Everything you need to know about the concept of entrepreneurship. The word entrepreneur is borrowed from the French language. It is derived from ‘entreprendre’ meaning to ‘undertake’.
Thus, entrepreneur is an ‘undertaker’ in the literal sense of the word. Its usage in French language can be traced much before the emergence of activities generally associated with entrepreneurs today. Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end.
An entrepreneur is a person who is devoted to search something new and exploit the novel notions and visions into gainful opportunities by bearing the risk involved in the process.
The entrepreneur conceives the idea of an enterprise, lives with it, and finally establishes the enterprise. Entrepreneurship refers to the process of activities undertaken by an entrepreneur.
Learn about the concept of entrepreneurship.
Additionally, learn about the definitions provided by eminent authors, nature and expert’s views on entrepreneurship.
Learn about the Concept of Entrepreneurship
Concept of Entrepreneurship – Definitions by Renowned Authors
An entrepreneur is a person who is devoted to search something new and exploit the novel notions and visions into gainful opportunities by bearing the risk involved in the process. The entrepreneur conceives the idea of an enterprise, lives with it, and finally establishes the enterprise. Entrepreneurship refers to the process of activities undertaken by an entrepreneur.
Jeffry. A. Timmons in ‘New Venture Creation, entrepreneurship for the 21st century’ opines “Entrepreneurship is a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach, and leadership balanced for the purpose of value creation and capture.”
He further adds that, “Entrepreneurship results in the creation, enhancement, realization, and renewal of value, not just for owners, but for all participants and stakeholders. At the heart of the process is the creation and/or recognition of opportunities, followed by the will and initiative to seize these opportunities. It requires a willingness to take risks both personal and financial-but in a very calculated fashion in order to constantly shift the odds of success, balancing the risk with the potential reward.”
According to Arthur Cole, “Entrepreneurship may be defined in simplest terms as the utilization by one productive factor of the other productive factors for the creation of economic goods.”
Entrepreneurship -the entrepreneurial function- can be conceptualized as the discovery of opportunities and the subsequent creation of new economic activity, often via the creation of a new organization.
Entrepreneurship is therefore a process which incorporates the activities like visualizing, risk bearing, organizing and establishing a business enterprise. By essence the concept of entrepreneurship is dynamic. It is totally engrossed with something new, innovative and novel. Entrepreneurship as a dynamic process gets manifested through the endeavours of the entrepreneurs to bring about new combinations, new products, new production processes, and establishing of new enterprises.
Entrepreneurship is a vital constituent that influences the economic growth of a country and also influences the global competitiveness of the country.
The process of entrepreneurship involves identification, evaluation and implementation of new business prospects. The process also involves establishment of new business firms and enterprises. The innovation also forms an integral part of the process. The process results in employment generation and improves the living standard of the people and influence the growth and development of the economy.
According to A. H. Cole, “Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or aggrandize profit by production or distribution of economic goods and services”.
“The essence of entrepreneurship lies in the perception and exploitation of new opportunities in the realm of business … it always has to do with bringing about a different use of national resources in that they are withdrawn from their traditional employ and subjected to new combinations.”
The Global Entrepreneurship Monitor (GEM) is the world’s one of the foremost study of entrepreneurship. GEM defines entrepreneurship as – “Any attempt at new business or new venture creation, such as self-employment, a new business organization, or the expansion of an existing business, by an individual, a team of individuals, or an established business”.
Concept of Entrepreneurship – A Detailed Explanation
The concepts of enterprise/entrepreneur and entrepreneur- ship have evolved through various stages each of which emphasises a different aspect of entrepreneurial function. The first systematic application of the term ‘entrepreneur’ to business activities was made by J.B. Say around 1800. While explaining this concept Say’s focus was on the entrepreneurial functions of coordination, organisation and supervision.
The next phase in the evolution of the concept of entrepreneur is marked by emphasis on innovation. Joseph A. Schumpeter, an Australian economist, focused on innovation and defined entrepreneur thus: “The entrepreneur in an advanced country is an individual who introduces something new in the economy— a method of production 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 new markets and the life.”
Briefly, an enterprise/entrepreneur is one who innovates, establishes an organisation and sets the organisation going with his distinctive ability. Schumpeter’s entrepreneurship is, however, more appropriate in the context of a developed economy. In a developing economy like India, Schumpeter’s innovations may not come true due to lack of proper infrastructure and inadequate capital.
Further, in such economies even if one imitates technique of production from a developed economy, he would be called an entrepreneur.
Peter F. Drucker too played with the word ‘innovation’ and said- The entrepreneur always searches for change, responds to it, and exploits it as an opportunity. Further elaborating his viewpoint, Drucker observed, Entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship.
Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.
