ENTREPRENEURSHIPBMSSEMVI
DEPARTMENT OF INFORMATION AND
COMMUNICATION TECHNOLOGY (ICT)
ICT 112: ENTREPRENEURSHIP AND INNOVATION
HISTORY OF ENTREPRENEURSHIP
ENTREPRENEURSHIP. The word first appeared in the French dictionary entitled
Dictionnaire Universel de Commerce compiled by Jacques des Bruslons and published
in 1723.Especially in Britain, the term "adventurer" was often used to denote the same
meaning. The study of entrepreneurship reaches back to the work in the late 17th and
early 18th centuries of Irish-French economist Richard Cantillon, which was
foundational to classical economics. Cantillon defined the term first in his Essai sur la
Nature du Commerce en Général, or Essay on the Nature of Trade in General, a book
William Stanley Jevons considered the "cradle of political economy".
RAM
- 1 -
, ENTREPRENEURSHIPBMSSEMVI
Cantillon defined the term as a person who pays a certain price for a product and resells
it at an uncertain price, "making decisions about obtaining and using the resources while
consequently admitting the risk of enterprise". Cantillon considered the entrepreneur to
be a risk taker who deliberately allocates resources to exploit opportunities to maximize
the financial return. Cantillon emphasized the willingness of the entrepreneur to assume
the risk and to deal with uncertainty, thus he drew attention to the function of the
entrepreneur and distinguished between the function of the entrepreneur and the owner
who provided the money.
Jean-Baptiste Say also identified entrepreneurs as a driver for economic development,
emphasizing their role as one of the collecting factors of production allocating resources
from less to fields that are more productive. Both Say and Cantillon belonged to French
school of thought and known as the physiocrats.
Dating back to the time of the medieval guilds in Germany, a craftsperson required
special permission to operate as an entrepreneur, the small proof of competence
(Kleiner Befähigungsnachweis), which restricted training of apprentices to craftspeople
who held a Meister certificate. This institution was introduced in 1908 after a period of
so-called freedom of trade (Gewerbefreiheit, introduced in 1871) in the German Reich.
However, proof of competence was not required to start a business. In 1935 and in 1953,
greater proof of competence was reintroduced (Großer Befähigungsnachweis
Kuhlenbeck), which required craftspeople to obtain a Meister apprentice-training
certificate before being permitted to set up a new business.
In the 20th century, entrepreneurship was studied by Joseph Schumpeter in the 1930s
and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich
von Hayek. While the loan from French of the word "entrepreneur" dates to the 1850,
the term "entrepreneurship" was coined around the 1920s. According to Schumpeter,
an entrepreneur is willing and able to convert a new idea or invention into a successful
innovation.
Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to
replace in whole or in part inferior offerings across markets and industries,
simultaneously creating new products and new business models, thus creative
destruction is largely responsible for long-term economic growth. The idea that
entrepreneurship leads to economic growth is an interpretation of the residual in
endogenous growth theory[and as such continues to be debated in academic economics.
An alternative description by Israel Kirzner suggests that the majority of innovations
may be incremental improvements such as the replacement of paper with plastic in the
construction of a drinking straw that require no special qualities.
For Schumpeter, entrepreneurship resulted in new industries and in new combinations
of currently existing inputs. Schumpeter's initial example of this was the combination
of a steam engine and then current wagon making technologies to produce the horseless
RAM
- 2 -
, ENTREPRENEURSHIPBMSSEMVI
carriage. In this case, the innovation (i.e. the car) was transformational, but did not
require the development of dramatic new technology. It did not immediately replace the
horse-drawn carriage, but in time incremental improvements reduced the cost and
improved the technology, leading to the modern auto industry.
Despite Schumpeter's early 20th-century contributions, the traditional microeconomic
theory did not formally consider the entrepreneur in its theoretical frameworks (instead
of assuming that resources would find each other through a price system). In this
treatment, the entrepreneur was an implied but unspecified actor, consistent with the
concept of the entrepreneur being the agent of x-efficiency.
