Entrepreneur
An
entrepreneur (a
loanword from
French) is a person who undertakes and operates a new enterprise or venture, and assumes some accountability for the inherent risks.
Most commonly, the term entrepreneur applies to someone who establishes a new entity to offer a new or existing product or service into a new or existing market, whether for a profit or not-for-profit outcome (see
entredonneur).
Business entrepreneurs often have strong beliefs about a market opportunity and are willing to accept a high level of personal, professional, or financial
risk to pursue that opportunity. Business entrepreneurs are often highly regarded in
US culture as being a critical component of its
capitalistic society.
Famed entrepreneurs in America include:
Henry Ford (automobiles),
J. Pierpont Morgan (banking),
Thomas Edison (electricity/light bulbs),
Barron Collier (advertising),
Milton S. Hershey (confections),
Bill Gates (computer operating systems and applications), and
Steve Jobs (computer hardware, software).
The British entrepreneurs include:
Richard Branson (travel and media)
Some distinguish business entrepreneurs as either "
political entrepreneurs" or "market entrepreneurs."
An entrepreneur is someone who organizes a
system to create a
product or
service in order to gain
profit. However, there is a general sense that entrepreneurship involves the establishment of a new venture while adopting some of the risk. There is no general definition for the word, as it has been used in a large variety of ways and has been commonly defined differently by different people. Some scholars of entrepreneurship, such as Prof. W. Long have tried to develop a specific definition by looking at the historical use of the word, as it evolved
(Outcalt 2000). Perhaps the first person to create a theory about modern entrepreneurs would be
Schumpeter, although instead of using the French word adopted by the American literature, he used the German word "unternehmer", and "unternehmergeist" (spirit of entrepreneurship).
Entrepreneur as a risk bearer
Richard Cantillon, an Irish man living in France, was the first to introduce the term
entrepreneur and his unique
risk bearing function in economics during the early 18th century. He defined an entrepreneur as an 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. Uncertainty is defined as a risk, which cannot be insured against and is incalculable. There is a distinction between ordinary risk and uncertainty. A risk can be reduced through the insurance principle, where the distribution of the outcome in a group of instances is known. On the contrary, uncertainty is a risk, which cannot be calculated. The entrepreneur, according to Knight, is the economic functionary who undertakes such responsibility of uncertainty, which by its very nature cannot be insured, or capitalized or salaried to. Mark Casson has extended this notion to characterize entrepreneurs as decision makers who improvise solutions to problems which cannot be solved by routine alone.
Opportunities During the California Gold Rush
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EntertainmentEntrepreneur as an organiser
Jeanâ€"Baptiste Say, an aristocratic industrialist, developed the concept of entrepreneur a little further. His definition associates entrepreneur with the functions of
co-ordination, organization and supervision. According to him, an entrepreneur is one who combines the land of one, labor of another and the capital of yet another, and, thus, produces a product.
By selling the product in the market, he pays interest on capital, rent on land and wages to laborers and what remains is his or her profit.
Functional and indicative approach to entrepreneur definition
Mark Casson divides the approach of defining entrepreneur into two parts, the first being the functional approach which states that an entrepreneur is what entrepreneur does. Second, the indicative approach provides a description of the entrepreneur by which he may be recognized. The indicative approach maybe more concrete: it can describe entrepreneur in terms of legal status, relation with other parties, position in society, etc. An entrepreneur is an individual whose specialism and economic contribution refer to allocation of factors of production.
Entrepreneur as a person willing to engage uncertainty
Frank Knight, in his seminal contribution to economics
Risk, Uncertainty and Profit (1921), defines uncertainty as a primary attribute of his entrepreneurship theory. If there were no uncertainty no losses would be made. Risk is calculable, uncertainty is not. Entrepreneur is a person who is willing to put his career and capital on an uncertain venture.
Entrepreneur as a leader
More recently, researchers such as R. B. Reich have argued that leadership, management ability, and team-building should be added to the definition of .