According to Drucker, the following are the sources of systematic innovation:
Sources which lie within the enterprise:
1. The unexpected—the unexpected success, the unexpected failure, the unexpected outside event.
2. The incongruity—between reality as it actually is and reality as it is assumed to be or as it ‘ought to be’.
3. Innovation based on process need.
4. Changes in industry structure or market structures that catch everyone unawares.
Sources which lie outside the enterprise:
1. Demographic—population changes.
2. Changes in perception, mood and meaning.
3. New knowledge, both scientific and non-scientific.
Another thinker who has emphasised innovation as a basic element of entrepreneurship is E.E. Hagen. According to Hagen, “An entrepreneur is an economic man who tries to maximise his profits by innovation. Innovations involve problem-solving and the entrepreneur gets satisfaction from using his capabilities in attacking problems.”
The modern concept of entrepreneurship is much wider and does not confine to any single aspect like risk-bearing, promotion, decision-making or innovation. Thus B. Higgins defines entrepreneurship as “the function of seeking investment and production opportunity, organising an enterprise to undertake a new production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique or commodity, discovering new sources of raw materials and selecting top managers for day to day operations of the enterprise.”
In conclusion, it may be said that today’s concept of entrepreneurship is all-inclusive in nature. It refers to the entrepreneurial functions of creating something new, organising and coordinating business activities, risk-bearing and handling economic uncertainty.
Concept of Entrepreneurship:
The concept of entrepreneurship has been around for a very longtime, but its resurgent popularity implies a sudden discovery. Richard Cantillon is credited with giving the concept of entrepreneurship a central role in Economics. According to him Entrepreneurs consciously make decisions about resource allocations.
They would always seek the best opportunities for using resources for the highest commercial yields. Adam Smith spoke of the enterpriser in his Wealth of Nations as an individual who undertook the formation of an organisation for commercial purposes.
He has ascribed to the entrepreneur the role of industrialist, but he also viewed entrepreneur as a person with unusual foresight who could recognise potential demand for goods and services. Another economist, Jean Baptiste Say described an entrepreneur as one who possessed certain arts and skills of creating new economic enterprises, yet a person who had exceptional insight into society’s needs and was “able to fulfill them.
Concept of Entrepreneurship – Meaning and Definitions
The word entrepreneur is borrowed from the French language. It is derived from ‘entreprendre’ meaning to ‘undertake’. Thus, entrepreneur is an ‘undertaker’ in the literal sense of the word. Its usage in French language can be traced much before the emergence of activities generally associated with entrepreneurs today.
Initially, the concept was used in the military sphere and later on it began to be applied to construction, engineering, and other related activities. It was only in the 18th century that the term entrepreneurship was applied almost exclusively to economic activities in general. Like many other terms, entrepreneurship as a concept remains rather vague.
Even today it is very difficult to define the term precisely. In the past two centuries, several scholars have attempted to define the concept by referring to the various ways in which it was employed. In the modern context, Richard Cantillon is supposed to have used the term entrepreneur for the first time in 1755.
He defined an entrepreneur as – ‘an 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, which are uncertain.’ He further goes on to say, ‘the farmer pays out fixed contractual rate of rent and wages to the landlord and labourers. He, however, sets that product at prices that are not fixed. So do the merchants’. This shows that entrepreneurship is essentially an ability to take risk in production and marketing.
According to Jean-Baptiste a French economist, entrepreneurship is essentially a function of co-ordination, organization and supervision. He is an agent who arranges for the assembly of production factors. In his own words, ‘the entrepreneur is the economic agent who unites all means of production.’ Thus, entrepreneurs are the ones who combine land, labour and capital for the purpose of production.
Entrepreneur, according to Joseph A. Schumpeter, is a person who foresees a potentially profitable opportunity and tries to exploit it. He is basically an innovator who introduces new combinations. He makes new things or makes things in a new way. His innovations of this kind may take such forms as introduction of new goods, introduction of new method of production, opening of a new market, conquest of a new source of material, etc.
He, however, makes a distinction between an inventor and an innovator. An inventor discovers and finds out new methods or techniques. Innovators make use of these inventions for commercial purposes. Thus, the innovator applies to practice the ideas conceived by the inventor.
Similarly, an innovator is very distinct from the routine manager. A manager more or less looks after day-to-day routine affairs of an organization. On the other hand, the innovator attempts to change the course of action to raise production and/or productivity. Thus, the entrepreneur is an innovator, endowed with an innate ability to innovate something new or do the same in a different manner.
Since, he charts a different course; there is no past experience to guide him in his chosen path. As such, there is an element of risk involved in this new approach of his. It is possible that an entrepreneur does not succeed in his willingness to assume the business risk and commit himself to that cause.
According to Frank H. Knight, entrepreneurs are a specialized group of persons who bear uncertainty. Uncertainty is some amount of risk which cannot be ensured against and is incalculable. So, an entrepreneur is the economic function that undertakes the responsibility of uncertainty.
According to McClelland, an entrepreneur is one who likes to take reasonable risk, wants to know how they can turnout as quickly as possible and has high degree of need for achievement. He is an individual responsible for the operation of a business including the choice of a project, the mobilization of necessary capital, decisions or product prices and quantities, the employment of labour, and expanding or reducing the productive facilities.