For Schumpeter, the entrepreneur did not bear risk: the capitalist did. Schumpeter
believed that the equilibrium was imperfect. Schumpeter (1934) demonstrated that the
changing environment continuously provides new information about the optimum
allocation of resources to enhance profitability. Some individuals acquire the new
information before others and recombine the resources to gain an entrepreneurial profit.
Schumpeter was of the opinion that entrepreneurs shift the production possibility curve
to a higher level using innovations.
Initially, economists made the first attempt to study the entrepreneurship concept in
depth. Alfred Marshall viewed the entrepreneur as a multi-tasking capitalist and
observed that in the equilibrium of a completely competitive market there was no spot
for "entrepreneurs" as an economic activity creator.
In the 2000s, entrepreneurship has been extended from its origins in for-profit
businesses to include social entrepreneurship, in which business goals are sought
alongside social, environmental or humanitarian goals and even the concept of the
political entrepreneur. Entrepreneurship within an existing firm or large organization
has been referred to as intrapreneurship and may include corporate ventures where large
entities "spin-off" subsidiary organizations.
Entrepreneurs are leaders willing to take risk and exercise initiative, taking advantage
of market opportunities by planning, organizing and deploying resources, [34] often by
innovating to create new or improving existing products or services.[35] In the 2000s, the
term "entrepreneurship" has been extended to include a specific mindset resulting in
entrepreneurial initiatives, e.g. in the form of social entrepreneurship, political
entrepreneurship or knowledge entrepreneurship.
According to Paul Reynolds, founder of the Global Entrepreneurship Monitor, "by the
time they reach their retirement years, half of all working men in the United States
probably have a period of self-employment of one or more years; one in four may have
engaged in self-employment for six or more years. Participating in a new business
creation is a common activity among U.S. workers over the course of their careers". In
recent years, entrepreneurship has been claimed as a major driver of economic growth
in both the United States and Western Europe.
RAM
- 3 -
, ENTREPRENEURSHIPBMSSEMVI
Entrepreneurial activities differ substantially depending on the type of organization and
creativity involved. Entrepreneurship ranges in scale from solo, part-time projects to
large-scale undertakings that involve a team and which may create many jobs. Many
"high value" entrepreneurial ventures seek venture capital or angel funding (seed
money) to raise capital for building and expanding the business.[37] Many organizations
exist to support would-be entrepreneurs,
including specialized government agencies, business incubators (which may be for-
profit, non-profit, or operated by a college or university), science parks and non-
governmental organizations, which include a range of organizations including not-for-
profits, charities, foundations and business advocacy groups (e.g. Chambers of
commerce). Beginning in 2008, an annual "Global Entrepreneurship Week" event
aimed at "exposing people to the benefits of entrepreneurship" and getting them to
"participate in entrepreneurial-related activities" was launched.
Entrepreneurship is the process of designing, launching and running a new business,
which is often initially a small business. The people who create these businesses are
called entrepreneurs.
What is Entrepreneurship? Entrepreneurship is starting a business from scratch,
which includes everything from idea conception to managing the company for the long
term.
Entrepreneurship has been described as the "capacity and willingness to develop,
organize and manage a business venture along with any of its risks to make a profit.
While definitions of entrepreneurship typically focus on the launching and running of
businesses, due to the high risks involved in launching a start-up, a significant
proportion of start-up businesses have to close due to "lack of funding, bad business
decisions, an economic crisis, lack of market demand, or a combination of all of these."
A broader definition of the term is sometimes used, especially in the field of economics.
In this usage, an Entrepreneur is an entity which has the ability to find and act upon
opportunities to translate inventions or technologies into products and services: "The
entrepreneur is able to recognize the commercial potential of the invention and organize
the capital, talent, and other resources that turn an invention into a commercially viable
innovation." In this sense, the term "Entrepreneurship" also captures innovative
activities on the part of established firms, in addition to similar activities on the part of
new businesses.
WHO IS AN ENTREPRENEUR?
