Chapter One

The Concept of Entrepreneurship

and Entrepreneur
 Meaning and Definition of
entrepreneurship
I. Entrepreneurship is the process of creating something new with value
by devoting the necessary time and effort, assuming the
accompanying financial, Psychic and social risk and Receiving the
resulting rewards (money, personal satisfaction and independence).
• From the above definition, we can understand that;
1) Entrepreneurship involves the creation process.
i.e creating something new of value
2) Entrepreneurship requires the devotion of the necessary time
and effort.
3) It involves the rewards of being entrepreneur .
i.e *Money-for profit oriented entrepreneurs
* Independence
* personal satisfaction
4) Assuming necessary risk is the final
aspect of entrepreneurship
II. Entrepreneurship is a French word literally
translated as between taker or go-between.
• The concept Entrepreneurship has evolved
over time and has always a subject to
modification.
Entrepreneurship in the Earliest period
• An entrepreneur was viewed as a go-between
• A person who sign contracts with a money
person.
Eg. Marco Polo
Entrepreneurship In the Middle Ages
• a person who managed large production
projects using the resource provided by the
government of the country.
Eg. The Cleric
Entrepreneurship in the17th century
• a person who entered in to a contractual
arrangement with the government to perform
a service or to supply products.
Entrepreneurship in 18th century
• The person with capital was differentiated
from the one who needed capital.
Eg. Thomas Edison
• Cantillon was the first to use entrepreneurship
in the business context. He considered
entrepreneurs risk takers because they buy at a
certain price and sell at uncertain price.
Entrepreneurship in 19th, 20th and 21st centuries
• By observing many economists view on
entrepreneurship the following common
behaviors of entrepreneurs are listed.
 Entrepreneur is an individual that initiates and
actively operates an entrepreneurial venture.
 It involves Innovation (changing, revolutionizing,
and introducing new approaches).
 Entrepreneurship can take place in both profit and
non- profit environments
 Entrepreneurship implies growth.
 Uniqueness -it means doing something new,
something untested and untried-something
unique.
 Creating Value- Through entrepreneurship, new
products, services, transactions, approaches,
resources, technologies and markets are created
that contribute something valuable to a
community or a marketplace.
 Process- Entrepreneurship is not a one-time
phenomenon; it occurs overtime.
Who is An Entrepreneur?
- As stated by Hisrich and Peters (2008), the word entrepreneur is
derived from the French word ”enterprendre” meaning to
undertake.
- The entrepreneur- is the one who undertakes to organize,
manage and assume risks of a business.
- Entrepreneur- is an innovator or developer who recognizes and
seizes opportunities, converts those opportunities into
workable/ marketable areas, adds value through time, effort,
money or skill, assuming the risks of the competitive market
place to implement those ideas and realizes the reward from
these efforts.
- In simple terms, entrepreneur is an individual who takes risks
and starts something new or an individual developing something
unique.
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Misconceptions about entrepreneurship

• Successful entrepreneurship needs only a great

idea.
• Entrepreneurship is easy.
• Entrepreneurship is a risky gamble.
• Entrepreneurship is found only in small
business reality.
 The Entrepreneurial Decision Process

It is a movement from a present life-style to forming

a new enterprise.
• There are three process
1. Decision to change from present career or life
style.
• The two most important incentives to leave a
present life style are
- Working Environment and
- Disruption
 The Entre…
2. The Decision that an Entrepreneurial Venture
is Desirable
• The perception that starting a new company is
desirable results from
- Culture
- Sub-culture
- Family
- Teachers
- Peers
 The Entre…
3. The Decision that both Internal and External
Factors Make the Venture Possible
• The factors are
- Government
- Background
- Marketing
- Role Model
- Finance
 The Entre…
• There are four process for the successful
establishment and management of the business.
1. Exploring the entrepreneurial context
2. Identifying opportunities and possible
competitive advantage
3. Starting the venture
• Researching the feasibility of the venture,
planning the venture, organizing the venture and
launching the venture.
4. Managing the venture
 Competencies and traits of entrepreneurs

The common characteristics of entrepreneurs

are
- Need for Achievement - All rounded
- Willingness to take risk: - Self determination
- Self-Confidence - Flexibility
- Innovation - Tenancy despite
failure
- Commitment
 Entrepreneurial Motivational Factors

