country depends primarily on the success or failure of the entrepreneurial development in that country.
The word ‘entrepreneur’ is derived from the French word ‘entreprendre’ which means ‘to undertake’. Originally it was meant to designate an organizer of musical or other entertainments. It was only in the beginning of the 18th century that the word was used to refer to economic activities. Since then, the term ‘entrepreneur’ is used in various ways expressing various views.
The term ‘entrepreneur’ is defined in a variety of ways. Economists differ in their opinion regarding the meaning of this term. Some economists and writers have given importance to the ‘organising’ aspect, some others to the ‘innovative’ aspect and certain others to the ‘risk-bearing’ aspect of the term.
Richard Cantillon – The term ‘entrepreneur’ was first used in the business field by Richard Cantillon, the French economist. To him, an entrepreneur means a dealer who purchases the means of production for combining them into marketable products.
Peter F. Drucker – “An entrepreneur is one who always searches for change, responds to it, and exploits it as an opportunity. Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service”.
F.H. Knight – “Entrepreneur is a person or a group of persons who bears risk and uncertainty”.
Evans – “Entrepreneurs are persons who initiate, organise, manage and control the affairs of a business unit that combines the factors of production to supply goods and services, whether the business pertains to agriculture, industry, trade or profession”.
An individual can set up business ventures and enterprises by utilizing his entrepreneurial talents. He can earn profit through production, processing or distribution of goods and services to the society. He is one of the important segments of economic growth.
An entrepreneur is enriched with the inborn qualities of adventurism, willingness to face risks, innovative urge and creativity. He is an action-oriented, highly motivated individual who takes risks to attain goals. An entrepreneur is one who puts up new projects, creates employment opportunities, and thereby paves the way for the growth of other sectors. In short, the entrepreneur is a person who brings in overall changes through innovation with a view to attaining social good.
Definitions of Entrepreneur – By Different Authors
The word entrepreneur is derived from the French word ‘entreprendre’ which means ‘to undertake’ i.e., individuals who undertake the risk of new enterprise. The word entrepreneur, therefore, first appeared the French language in the beginning of the sixteenth century.
The work was also applied to the leaders of military expedition. But it was Richard Cantilon, an Irishman, living in French who first used the term entrepreneur to refer to economic activities.
According to Cantilon, “An entrepreneur is a person who buys factor services at certain prices with a view to selling its product at uncertain prices.” Thus, to Cantilon, an entrepreneur is a bearer of risk which is non-insurable.
One of the most renowned French economists Jean Baptiste Say defined the term entrepreneur in a meaningful manner.
According to J.B. Say, “an entrepreneur is the agent who unites all the factors of production and who finds in value of the products the re-establishment of the entire capital the employees, and the value of wages, the interest and the rent which he pays as well as the profits belonging to himself.”
He may or may not supply capital but he must have judgment, perseverance and the knowledge of the world of business. He must possess the art of “superintendence and administration.”
Adam Smith, the father of classical economics, did not use the term entrepreneur anywhere. Instead, he used the words like employer, the merchant the undertaker and the master.
Alfred Marshall wrote about the capitalists and management but he was silent about their difference as such, the classical economist ignored the term entrepreneur entirely.
A.P. Usher – “Specialization or division of labour necessitates an entrepreneurial Junction the crux of which is to coordinate different economic activities, this view on entrepreneurship was very narrow land it reduced the entrepreneurship activities to no more than a managerial Junction.”
F.R. Knight, in his article on Risk, Uncertainly and Profit propounded the maxim that “entrepreneurs are a specialized group of persons who bear risks and deal with uncertainty.” He also identified social, psychological and economic factors which govern the supply of entrepreneurship.
David Ricardo, a contemporary of J.B. Say – “The foremost motive of a risk taker is to a mass capital and capital accumulation is the sine-qua-none of economic development.”
With J.A. Schumpeter, the term entrepreneur had received a wide popularity and thrust. He defined the entrepreneur as an innovator who carries out new combinations to initiate the process of economic development through introduction of new products, new markets, conquests of new source of raw materials and establishment of a new organization of industry.
He said, “The carrying out of new combinations we call enterprise, the individuals whose function is to carry them out we call entrepreneurs.” He has put emphasis on Profit, which are the product of innovation and the prime mover of economic development.
According to Schumpeter – “The process of development is a deliberate and continuous phenomenon which is actively promoted by the escort services of a change agent who provides economic leadership. This change agent is what is called entrepreneur.”
Peter E Drucker defines an entrepreneur as one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the basic tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service.