An entrepreneur is a person with a dream, originality and daring, who acts as the boss,
who decides as to how the commercial organization shall run, who co-ordinates all
RAM
- 4 -
DEPARTMENT OF INFORMATION AND
COMMUNICATION TECHNOLOGY (ICT)
ICT 112: ENTREPRENEURSHIP AND INNOVATION
HISTORY OF ENTREPRENEURSHIP
ENTREPRENEURSHIP. The word first appeared in the French dictionary entitled
Dictionnaire Universel de Commerce compiled by Jacques des Bruslons and published
in 1723.Especially in Britain, the term "adventurer" was often used to denote the same
meaning. The study of entrepreneurship reaches back to the work in the late 17th and
early 18th centuries of Irish-French economist Richard Cantillon, which was
foundational to classical economics. Cantillon defined the term first in his Essai sur la
Nature du Commerce en Général, or Essay on the Nature of Trade in General, a book
William Stanley Jevons considered the "cradle of political economy".
RAM
- 1 -
, ENTREPRENEURSHIPBMSSEMVI
Cantillon defined the term as a person who pays a certain price for a product and resells
it at an uncertain price, "making decisions about obtaining and using the resources while
consequently admitting the risk of enterprise". Cantillon considered the entrepreneur to
be a risk taker who deliberately allocates resources to exploit opportunities to maximize
the financial return. Cantillon emphasized the willingness of the entrepreneur to assume
the risk and to deal with uncertainty, thus he drew attention to the function of the
entrepreneur and distinguished between the function of the entrepreneur and the owner
who provided the money.
Jean-Baptiste Say also identified entrepreneurs as a driver for economic development,
emphasizing their role as one of the collecting factors of production allocating resources
from less to fields that are more productive. Both Say and Cantillon belonged to French
school of thought and known as the physiocrats.
Dating back to the time of the medieval guilds in Germany, a craftsperson required
special permission to operate as an entrepreneur, the small proof of competence
(Kleiner Befähigungsnachweis), which restricted training of apprentices to craftspeople
who held a Meister certificate. This institution was introduced in 1908 after a period of
so-called freedom of trade (Gewerbefreiheit, introduced in 1871) in the German Reich.
However, proof of competence was not required to start a business. In 1935 and in 1953,
greater proof of competence was reintroduced (Großer Befähigungsnachweis
Kuhlenbeck), which required craftspeople to obtain a Meister apprentice-training
certificate before being permitted to set up a new business.
In the 20th century, entrepreneurship was studied by Joseph Schumpeter in the 1930s
and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich
von Hayek. While the loan from French of the word "entrepreneur" dates to the 1850,
the term "entrepreneurship" was coined around the 1920s. According to Schumpeter,
an entrepreneur is willing and able to convert a new idea or invention into a successful
innovation.
Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to
replace in whole or in part inferior offerings across markets and industries,
simultaneously creating new products and new business models, thus creative
destruction is largely responsible for long-term economic growth. The idea that
entrepreneurship leads to economic growth is an interpretation of the residual in
endogenous growth theory[and as such continues to be debated in academic economics.
An alternative description by Israel Kirzner suggests that the majority of innovations
may be incremental improvements such as the replacement of paper with plastic in the
construction of a drinking straw that require no special qualities.
For Schumpeter, entrepreneurship resulted in new industries and in new combinations
of currently existing inputs. Schumpeter's initial example of this was the combination
of a steam engine and then current wagon making technologies to produce the horseless
RAM
- 2 -
, ENTREPRENEURSHIPBMSSEMVI
carriage. In this case, the innovation (i.e. the car) was transformational, but did not
require the development of dramatic new technology. It did not immediately replace the
horse-drawn carriage, but in time incremental improvements reduced the cost and
improved the technology, leading to the modern auto industry.
Despite Schumpeter's early 20th-century contributions, the traditional microeconomic
theory did not formally consider the entrepreneur in its theoretical frameworks (instead
of assuming that resources would find each other through a price system). In this
treatment, the entrepreneur was an implied but unspecified actor, consistent with the
concept of the entrepreneur being the agent of x-efficiency.