In another economic theory, the entrepreneur is seen as an individual who bears the risk of operating a business in the face or uncertainty about future conditions and who is rewarded accordingly by his profits or losses. David Holt defines an entrepreneur as an individual who assumes the risk of starting a new business, creating a new commercial product or service, and consequently seeking profitable regard within a free enterprise system.
Leibenstein defines entrepreneur as an individual or a group of individuals having four major characteristics – connection of different markets, capability of making up market deficiencies (gap filling), input completion, and creation and expansion of time defined. An entrepreneur is one who always searches for change, responds to it, and exploits it as an opportunity. The response to change is innovation.
According to him, innovation is the purposeful and organized search for changes and in the systematic analysis of the opportunities such changes might offer scope for economic or social innovations. An entrepreneur makes things happen rather than see things happen. He can thus be expected to have two sets of skills—venture skills and management skills.
Concept of Entrepreneurship – Some Major Definitions
The various definitions of entrepreneurship are as follow:
According to J. Schumpeter, entrepreneurship can be defined as a creative activity, the entrepreneur being an innovator, who introduces something new into the economy, a new method of production not yet tested by experience in the branch of manufacturing concern, a product with which the consumers are not familiar, a new source of raw materials or of new market hitherto unexploited.
According to Cole, entrepreneurship is the purposeful activity of an individual or a group of associated individuals undertaken to initiate, maintain and aggrandise profit by production or distribution of economic goods and services.
Entrepreneurship is the process of identifying opportunities in the market, mobilising the resources required to pursue these opportunities and investing the resources to exploit the opportunities for long term gains.
The activity of bringing together the factors of production (namely labour, land and capital) required for producing goods or services is called entrepreneurship.
Entrepreneurship is the inclination (attitude) of mind to take calculated risk with confidence to achieve a pre-determined business or individual objective.
The above definitions state that entrepreneurship is a goal-oriented process involving production or distribution of products or services. It may be undertaken by one person or by a group of persons.
Entrepreneurship refers to the general trend of setting up new enterprises in a society. Entrepreneurship is also the process of developing hidden potential in a person to become an entrepreneur. Traditionally, it was believed that entrepreneurs were born and not made, but recent studies have proved that entrepreneurship can be developed through creating opportunities, extending facilities, allowing incentives and by proper training.
Hence, it can be believed that entrepreneurs are not only born, but they can be made. Entrepreneurship is not a matter of heritage only, it is with the individuals who respond to external opportunities.
Concept of Entrepreneurship – With Qualities and Pre-Qualities
Development economists are concerned with, among others, the study of human resources and entrepreneurship in particular. The study of role of human resources in economic development will include aspects no only like educational levels and productive skills acquired by the labor force (which includes all types of labor), but also the aspects like “social response to economic opportunity readiness to undergo economic change” on the part of the labor force.
It is in the context of later aspects, socio-cultural besides economic factors assume considerable importance. Entrepreneurship is a form of human resource and is as much influenced by socio-cultural factors as any other. Different views on the role of entrepreneurship and the theories, which purport to isolate and explain the factors which, determine the nature and performance of entrepreneurship is worth studying.
Development economists tell us that the level and rate of economic growth depend on natural resources, physical capital accumulation, human resource development and technological progress, provided the socio-cultural environment is favourable to growth. The behaviour pattern of people is also responsible for economic development.
Human qualities, which are conducive to economic development, are:
(i) An interest in material well-being;
(ii) An interest in techniques and innovations;
(iii) An ability to look ahead and a willingness to take risk;
(v) An ability to collaborate with other people and to observe certain rules.
The above pre-qualities are necessary for the reason that:
(i) It provides a motive,
(ii) Many different technical aids are use in modern industry and these are continuously changing,
(iii) Installation of capital goods produces results only after considerable time and these results may sometimes prove disappointing.
(iv) Whole process requires continuous and harmonious co-operation if it is of work.
Now the question arises is, can these human qualities necessary for economical development be acquired by the populations of developing economics and for such acquisition of human qualities what is the most appropriate socio-cultural environment? To understand this, the phases of industrialization will helpful.
Till the Industrial Revolution in the late 10th century, which took place in Britain and later spread to other countries, the state of science and technology applied to industry and other economic activities was stagnant. Before reaching the present stage of modern capitalism with highly developed and sophisticated technology, western economies have passed through wells defined, but by no means non-overlapping stages like primitive, tribal, ancient agricultural, medieval feudal and traditional capitalist.
In these earlier stages, neither economic organization nor technology was complex enough to require or engender entrepreneurship of a high order. No doubt in all these stages the functions performed by a peasant, an artisan, a feudal lord and a capitalist resembled the functions of their prototypes in the modern age.