International Labour Organization (ILO) defines entrepreneurs as those people who have the ability to see and evaluate business opportunities, together with the necessary resources to take advantage to them and to initiate appropriate action to ensure success.
Definitions of an Entrepreneur – Some Important Definitions by Eminent Thinkers (With Who is an Entrepreneur?)
An entrepreneur is considered as a person whose main purpose is to set up his own business or industry. Entrepreneur is a person who always wants his own business instead of working in other business. He takes initiative to open his own business, always looks for an opportunity, tries to come up with the innovative idea and wants to achieve his goals by doing his best. He always comes up with the new idea that is unique to the society and benefits to the society.
His focus is on to transform the opportunity into economic gain. Entrepreneurs are very important for the nation as those are the persons who perfectly exploit the resources of the country and generate wealth for the nation that ultimately help the citizens of that country to get the employment. He is the one who knows the perfect combination of human resources and non-human resources that will be required for the production. Entrepreneur turns the environment of the country into the good one.
However, we tend to think of entrepreneurs as people who have a talent for seeing opportunities and the abilities to develop those opportunities into profit-making businesses.
Are entrepreneurs born or made? The debate still rages, but the current consensus is that successful entrepreneurs share a constellation of personality traits. In other words, some people are naturally more entrepreneurial than others.
A common misperception about entrepreneurs is that entrepreneurs are wild risk-takers. Entrepreneurs do take risks, but only calculated ones. One of the abilities which the successful entrepreneurs share is the ability to evaluate risks. But remember, you don’t need to have all the traits associated with entrepreneurship to be a successful entrepreneur.
The main quality you need is a determination to make your business venture successful. The rest of the qualities necessary to being a successful entrepreneur, you can learn. Anyone who has ever looked at problems and seen it as an opportunity is a likely prospect. The same goes for anyone who feels as if his ambition is held in check by corporate red tape. But it takes more than just cleverness and frustration with the status quo to get an entrepreneurial venture off the ground.
While there’s no single entrepreneurial archetype, certain common traits indicate an entrepreneurial personality. For instance, the entrepreneurial adult first often appears as an entrepreneurial child. And although it’s far from a necessary ingredient for entrepreneurship, the need to succeed is often greater among those whose backgrounds contain an extra struggle to fit into society.
In addition, contrary to popular belief, entrepreneurs aren’t generally high-risk takers when they can’t affect the outcome of the situation, they tend to set realistic and achievable goals and when they do take risks, they’re usually calculated ones based on facts and experience, rather than instincts. Entrepreneurs are driven not by the need to make money, but by the need to make their dreams a reality. More often than not, money is a by-product of an entrepreneur’s motivation rather than the motivation itself.
Entrepreneurs are participants, not observers; players, not fans. And to be an entrepreneur is to be an optimist, to believe that with the right amount of time and money, you can do anything.
The entrepreneur word is derived from the French word Entreprendre which means to undertake, i.e., the person who is ready to accept the challenges, risks, whatever will come to his way while starting a new business. In early sixteenth century, the Frenchmen who organized and led military expeditions were referred to as entrepreneurs. A French economist Richard Cantilon used the word entrepreneur for first time for business activities. According to Cantilon “An entrepreneur is a person who buys factor services at certain prices with a view to selling its product at uncertain prices”. Thus to Cantilon an entrepreneur is a person who takes risk to open a business.
According to Jean Baptiste, another French economist, “An entrepreneur is the economic agent who unites ail means of production, the labour force of the one and the capital or land of the others and who find in the value of the products which results from their employment, the reconstitution of the entire capital that he utilizes and the value of the wages, the interest and the rent which he pays as well as profit belonging to himself”. An Entrepreneur is an economic agent who better knows all the means and their perfect combination that will be useful for the production.
In the words of J.A. Schumpeter, “The entrepreneur in an advanced economy is an individual who introduces something new in the economy, a method of production is not yet tested by experience in the branch of manufacture concerned, a product with which consumers are not yet familiar, a new source of raw material or of new markets and the like”.
According to him an entrepreneur is an innovator, who brings new things into the economy; Innovation may be a new product, new methods of production, creating new markets, new sources of raw materials, new processes adopted into the organization that are not at all adopted by any organization.
Some Important Definitions:
Peter F. Drucker defines an entrepreneur as one who always searches for changes, responds to it and exploits it as an opportunity. Innovation is the basic tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service.
Gillian Murphy, leader of San Joaquin Delta College Small Business Development Center, says – “An entrepreneur is not static but fluid…continues to seek opportunities and/or different methods of operation.”
