CHAPTER 1: THE NATURE OF ENTREPRENEURSHIP
1.1 INTRODUCTION
The word ‘entrepreneur’ is widely used, both in everyday conversation and as a technical term in
management and economics. Its origin from a French word, entreprender, where an entrepreneur
was an individual commissioned to undertake a particular commercial project. A number of
concepts have been derived from the idea of the entrepreneur such as entrepreneurial,
entrepreneurship and entrepreneurial process. The idea that the entrepreneur is someone who
undertakes certain projects offers an opening to developing an understanding of the nature of
entrepreneurship. Undertaking particular projects demands that particular tasks be engaged in
with the objective of achieving specific outcomes and that an individual take charge of the
project. Entrepreneurship is then what the entrepreneur does. Entrepreneurial is an adjective
describing how the entrepreneur undertakes what he or she does. The entrepreneurial process in
which the entrepreneur engages is the means through which new value is created as a result of
the project: the entrepreneurial venture.
Chapter Objectives
This chapter is concerned with developing a predominant and integrated perspective of the
entrepreneur and entrepreneurship. It reviews the great variety of definitions given for the word
entrepreneurship and also the different activities performed by the entrepreneur.
After completing this chapter, students will be able to:
▪ Define the term entrepreneurship and entrepreneur
▪ Identify types of entrepreneur
▪ Recognize the role of entrepreneurship in the economy
▪ Analyze the entrepreneurial competences
▪ Understand creativity and innovation
1.2 Historical Origin of Entrepreneurship
What is entrepreneurship? And who is an entrepreneur? These two questions are asked more
frequently reflecting the increasing demand in the field of entrepreneurship. Offering a specific
and unambiguous definition of the term entrepreneurship /entrepreneur presents a challenge. This
1
,is not because definitions are not available, but because there are so money. Here let us took in to
the historical development of entrepreneurship so as to grasp the meaning of the word
entrepreneurship.
During the ancient period the word entrepreneur was used to refer to a person managing large
commercial projects through the resources provided to him.
In the 17th Century a person who has signed a contractual agreement with the government to
provide stipulated products or to perform service was considered as entrepreneur. In this case the
contract price is fixed so any resulting profit or loss reflects the effort of the entrepreneur. In the
18th Century the first theory of entrepreneur has been developed by Richard Cantillon. He said
that an entrepreneur is a risk taker. If we consider the merchant, farmers and /or the professionals
they all operate at risk. For example, the merchants buy products at a known price and sell it at
unknown price and this shows that they are operating at risk. The other development during the
18th Century is the differentiation of the entrepreneurial role from capital providing role. The
later role is the base for today’s venture capitalist.
In the late 19th and early 20th Century an entrepreneur was viewed from economic perspectives.
The entrepreneur organizes and operates an enterprise for personal gain. In the middle of the 20th
Century the notion of an entrepreneur as an inventor as established. “The function of the
entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention or
more generally untried technological possibility for producing new commodities or producing an
old one in a new way or opening a new outlet for products by reorganizing a new industry.”
The concept of innovation and newness are at the heart of the above definition. From the
historical development it is possible to understand the fact that the perception of the word
entrepreneur was evolved from managing commercial project to the application of innovation
(creativity) in the business idea.
1.3 Definitions of Entrepreneurship and Entrepreneur
Here we will see some definitions of entrepreneurship and entrepreneur. Intuitively, it is know
that entrepreneurship is the process and entrepreneur is the person undertaking entrepreneurial
activity such as undertaking own business. Finally we will see the common attributes of the
definitions of entrepreneurship and entrepreneur.
1. Entrepreneurship is the process of identifying opportunities in the market place, arranging the
resources required to pursue these opportunities and investing the resources to exploit the
2
, opportunities for long term gains. It involves creating incremental wealth by bringing
together resources in new ways to start and operate an enterprise.
2. Entrepreneurship is the processes through which individuals become aware of business
ownership then develop ideas for, and initiate a business.
3. Entrepreneurship can also be defined as the process of creating something different and
better with value by devoting the necessary time and effort by assuming the accompanying
financial, psychic and social risks and receiving the resulting monetary reward and personal
satisfaction. In this case an individual should come up with something different and better in
order to the named as entrepreneur.
4. Entrepreneurship is the art of identifying viable business opportunities and mobilizing
resources to convert those opportunities into a successful enterprise through creativity,
innovation, risk taking and progressive imagination.
Entrepreneurship is a practice and a process that results in creativity, innovation and enterprise
development and growth. It refers to an individual’s ability to turn ideas into action involving
and engaging in socially-useful wealth creation through application of innovative thinking and
execution to meet consumer needs, using one’s own labor, time and ideas. Engaging in
entrepreneurship shifts people from being “job seekers” to “job creators”, which is critical in
countries that have high levels of unemployment. It requires a lot of creativity which is the
driving force behind innovation.
In general, the process of entrepreneurship includes five critical elements. These are:
1) The ability to perceive an opportunity.
2) The ability to commercialize the perceived opportunity i.e. innovation
3) The ability to pursue it on a sustainable basis.
4) The ability to pursue it through systematic means.
5) The acceptance of risk or failure.
Based on the above concepts of entrepreneurship, an entrepreneur can be defined as follows:
1) An entrepreneur is any person who creates and develops a business idea and takes the risk
of setting up an enterprise to produce a product or service which satisfies customer needs.
2) An entrepreneur can also be defined as a professional who discovers a business opportunity
to produce improved or new goods and services and identifies a way in which resources
required can be mobilized.