The situation of the developing economy in the second half of the twentieth century is entirely different. The last two centuries have witnessed enormous progress in science and technology, which has come to remain as a decisive factor in the economic environment. Each developing economy is facing challenges from changes taking place within the country and also changes taking place elsewhere owing to its exposure through trading and other relations with other countries.
The internal challenges are the results of growing awareness on the part of the people of their economic backwardness. The challenges from outside are the results of its contact with countries that have progressed rapidly over the last 150 years. It is in this context, entrepreneurship assumes a prominent role.
The difference in setting and relative position between the present day and developing economies and the industrialized economies in their early stage of development makes the entrepreneurial role in the developing economies different from that of typical entrepreneur during the early periods of industrialization of industrially advanced countries.
The term entrepreneur first appeared in the French Language and was applied to leaders of military expeditions in the beginning of the sixteenth century. After 1700 the term was applied to other types of adventures, particularly to the fields of civil engineering projects like construction of roads, bridges, harbors and buildings. Later on the term was applied to the function of buying labor and martial at uncertain prices and selling the resultant product at a contracted price.
Richard Cantillon, an Irishman living in France was the first person to use the term “entrepreneur” to refer economic activities. He defined an entrepreneur as a person who buys factor services at certain prices with a view to sell its product at uncertain prices in the future. He conceived of an entrepreneur as bearer of non-insurable risk.
That is entrepreneur carry on production and exchange of goods at some risk, facing the possibility of bankruptcy, when the demand for their products is depressed. He also distinguished between the owner and an entrepreneur and writes that the essential characteristics of entrepreneur were to take risk and create innovations.
J.B. Say, French Economist defines that an entrepreneur is the agent who unites all means of production and who finds in value of the products the re-establishment of the entire capital he employs, and the value of the 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 judgement, perseverance and knowledge of the world of business. He must possess the art of superintendence and administration.
Development economists tell is that the level and rate of economic growth depend on natural resources, physical capital accumulation, human resources development and technological progress, provided the socio-cultural environment is favourable to growth. The behaviour pattern of people is also responsible for economic development human qualities, which are conducive to economic development.
Indian agriculture was very important because as many as 75% of its population depends on agricultural production. Slowly India has realized that industrial production is as important as agriculture. In the early stages, then government has dedicated to start giant industries in various fields by importing technology and manpower. But the father of nation was favouring the village and small-scale industries so that the country can use available raw material and manpower.
By doing so India would have built strong industrial base and would have become a landmark in industrial revaluation. After a long spell, India has realized that small-scale industries sector will help in building Industrial India. Thus, Indian government started promoting the small-scale industries in all states by giving incentives and support. At this stage, a special class of people emerged, known as Entrepreneurs.
Concept of Entrepreneurship – Explained!
According to Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 “Enterprise means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services.”
The act of creating a new enterprise in response to identified opportunities is called entrepreneurship. In other words, entrepreneurship can be defined as an action taken by an entrepreneur to establish a new enterprise. The activities of an entrepreneur can be understood in terms of either starting a new enterprise or revitalizing the existing enterprise with respect to a perceived opportunity.
Starting a business always involves a certain degree of risk. The act of entrepreneurship is often allied with true uncertainty, particularly when it involves bringing something new to the world, whose market never exists. Although if the market exists, there is no guarantee that a particular new entrepreneur would be successful to develop his/her foothold in the exiting market.
For example, in case of beverage industry, there is the monopoly of few organizations, such as Coca-Cola and Pepsi. These are dominant players in the global market. If a new entrepreneur decides to launch a new flavored soft drink, there is no guarantee whether his/her venture would be successful or not.
Some of the management experts have defined entrepreneurship in the following ways:
According to Kuratko & Hodgetts, “Entrepreneurship is a dynamic process of vision, change, and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. Essential ingredients include the willingness to take calculated risks in terms of time, equity, or career – the ability to formulate an effective venture team; the creative skill to Marshall needed resources – and fundamental skill of building solid business plan – and finally, the vision to recognize opportunity where others see chaos, contradiction, and Confusion.”
According to Frank H. Knight and Peter Drucker, “Entrepreneurship is about taking risks and the behavior of the entrepreneur reflects a kind of person who wishes to put his career and financial security on the line and take risks in the name of an idea, spending much time as well as capital on an uncertain venture.”
According to D.C. McClelland, “Entrepreneurship is doing things in a better way and decision-making under the condition of uncertainty.”
Benjamin Higgins has defined entrepreneurship as, “The function of foreseeing investment and production opportunity, organizing an enterprise to undertake a new production process, raising capital, hiring labor, arranging for the supply of raw materials, and selecting to managers for the day-to-day operation of the enterprise.”
Essien has defined entrepreneurship, “As the total of self-asserting attribute that enables a person to identify business opportunity together with the capacity to organize needed resources with which to profitability, taken advantage of such opportunities in the face of calculated risks and uncertainties.”
In the view of Harvard School, “Entrepreneurship consists of any earnest activity that starts, maintains, or develops a profit-oriented business in interaction with internal situation of the business and with the external situations such as economic, social, and political situations surrounding the business.”