For Schumpeter, the entrepreneur did not bear risk: the capitalist did. Schumpeter
believed that the equilibrium was imperfect. Schumpeter (1934) demonstrated that the
changing environment continuously provides new information about the optimum
allocation of resources to enhance profitability. Some individuals acquire the new
information before others and recombine the resources to gain an entrepreneurial profit.
Schumpeter was of the opinion that entrepreneurs shift the production possibility curve
to a higher level using innovations.
Initially, economists made the first attempt to study the entrepreneurship concept in
depth. Alfred Marshall viewed the entrepreneur as a multi-tasking capitalist and
observed that in the equilibrium of a completely competitive market there was no spot
for "entrepreneurs" as an economic activity creator.
In the 2000s, entrepreneurship has been extended from its origins in for-profit
businesses to include social entrepreneurship, in which business goals are sought
alongside social, environmental or humanitarian goals and even the concept of the
political entrepreneur. Entrepreneurship within an existing firm or large organization
has been referred to as intrapreneurship and may include corporate ventures where large
entities "spin-off" subsidiary organizations.
Entrepreneurs are leaders willing to take risk and exercise initiative, taking advantage
of market opportunities by planning, organizing and deploying resources, [34] often by
innovating to create new or improving existing products or services.[35] In the 2000s, the
term "entrepreneurship" has been extended to include a specific mindset resulting in
entrepreneurial initiatives, e.g. in the form of social entrepreneurship, political
entrepreneurship or knowledge entrepreneurship.
According to Paul Reynolds, founder of the Global Entrepreneurship Monitor, "by the
time they reach their retirement years, half of all working men in the United States
probably have a period of self-employment of one or more years; one in four may have
engaged in self-employment for six or more years. Participating in a new business
creation is a common activity among U.S. workers over the course of their careers". In
recent years, entrepreneurship has been claimed as a major driver of economic growth
in both the United States and Western Europe.
RAM
- 3 -
, ENTREPRENEURSHIPBMSSEMVI
Entrepreneurial activities differ substantially depending on the type of organization and
creativity involved. Entrepreneurship ranges in scale from solo, part-time projects to
large-scale undertakings that involve a team and which may create many jobs. Many
"high value" entrepreneurial ventures seek venture capital or angel funding (seed
money) to raise capital for building and expanding the business.[37] Many organizations
exist to support would-be entrepreneurs,
including specialized government agencies, business incubators (which may be for-
profit, non-profit, or operated by a college or university), science parks and non-
governmental organizations, which include a range of organizations including not-for-
profits, charities, foundations and business advocacy groups (e.g. Chambers of
commerce). Beginning in 2008, an annual "Global Entrepreneurship Week" event
aimed at "exposing people to the benefits of entrepreneurship" and getting them to
"participate in entrepreneurial-related activities" was launched.
Entrepreneurship is the process of designing, launching and running a new business,
which is often initially a small business. The people who create these businesses are
called entrepreneurs.
What is Entrepreneurship? Entrepreneurship is starting a business from scratch,
which includes everything from idea conception to managing the company for the long
term.
Entrepreneurship has been described as the "capacity and willingness to develop,
organize and manage a business venture along with any of its risks to make a profit.
While definitions of entrepreneurship typically focus on the launching and running of
businesses, due to the high risks involved in launching a start-up, a significant
proportion of start-up businesses have to close due to "lack of funding, bad business
decisions, an economic crisis, lack of market demand, or a combination of all of these."
A broader definition of the term is sometimes used, especially in the field of economics.
In this usage, an Entrepreneur is an entity which has the ability to find and act upon
opportunities to translate inventions or technologies into products and services: "The
entrepreneur is able to recognize the commercial potential of the invention and organize
the capital, talent, and other resources that turn an invention into a commercially viable
innovation." In this sense, the term "Entrepreneurship" also captures innovative
activities on the part of established firms, in addition to similar activities on the part of
new businesses.
WHO IS AN ENTREPRENEUR?
An entrepreneur is a person with a dream, originality and daring, who acts as the boss,
who decides as to how the commercial organization shall run, who co-ordinates all
RAM
- 4 -