3
1.1 INTRODUCTION
The word ‘entrepreneur’ is widely used, both in everyday conversation and as a technical term in
management and economics. Its origin from a French word, entreprender, where an entrepreneur
was an individual commissioned to undertake a particular commercial project. A number of
concepts have been derived from the idea of the entrepreneur such as entrepreneurial,
entrepreneurship and entrepreneurial process. The idea that the entrepreneur is someone who
undertakes certain projects offers an opening to developing an understanding of the nature of
entrepreneurship. Undertaking particular projects demands that particular tasks be engaged in
with the objective of achieving specific outcomes and that an individual take charge of the
project. Entrepreneurship is then what the entrepreneur does. Entrepreneurial is an adjective
describing how the entrepreneur undertakes what he or she does. The entrepreneurial process in
which the entrepreneur engages is the means through which new value is created as a result of
the project: the entrepreneurial venture.
Chapter Objectives
This chapter is concerned with developing a predominant and integrated perspective of the
entrepreneur and entrepreneurship. It reviews the great variety of definitions given for the word
entrepreneurship and also the different activities performed by the entrepreneur.
After completing this chapter, students will be able to:
▪ Define the term entrepreneurship and entrepreneur
▪ Identify types of entrepreneur
▪ Recognize the role of entrepreneurship in the economy
▪ Analyze the entrepreneurial competences
▪ Understand creativity and innovation
1.2 Historical Origin of Entrepreneurship
What is entrepreneurship? And who is an entrepreneur? These two questions are asked more
frequently reflecting the increasing demand in the field of entrepreneurship. Offering a specific
and unambiguous definition of the term entrepreneurship /entrepreneur presents a challenge. This
1
,is not because definitions are not available, but because there are so money. Here let us took in to
the historical development of entrepreneurship so as to grasp the meaning of the word
entrepreneurship.
During the ancient period the word entrepreneur was used to refer to a person managing large
commercial projects through the resources provided to him.
In the 17th Century a person who has signed a contractual agreement with the government to
provide stipulated products or to perform service was considered as entrepreneur. In this case the
contract price is fixed so any resulting profit or loss reflects the effort of the entrepreneur. In the
18th Century the first theory of entrepreneur has been developed by Richard Cantillon. He said
that an entrepreneur is a risk taker. If we consider the merchant, farmers and /or the professionals
they all operate at risk. For example, the merchants buy products at a known price and sell it at
unknown price and this shows that they are operating at risk. The other development during the
18th Century is the differentiation of the entrepreneurial role from capital providing role. The
later role is the base for today’s venture capitalist.
In the late 19th and early 20th Century an entrepreneur was viewed from economic perspectives.
The entrepreneur organizes and operates an enterprise for personal gain. In the middle of the 20th
Century the notion of an entrepreneur as an inventor as established. “The function of the
entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention or
more generally untried technological possibility for producing new commodities or producing an
old one in a new way or opening a new outlet for products by reorganizing a new industry.”
The concept of innovation and newness are at the heart of the above definition. From the
historical development it is possible to understand the fact that the perception of the word
entrepreneur was evolved from managing commercial project to the application of innovation
(creativity) in the business idea.
1.3 Definitions of Entrepreneurship and Entrepreneur
Here we will see some definitions of entrepreneurship and entrepreneur. Intuitively, it is know
that entrepreneurship is the process and entrepreneur is the person undertaking entrepreneurial
activity such as undertaking own business. Finally we will see the common attributes of the
definitions of entrepreneurship and entrepreneur.
1. Entrepreneurship is the process of identifying opportunities in the market place, arranging the
resources required to pursue these opportunities and investing the resources to exploit the
2
, opportunities for long term gains. It involves creating incremental wealth by bringing
together resources in new ways to start and operate an enterprise.
2. Entrepreneurship is the processes through which individuals become aware of business
ownership then develop ideas for, and initiate a business.
3. Entrepreneurship can also be defined as the process of creating something different and
better with value by devoting the necessary time and effort by assuming the accompanying
financial, psychic and social risks and receiving the resulting monetary reward and personal
satisfaction. In this case an individual should come up with something different and better in
order to the named as entrepreneur.
4. Entrepreneurship is the art of identifying viable business opportunities and mobilizing
resources to convert those opportunities into a successful enterprise through creativity,
innovation, risk taking and progressive imagination.
Entrepreneurship is a practice and a process that results in creativity, innovation and enterprise
development and growth. It refers to an individual’s ability to turn ideas into action involving
and engaging in socially-useful wealth creation through application of innovative thinking and
execution to meet consumer needs, using one’s own labor, time and ideas. Engaging in
entrepreneurship shifts people from being “job seekers” to “job creators”, which is critical in
countries that have high levels of unemployment. It requires a lot of creativity which is the
driving force behind innovation.
In general, the process of entrepreneurship includes five critical elements. These are:
1) The ability to perceive an opportunity.
2) The ability to commercialize the perceived opportunity i.e. innovation
3) The ability to pursue it on a sustainable basis.
4) The ability to pursue it through systematic means.
5) The acceptance of risk or failure.
Based on the above concepts of entrepreneurship, an entrepreneur can be defined as follows:
1) An entrepreneur is any person who creates and develops a business idea and takes the risk
of setting up an enterprise to produce a product or service which satisfies customer needs.
2) An entrepreneur can also be defined as a professional who discovers a business opportunity
to produce improved or new goods and services and identifies a way in which resources
required can be mobilized.
3