Author of the book, “Low-Risk, High-Reward- Starting and Growing Your Small Business with Minimal Risk”, Bob Reiss, presented a holistic definition of an entrepreneur. “He was a person who can recognize a good opportunity and will pursue it whether or not resources are available. The entrepreneur is also confident, adaptable and determined to succeed, even when there are setbacks”.
An entrepreneur, Daile Tucker, said that, “Entrepreneurs compete with themselves and believe that success or failure lies within their personal control or influence.”
Kilby – Emphasizes the role of an imitator entrepreneur who does not innovate but imitates technologies innovated by others, are very important in developing economies.
Schumpeter – According to him entrepreneurs are innovators who use a process of shattering the status quo of the existing products and services, to set up new products, new services.
David McClelland – An entrepreneur is a person with a high need for achievement [n-Ach]. He is energetic and a moderate risk taker.
Definition of Entrepreneur – By Richard Cantillon, Jean Baptiste Say, Joseph Schumpeter, Israel Kirzner, Mc Clelland, Jan Tin Bergen and R Ronstadt
There is no unanimity in the definition of the term ‘entrepreneur’. There are many definitions on entrepreneur. In this section we shall try to understand the gist and the essence of some noteworthy definitions.
The essence of Richard Cantillon’s definition is that the entrepreneur is a bearer of uncertainty.
According to Richard Cantillon’s original formulation, the entrepreneur is a specialist in taking on risk. He “insures” workers by buying their products (or their labor services) for resale before consumers have indicated how much they are willing to pay for them. The workers receives an assured income (in the short run, at least), while the entrepreneur bears the risk caused by price fluctuations in consumer markets.
According to Jean Baptiste Say, the entrepreneur is the economic agent “who unites all means of production-the labor of the one, the capital or the land of the others- and who finds in the value of the products which result from their employment the reconstitution of the entire capital that he utilizes and the value of the wages, the interest, and the rent which he pays, as well as the profits belonging to himself”.
Uncertainty and risk are the basic elements of Frank Knight’s definition of an entrepreneur. Entrepreneurs attempt to predict and act upon change within markets. The entrepreneur bears the uncertainty of market dynamics. Joseph Schumpeter described the entrepreneur as the innovator who implements change within markets through the carrying out of new combinations. The carrying out of new combinations can take several forms.
The forms are:
(i) The introduction of a new good or quality thereof,
(ii) The introduction of a new method of production,
(iii) The opening of a new market,
(iv) The conquest of a new source of supply of new materials or parts,
(v) The carrying out of the new organization of any industry.
According to Professor Israel Kirzner, the entrepreneur recognizes and acts upon market opportunities. He describes alertness as the fundamental quality of the entrepreneur. Alertness is the entrepreneur’s ability to perceive new economic opportunities that no prior economic actor has yet recognized. The entrepreneur might foresee demand for a new product that has not hitherto been manufactured; he might then decide to manufacture that good himself.
Peter Drucker said that the entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”
Mc Clelland (1971) said “I am not using the term “entrepreneur” in the sense of “capitalist”- in fact, I should like to divorce “entrepreneur” entirely from any conations of ownership. An entrepreneur is someone who exercises control over production that is not just for his personal consumption. According to my definition, for example- an executive in a steel-production unit in the U.S.S.R. is an entrepreneur”.
The New Encyclopedia Britannica considers an entrepreneur as “an individual who bears the risk of operating a business in the face of uncertainty about the future condition.
As professor Jan Tin Bergen points out “The best entrepreneur in any developing country is not necessarily the man who uses much capital, but rather the man who knows how to organize the employment and training of his employees. Whoever concentrates on this is rendering a much more important service to his country than the man who uses huge capital.”
Entrepreneurs exploit opportunities and turn them into successful new ventures. They start their own firms because of the challenge, profit potential and enormous satisfaction they foresee lying ahead. They seek independence and the satisfaction of creating a successful business of their own. They feel tremendous satisfaction in building something from nothing and then seeing it succeed and embraced by the market. They seek profits while accepting the risk and uncertainty.
Entrepreneurship is more than simply ‘starting a business’. It is, in a nutshell, a process through which individuals identify opportunities, allocate resources, and create value. This creation of value is often through the identification of unmet needs or through the identification of opportunities for change. According to R Ronstadt Entrepreneurship is the dynamic process of creating incremental wealth. It involves creating new systems, resources or processes or products, new goods or services and/or serve new markets.