The reasons /factors for small firm formation can

be divided between "Pull" and" Push" influences.
Pull Influence
• Some individuals are attracted towards small
business ownership by positive motive such as:
- Desire for independence
- Desire to exploit an opportunity
- Financial incentive
Push influence
• Many people are pushed into finding a new
enterprise by variety of factors including;
- Redundancy (Being without a job,
idleness)
- Unemployment
- Disagreement with previous employer
Characteristics of Entrepreneurs
• An entrepreneur is an individual who has a high level of ;
 Administrative capability
 Talent and ability for decision making
 Communication skill
 Organizational skill and
 Technical knowledge
• Some of the most frequently cited competencies of entrepreneurs are;
a) Clear vision: identifying or determining where they want to be.
b) Clear objective: SMART objectives
c) Drive to achieve: entrepreneurs are internally driven by a strong desire to
compete, to excel against self- imposed standards and to pursue and attain
challenging goals.
d) Commitment: dedication to success and overcome obstacles.
e) Capacity to assume calculated risks : assuming the responsibility for loss
that may occur due to unforeseen contingencies of the future.
- They assumes all possible risks of running business, which emerges due
to the possibility of changes in the tastes of consumers, technology,
techniques of production and new invention.
- Successful entrepreneurs have special ability to reduce risks by their
initiative, skill and good judgement.
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Continued…

f) Initiative taking: they actively seek and take the initiatives.

i.e.- being responsible for the success and failure of the operation.
- taking the initiative in solving a problem or filling the vacuum
where no leadership exist.
g) Opportunity orientation: having analytical ability to analyze an
opportunity, a problem or situation.
- They focuses on opportunities rather than on resources,
structures or strategy.
h) Persistent problem solving
i) Self-confidence: successful entrepreneurs have internal locus of
control, they believe in themselves.
- They do not believe in fate or luck.
- Their self-confidence increases their feeling of being
independent.
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Continued…

j) Seeking feedback and networking: effective

entrepreneurs are often described as quick learners,
seeking information aggressively from others.
- They have strong desire to know how well they are
doing and how they might improve their performance.
- They maintains sustainable network with investors,
partners and employees.
k) Tolerance of uncertainty and failure: effective
entrepreneurs uses failure as learning experience.
- They do not become disappointed, discouraged or
dispersed by the failure.
l) Creativity and innovativeness: innovation implies
doing new thing or doing of things that are already
being done in a new way.
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 Some Success and failure factors of
entrepreneurship
• The entrepreneurial team
• Venture product or service
• Markets and timing
• Business ideology
 Types of entrepreneurs

• There are different bases to classify

entrepreneurs, some of them are
Based on the type of Business
According to the type of business, entrepreneurs
are classified as follows:
1. Business entrepreneurs are individuals who
conceive an idea for a new product or service
and then create a business to materialize their
idea in to reality.
2. Trading entrepreneur is one who undertakes
trading activities and is not concerned with the
manufacturing.
3) Industrial entrepreneur is essentially a
manufacturer who identifies the potential needs
of the customers and tailors a product or service
to meet the marketing needs.
4. Corporate entrepreneur is a person who
demonstrates his innovative skill in organizing
and managing corporate undertaking.
5. Agricultural entrepreneur is the entrepreneur
who undertakes agricultural activities such as
raising and marketing of crops.
Based on technology(use of skill)
1. Technical entrepreneur is a "Crafts man" with
skill in production techniques.
2. Non-technical entrepreneur is a person who is
concerned with developing alternative
marketing and distribution strategies to
promote his/her business.
3. Professional entrepreneur is a person who
is interested in establishing a business but
does not have interest in managerial or
operating it once it is established.
Entrepreneurs based on Idea generation
1. Technological entrepreneur is one who
invents a new technology to produce new
products or new process for producing old
product.
2. Geographical entrepreneur is one who moves
technology, products, and processes that go
with it from one place to another. It is
common to introduce new products or
services from more advanced nation to
developing nation.
3. Sociological entrepreneur- is one who finds a
new situation in which to sell an old product
(existing products).
Based on source of capital
Based on source of capital entrepreneurs can be
classified as;
1. Private entrepreneurs- is when an individual
on the basis of his or her own property start
up a new venture.
2. Collective entrepreneurs- when a venture is
created in a grouped based on collective
property or contribution.
Entrepreneurs based on the reason to start-up
Based on the reason to start-up, entrepreneurs can
be classified as follows:
1. Opportunity-driven entrepreneurs- they start a
company because they see clear market
opportunities to exploit.
2. Necessity-driven entrepreneur- goes in to
business to create self-employment and to win a
living.
Entrepreneurs Vs (Inventor, owner-manager,
Intrapreneurs)
• Entrepreneurs are more concerned with being
creative in using resources, they are less
concerned with managing resources efficiently.
• Owner-manger may or may not be entrepreneur,
they own and manage enterprises in a way, which
fits with their personal motivation.
• Innovators successfully exploit new ideas
( implement new ideas)
• Innovators to be called entrepreneurs they
must start a business using their innovation.
• Innovation is one characteristics of
entrepreneurs.
 Benefits and Limitation of Entrepreneurship

From the benefits of entrepreneurship

Help to gain control over your own destiny.
Help to reach your full potential.
Help to get more profit.
Gives you recognition.
Opportunity to do things that you enjoy doing.
 Benefits…
 From the potential drawbacks of entrepreneurship
Uncertainty of income
Involves risk
- Financial risk - Family and social risk
- Career risk - Psychic risk
Working long hours
High level of stress
Complete responsibility