Economist Joseph Schumpeter has given a significant contribution in understanding the concept of entrepreneurship. According to him, “An entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation.” In the view of Schumpeter an entrepreneur employs “the gale of creative destruction.” Creative destruction can be defined as the process of creating new product, business model, or other business innovations by replacing the old ones.
Thus, new products and technologies developed by entrepreneurs over time make current products and technologies obsolete. For example, before the advent of mobile phones, pagers were very popular among people, but with the invention of mobile phones, pagers became obsolete.
Therefore, Schumpeter held the argument that creative destruction is the main factor behind economic growth and industry dynamism. He also held a view that entrepreneurship results not only in new industries, but also in new combinations of currently existing inputs.
Schumpeter exemplified this concept with the invention of a steam engine, which was used to develop a horseless carriage. Further, the horseless carriage was transformed into a car. This formation of car from steam engine was not the development of a new technology, but the application of existing technologies in a novel manner.
Thus, we can say that entrepreneurship is an act of bearing risks, bringing innovation, generating employment, and mobilizing resources.
Concept of Entrepreneurship – Definition, Meaning and Concept
Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end.
Some of the definitions of entrepreneurship are given below:
Schumpeter – “Entrepreneurship is based on purposeful and systematic innovation. It included not only the independent business man but also company directors and managers who actually carry out innovative functions.”
Higgins – “Entrepreneurship is meant for the function of seeing investment and production opportunity, organizing an enterprise to undertake a new production process, raising capital, hiring labour, arranging for supply of raw materials, and selecting top managers for day-to-day operations of the enterprise.”
In the above definitions, entrepreneurship refers to the functions performed by entrepreneurs in establishing an enterprise. Just as management is regarded as what managers do, entrepreneurship is regarded as what entrepreneurs do. Thus, entrepreneurship is the act of being an entrepreneur. It is the process of giving birth to a new enterprise. Thus, entrepreneurship means creating something new, organizing, coordinating and undertaking risk, and handling economic uncertainty.
The meaning of entrepreneurship varies from country to country. While some consider entrepreneurs primarily-as innovators, certain others think of them as managers of an enterprise, some as bearers of risks and others as mobilisers and allocators of capital. In India, an entrepreneur can be defined as a person or a group of persons who are responsible for the existence of a new business enterprise.
While John Kunkel considered entrepreneurship as a function of social, political and economic structure, Max Weber treated it as a function of religious beliefs. The concept of entrepreneurship involves four key elements.
3. Vision and
These four elements are interrelated and form a continuous process in business.
Organising involves mobilization of resources and utilization of them to initiate, maintain or enhance profit by the production or supply of goods or services. Entrepreneurs also mobilize other factors of production such as land, labour and capital.
Starting a new enterprise always involves risk. The enterprise may earn profit or incur loss. The entrepreneurs should be bold enough to assume this risk.
Entrepreneurial vision encompasses the relentless pursuit of operational excellence, innovative technology and responsiveness to the needs of the market.
Innovation refers to introduction of something new in the economy, ex. a new product or a new method of production. According to Schumpeter, economic development can take place only through creative innovations and changes. The innovations may be related to new products, new technology, new sources of raw material, new market or new organisation.
To sum up, entrepreneurship is the practical ability to create and build up something new from nothingness. It is fundamentally an act of human creativity. The act of merely observing, analysing or interpreting a process is not entrepreneurship.
Concept of Entrepreneurship – Explained in a Nutshell
Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by individuals who assume the 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 or may not be new or unique but value must somehow be infused by the entrepreneur by securing and allocating the necessary skills and resources.
Many of them have used innovation and creativity to build huge enterprises. Entrepreneurship is now regarded as “pioneer ship” of business. According to Peter E Drucker “Entrepreneurship is defined as ‘a systematic innovation, which consists in the purposeful and organized search for changes, and it is the systematic analysis of the opportunities such changes might offer for economic and social innovation”
The concept of Entrepreneurship refers to a special skill or ability to mobilize the factors of production – Land, labour & capital and use them to produce new goods and services. The history of the early industrial development and trade and subsequent innovation in any country is largely the history of its entrepreneurs.
It describes people with the pioneering spirit, intuitive and inspiration and a willingness to work hard and take risks. They are the energetic self-starters who make it their mission to meet business challenges, independently and are restless in working for someone else, for a salary.
(i) Entrepreneurship involves decision making, innovation, implementation, forecasting of the future, independency, and success.
(ii) Entrepreneurship is a discipline with a knowledge base theory and is an outcome of complex socio-economic, psychological, technological, legal and other factors.
(iii) It is a dynamic and risky process.
(v) Entrepreneurship is equally applicable to big and small businesses, to economic and non-economic activities.
(vi) Different entrepreneurs might have some common traits but all of them will have some different and unique qualities.
(vii) Entrepreneurship is a process. It is not a combination of some stray incidents.