In western financial circles since the early 1990's, the term has often been applied to those who are simply opportunistic. While the first to take advantage of any opportunity could be considered a leader, that alone should be insufficient to qualify one as an Entrepreneur. Instead, a hallmark would be one who
creates opportunity. A succinct example:
Sell a man a fish, you have sold one fish. Teach a man to fish, and you can sell him bait for life.There are two theories about how entrepreneurs develop, often called the "supply" and "demand" theories. In the supply theory, entrepreneurs are born, not made -- certain people have the personality traits that make a good entrepreneur. Several
research studies have shown that entrepreneurs are convinced that they can command their own destinies, or in the jargon of
behaviorial scientists, the "
locus of control" of the entrepreneur lies within himself. It is this self-belief which stimulates the entreprenuer, according to supply-side theorists. John G. Burch, writing in the September-October
1986 edition of
Business Horizons gave a list of in-born traits that make an entrepreneur:
*
A desire to achieve: The push to conquer problems, and give birth to a successful venture.
*
Hard work: It is often suggested that many entrepreneurs are
workaholics.
*
Desire to work for themselves: Entrepreneurs like to work for themselves rather than working for an organization or any other individual. They may work for someone to gain the knowledge of
product or
service that they may want to produce.
*
Nurturing quality: Willing to take charge of, and watch over a venture until it can stand alone.
*
Acceptance of responsibility: Are
morally, ly, and
mentally accountable for their ventures. Some
entrepreneurs may be driven more by
altruism than by self-interest.
*
Reward orientation: Desire to achieve, work hard, and take
responsibility, but also with a commensurate desire to be rewarded handsomely for their efforts; rewards can be in forms other than money, such as recognition and
respect.
*
Optimism: Live by the
philosophy that this is the best of times, and that anything is possible.
*
Orientation to excellence: Often desire to achieve something outstanding that they can be proud of.
*
Organization: Are good at bringing together the components (including people) of a venture.
*
Profit orientation: Want to make a profit; but the profit serves primarily as a meter to gauge their success and achievement.
In academic circles, however, the "demand" theory is now generally more prevalent. The demand theory holds that entrepreneurs emerge out of the combination of entrepreneurial opportunities and people who are well-positioned to take advantage of them. Thus, anyone who encounters the right conditions might become an entrepreneur, if they find themselves in a position where they find a valuable problem that they alone can solve. Scholars studying the demand theory try to understand the conditions under which entrepreneurs appear, particularly in understanding how differences in the information various people have (see
Austrian School economics) creates entrepreneurial opportunities, and how environmental factors (access to capital, competition, etc.) change the rate of entrepreneurship. Entrepeneurs are an important part of the society.
Entrepreneurial education is the teaching of entrepreneurial skills like
competitiveness, risk-taking and self confidence. Development of an entrepreneurial mindset as done in a
Junior Enterprise.
*
Master of Enterprise*
Junior Enterprise*
Young Enterprise*Binks, M. and Vale, P. (1990).
Entrepreneurship and Economic Change. Maidenhead: McGraw-Hill.
*Casson, M. (2005). 'Entrepreneurship and the theory of the firm'. Journal of Economic Behavior & Organization, 58 (2) , 327-348
*Hebert, R.F. and Link, A.N. (1988).
The Entrepreneur: Mainstream Views and Radical Critiques. New York: Praeger, 2nd edition.
*Knight FH (1921/61).
Risk uncertainty and profit. Kelley, 2nd edition.
*Maria T. Brouwer (2002). 'Weber, Schumpeter and Knight on entrepreneurship and economic development'.
Journal of Evolutionary Economics, vol. 12(1-2), p. 83. Heidelberg.
*
Roy L. Morris, "The Secret to Successful Startups: Low Fat Diets and Lots of Exercise"*
Roy L. Morris (2005), "Where Have All the Lead Angels Gone?," Forum Focus, MIT Enterprise Forum Global, Spring 2005Theories of the Firm
*Long, W. (1983). The meaning of entrepreneurship. American Journal of Small Business, 8(2), 47-59. (c971086)
*Outcalt, Charles, (2000). '
The Notion of Entrepreneurship: Historical and Emerging Issues'. Cellcee digest. Kauffman Center for Entrepreneurial Leadership.
* Reich, R. B. (1987, May/June). Entrepreneurship reconsidered: The team as hero. Harvard Business Review. (c96187)