(viii) It is the purposeful and organized search for change, conducted after systematic analysis of opportunities in the environment.
(ix) Entrepreneurship is a philosophy – it is the way one thinks, one acts and therefore it can exist in any situation, be it business or government or in the field of education, science & technology.
(x) Entrepreneurship can be described as a process of action that an entrepreneur undertakes to establish his enterprise.
(xi) Entrepreneurship is a creative activity.
(xii) It is the ability to create and build something from practically nothing.
(xiii) It is a knack of sensing opportunity where others may see chaos, contradiction and confusion.
(xiv) Entrepreneurship is the attitude of mind to seek opportunities, take calculated risks and derive benefits by setting up a venture.
(xv) It comprises of numerous activities involved in conception, creation and running an enterprise.
(xvi) Entrepreneurship is a dynamic process of vision, change, and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions.
(xvii) Essential ingredients include the willingness to take calculated risks-in terms of time, equity, or career; the ability to formulate an effective venture team; the creative skill to marshal needed resources;
Therefore “Entrepreneurship is a dynamic process of vision, change, and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. Essential ingredients include the willingness to take calculated risks-in terms of time, equity, or career, ability to formulate an effective venture team, creative skill to organize needed resources, the fundamental skill of building a solid business plan and, above all, the vision to recognize opportunity where others see chaos, contradiction, and confusion.”
Concept of Entrepreneurship – With Qualities of an Entrepreneur
The concept of entrepreneur came into existence since 16th century. In the beginning it was limited to the military services and civil engineering fields. With growth of time the scope of entrepreneurship developed and today “An entrepreneur is one who is ready to create something new with risks of economic uncertainty”.
According to the above definition, an entrepreneur is “An organiser who can undertake a number of complex operations like obstacles to be surmounted, anxieties to be suppressed, misfortunes to be repaired and expedients to be devised”.
It gives a feeling that, besides the above factors an entrepreneur should also possess the following qualities:
(i) Knowledge of business world
(ii) Capital command
(iii) Moral qualities of work judgement
(v) Economic aspect.
As stated above an entrepreneur is “an inventor” and hence he should have foresightedness, visualization, marketability of the product, economic aspect and risks’ involvement, a successful entrepreneur may create the following prospective –
(i) May introduce new product in the market
(ii) May bring new manufacturing technology
(iii) May create a new market
(iv) May establish a new organization
(v) May generate a new avenue for the market.
Concept of Entrepreneurship – Modern Concept: With Views on Entrepreneurship
Features of Modern Concept:
(i) Capacity of establishing a venture.
(ii) Capacity of controlling a venture.
(iii) Capacity of directing a venture.
(iv) Capacity of improving a venture.
Various Views of Entrepreneurship:
1. Risk Bearing Capacity:
Richard Cantillion, “It is a function of bearing non insurable risk.”
According to him, risk bearing forms a unique constitutive function of entrepreneurship. E.g., the farmer pays out contractual incomes which are certain to the landlords and labourers and sells at prices that are certain.
Investment → Transformation → Profit or losses
Frank H. Knight, “It is a risk bearing capacity which is incalculable and cannot be insured as well.”
2. Function of Organisation and Coordination:
J.B. Say, “Entrepreneurship is a function of organising and collecting the production factor.”
Here, entrepreneur is an organiser and collector. He says that entrepreneurship is an economic factor which includes all production factors.
3. Managerial Skill:
B. F. Hoeslitz, “Financial ability is not the prime factor in entrepreneurship. Managerial skill is an important factor of venture.”
J. S. Mill, “Superintendence, control and direction are the abilities of entrepreneurship.”
4. Innovation Activity:
Joseph Schumpeter, “Entrepreneurship is a creation and innovative activity.”
According to him, it is extraordinarily powerful like converting the crude oil into an energy source, whereby established ways of doing things are destroyed by the creation of new and better ways to get things done.
5. Groups Level Reactiveness:
6. Organisation Building Ability:
7. Capacity of High Achievement:
Mc Clelland, “There are two features in any entrepreneurship i.e.,
(1) Ability to do any function with new & skilled manner;
(2) Capacity to take any decision at the time of uncertain time period.”
They think that entrepreneurship is not a causal behaviour, it is fully related to psychological activity.
Thus, we can divide the concepts of entrepreneurship in three categories:
1. Classical concept
2. Neo classical concept
3. Modern concept
1. Classical Concept:
Richard Cantillon, Frank H. Knight, Adam Smith, J.B. Say, J.S. Mill, David Ricardo are included in classical ideology.
(i) Capacity of bearing uncertainty and risk.
(ii) Ability of collecting and organising various production factor.
(iii) Ability of collecting production factors and their control and superintendence. (It can be applied on undeveloped economy)
2. Neo Classical Concept:
Waltus Alfred Marshall, Joseph Schumpeter are the supporters of neo-classical concept.
(i) Various managerial functions regarding business such as preparing plan, organising the production factor, their control and direction ability.
(ii) The changing ability or innovative ability.
(iii) It is applied on all developing countries.
3. Modern Concept:
J.E. Stepnek, George Evens, Peter Kilby, Higgins, Peter F. Drucker, H.W. Johnson, Robert Lamb are the supporter of modern concept.
(i) Wider coverage area of commercial and industrial activities.
(ii) Risk bearing & promotion of new venture are the basic of modern ideology.
(iii) Searching new opportunities, new innovation, social innovation, dynamic leadership are the result of modern concept.
The Concept of Entrepreneurship – Definition, Core Elements, Experts’ Views and Nature
Entrepreneurship is the process of identifying opportunities in the market place, marshalling the resources required to pursue these opportunities and investing the resources to exploit the opportunities for long term gains. It involves creating wealth by bringing together resources in new ways to start and operate an enterprise.
According to Cole “entrepreneurship is the purposeful activity of an individual or a group of associated individuals undertaken to initiate, maintain and aggrandise profit by production or distribution of economic goods and services“.
This definition states that entrepreneurship is a goal-oriented process involving production or distribution of products or services. It may be undertaken by one person or by a group of persons.
In the words of Higgins, “entrepreneurship is meant the function of seeking investment and production opportunity, organising an enterprise to undertake a new production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique, discovering new sources of raw materials and selecting top managers for day to day operations of the enterprise.”
This definition highlights risk-taking, innovating and resource organising aspects of entrepreneurship.
According to Kao, “entrepreneurship is the attempt to create value recognition of business opportunity, the management of risk-taking appropriate to the opportunity and through the communicative and management skills to mobilise human, financial and material resources necessarily to bring a project to friction.
This definition recognises that entrepreneurship involves the fusion of capital, technology and human talent to complete a project successfully and with reasonable degree of risk.
“Entrepreneurship is the professional application of knowledge, skills and competencies and/or of monetizing a new idea, by an individual or a set of people by launching an enterprise de novo or diversifying from an existing one (distinct from seeking self-employment as in a profession or trade), thus to pursue growth while generating wealth, employment and social good”. — National Knowledge Commission.
Four Core Elements of Entrepreneurship:
From various definitions, it emerges that entrepreneurship primarily – consists of four main elements:
(a) Creativity and Innovation form the core of entrepreneurship that enables the entrepreneur to think entire new ways of working. Key part of entrepreneurship is to identify opportunities that no one else has noticed earlier. Such opportunities need not be large; these can even be small ones. Creative people are receptive to new ideas generated by other.
(b) Ability to Apply the Creativity – Besides the entrepreneurs have an ability to apply the creativity to business problems. They understand the people and the environment around them. They can effectively martial resources for the same. It is not enough to think creatively, successful entrepreneurship demands thoughts be translated in to action and result. They need an ability of getting things done.
(c) Change – They have a sound belief in their ability to change the status quo-the way the things are being done presently. With their drive and passion to achieve success they change the way things the being performed.
(d) Creating Value – Entrepreneurs focus on creating value by doing things in cheaper, better an, faster manner.
Thus, entrepreneurship can be defined as – “Creation of value through people working together 1 implement an idea through the application of drive and willingness to take risk.”
Entrepreneurship is considered as the process or action of setting up of the new venture and the venture so set-up is called the enterprise Schumpeter described it as a process and the entrepreneurs as innovators who use the process to shatter the status quo through the combination of resources and new methods of commerce.
McClelland’s View on Entrepreneurship:
McClelland’s Need Theory explains the concept of entrepreneurial motivation. He identified three motivating needs, – (i) Need for power (ii) need for affiliation and (iii) need for achievement. McClelland is of the view that the need for achievement is a distinct human motive that can be distinguished from other needs.
McClellan’s subjected a group of fifty two entrepreneurs in India to the concentrated achievement motivation course. Two thirds of them were found usually active in the ‘post training period’. Some of them actually started new business and others investigated new product lines.
His study showed that achievement motivation is a major contributory factor for entrepreneurship. Need for achievement is simply the desire to do well not so much for the sake of social recognition or prestige, but for the sake of an inner feeling of personal accomplishment. It is this need for achievement which guides an entrepreneur’s actions.
McClelland Identified Two Characteristics of Entrepreneurs:
(i) To do something in a new and better way,
(ii) To take decisions under uncertainty.
Entrepreneurial role involves doing things in a new and better way. A business man who simply behaves in traditional ways is not an entrepreneur. On the other hand, if there is no significant uncertainty and the action involves applying known and predictable results entrepreneurship is no at all involved.
Following psychological factors contribute to entrepreneurial motivation:
(1) Need for achievement through self-study, goal setting and inter personal support.
(2) Keen interest in situations involving moderate risk.
(3) Desire for taking personal responsibility.
(4) Concrete measures of task performance.
(5) Anticipation of future possibilities.
(6) Organisational skills.
(7) Energetic or novel instrumental activity.
The needs are the basic stimulating factors and the need, or, achievement stimulates the behaviour of a person to be an entrepreneurship.
Josheph A. Schumperter’s View of Entrepreneurship as a Function of Innovation:
Joseph A. Schumpeter, for the first time, put the human agent at the centre of process of economic development and assigned a critical role to the entrepreneurship in his theory of economic development. He described an entrepreneur as a key man in the process of development.
He innovates new ideas and puts them into practice. Schumpeter treats entrepreneurs as motivated and talented class of people who forces the profitable opportunities and exploits them.
The entrepreneur Schumpeter’s view is basically an innovator, and innovator is one who carries new combinations of means of production such as:
(1) The introduction of new goods, that is, one with which consumers are not yet familiar, new quality of goods;
(2) The introduction of a new method of production, that is, one not yet tested by experience in the branch of manufacture concerned which need by no means be founded upon a discovery significantly new, and also exist in a way of handling in commodity commercially;
(3) The opening of a new market, that is, a market into which that particular branch of manufacture of the company in question has not previously entered, irrespective of whether this source already exists or whether it has market has existed before;
(4) The conquest of a new source of raw materials or half manufactured goods, again irrespective of whether this source already exists or whether it has to be created;
(5) The conquest of a new source of raw materials or half manufactured goods, again irrespective of whether this source already exists or whether it has to be created;
(6) The carrying out of a new organisation of any industry, like the creation of a monopoly position, for example, through trustification or the breaking up of a monopoly position.
Entrepreneurship is not a profession or permanent occupation and therefore it cannot formulate a social class like capitalists or wage earners. Psychologically, entrepreneurs are not solely motivated by profit. According to Schumpeter, both interest and profit will arise from progress (change) and would not exist in the static society.
Schumpeterian innovation’ is a creative response to a situation Schumpeterian theory of economic development was conceived in the context of industrial revolution. His explanations of development are influenced by the experiences of that period. As far as the magnitude of this theory is concerned it was based on big private entrepreneurship. This theory has less application in under developed countries.
Arthur Cole’s View of Entrepreneurship as a Decision-Making Process:
Arthur H. Cole of the view that main functions, of an entrepreneurs is make decisions. He takes decisions regarding activities of the enterprise. He decides about the type of business to be done and the ways of doing it. Herberton Evans views the entrepreneur as the person or group of persons who has (or assumes) the task of determining the kind of business to be operated.
Once decisions are taken then Implementing such decisions is the managerial part, Evans notes that once these them are decided the role of the entrepreneur does not cease, instead of must be continuously alert and ready to make new decisions in the light of the changing market conditions and arising opportunities.
Arthur H. Cole describes an entrepreneur as a decision maker half a dozen spheres of action in which he must engage.
He has the following functions of the entrepreneur:
(1) The determination of the business objective of the enterprise and the change of those objectives as conditions require or make advantageous.
(2) The development and maintenance of an organisation, including efficient relation with subordinates and employees.
(3) The securing of adequate financial resources, the retention of them and the creation of good relations with investors.
(4) The acquision of effective technological equipment and the revision of it as new machinery appear.
(5) The development of a market for products and the devising of new product to meet or anticipate consumer demands.
(6) The maintenance of good relations with public authorities and with society at large.
The main features of entrepreneurship are as follows:
(1) Economic activity – Entrepreneurship is primarily an economic function because it involves the creation and operation of enterprise. It is basically concerned with the production and distribution of goods and services.
(2) Creative activity – Entrepreneurship is a creative response to changes in the environment. It involves innovation or introduction of something new and better. An entrepreneur is a change agent.
(3) Purposeful activity – The entrepreneur creates and operates an enterprise to earn profits through satisfaction of customers, therefore, entrepreneurship is goal-oriented activity.
(4) Function of risk-bearing – Risk is an inherent and inseparable element of entrepreneurship. An entrepreneur grantees rent to the landlord, wages to employees, and interest to investors in the hope of earning more than the expenses. He assumes the uncertainty of future. In the pursuit of profit, there is every possibility of loss.
(5) Organizing function – An entrepreneur brings together various factors of production coordination and control efforts of all the persons engaged in his enterprise. He harnesses land, labour, capital, and other resources for the benefit of mankind. Therefore, an entrepreneur is an organization builder.
(6) Gap-filling function – The gap between human needs and the available products and services gives rise to entrepreneurship. An entrepreneur identifies this gap and takes necessary steps to fill the gap. He introduces new products and services, new methods of production or distribution, new source of inputs and new markets.
(7) Dynamic function – Entrepreneurship is a dynamic function. Entrepreneurs thrive on change in the environment which brings about useful opportunities for business. Flexibility is the hallmark of a successful entrepreneur.
(8) Innovative function – Entrepreneurship is an innovative function as it involves doing things in a new and better way. Innovation may take several forms a new product, a new source of raw materials, a new market, and a new method of production.