CHAPTER ONE

THE CONCEPT OF ENTREPRENEUR

1.1. Definitions and Philosophy
The word entrepreneur was originated in 17th century from French word “Entreprendre” which means,
“to undertake”. In a business context, it means to start the business.
There is no universally accepted definition of entrepreneurship. Different professionals and
practitioners define the word differently.
For an Economist an entrepreneur is one who brings resources in to combination and make their
value greater than before. Also one who introduces change, innovations, and a new order.
To a psychologist, an entrepreneur is driven by certain forces. He/she needs to obtain or attain
something, to experiment, to accomplish, or perhaps to escape authority of others.
To businessman, an entrepreneur appear as a source of supply, a customer or someone who creates
wealth for others as well, who finds better ways to utilize resources and reduce west and who produces
jobs others are glad to get.
Although each of the definitions views entrepreneurs from slightly different perspective they all contain
similar notions such as newness, organizing, creating, wealth, and risk taking.
Generally Entrepreneurship is defined as the process of creating something new with value by devoting
the necessary time and effort, assuming the accompanying financial, physic, and social risk and
receiving the resulting rewards of monetary and personal satisfaction and independence.
The definition stresses on four basic aspects of being an entrepreneur regardless of the field.
i. Creation process-creation of something of value to the entrepreneur and value to the
audience for which it is developed.
ii. Entrepreneurship requires the devotion of the necessary time and effort.
iii. Assuming the necessary risk (financial, physic, and social)
iv. Rewards of being an entrepreneur (independence, personal satisfaction and monetary
reward for profit entrepreneurs)
Entrepreneurship is thus, the practice of starting new organizations, particularly new businesses
generally in response to identified opportunities.
What is corporate entrepreneurship?
The very word Entrepreneur brings to mind motivated individuals who work for themselves. But such
people can thrive within the corporate structure too. Within a company, this phenomenon is sometimes
referred to as “corporate entrepreneurship”.
What is the purpose of this course?
The purpose of any entrepreneurship course should be to nurture sprit of innovation in students. They
are encouraged to find new ways to view problems. It will attempt to educate students about the
challenges and rewards of entrepreneurship, recognize entrepreneurial skills and behaviors can be
developed.
1.2. History
In 1950s there were different economic reformation and restructuring took place across several countries
to stimulate the economic development. To end this, some countries reduced the tax; they offered
different incentives, arranged training workshop. However, one thing draws the attention of researchers,
there were people set apart from the support of the government but could succeed in their business.

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Researchers worked a lot to identify the reason for their success. Among the researchers who strongly
worked in this area was David McClelland, the professor at Harvard University. His research has
brought that these people seceded because of their need for achievement and latter he added goal setting
and taking calculated risk behaviors.
Many pioneering entrepreneurs of the world had emerged after the year, 1950s.
1.3. Role of entrepreneurs within the economy
1. Innovation and creativity
2. Generate more jobs
3. Better income distribution
4. Better Production method and products
5. Conservation of natural resources
6. Generation of Foreign currency
7. Improvement in the Standard of Living
8. Promotes Country's Export Trade:
9. Facilitates Overall Development:
1.4. Characteristics of Successful Entrepreneurs:
John Hornaday of Boston College develops the composite list of entrepreneurial traits. These traits
include:
 Self confident and optimistic -Energetic and diligent
 take calculated risk - Creative & innovative
 Able to set SMART goals - Dynamic leader
 Respond positively to challenges - Responsive to suggestions
 Flexible and able to adopt - Take initiatives
 Knowledgeable of markets -Resourceful and preserving
 Able to get along well with others - Responsive to criticism
 Independent minded - Need for achievement
 Versatile knowledge
Entrepreneurial Creativity and Innovation
The terms creativity and innovation are often used to mean the same thing, but each has a unique
connotation.
Creativity - is “the ability to bring something new into existence. This definition emphasizes the
“ability”, not the “activity”, of bringing something new into existence. It is not ability to create out of
nothing (only God can do that), but the ability to generate new ideas by combining, changing, or
reapplying existing ideas.
Creativity is most often defined as the mental ability to conceptualize (imagine) new, unusual or
unique ideas, to see the new connection between seemingly random or unrelated things.
Creativity is also an attitude, the ability to accept change and newness, a willingness to
play with ideas and possibilities, a flexibility of outlook, the habit of enjoying the good, while looking
for ways to improve it
How to develop creativity?
Creativity is a process that can be developed and improved.
Phase 1: Background or knowledge accumulation

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  Read in a variety of fields
 Join professional groups and associations
 Attend professional meetings and seminars
 Travel to new place
 Talk to anyone and everyone about your subject
 Scan magazine, newspapers, and journals for articles related to the subject
 Carry a small notebook and record useful information
Phase 2: The Incubation Process
Some of the most helpful steps to induce incubation are:
 Exercise regularly, Play (sports, board game, puzzles)
 Think about the project or problem before falling asleep
 Sit back and relax on a regular basis
Phase 3: Evaluation and Implementation
 Practice your hobbies
 Increase your energy level with proper exercise, diet and rest
 Educate yourself in the business planning process and all facets of business
 Test your ideas with knowledgeable people
 Educate yourself in selling process
 Learn about organizational policies and practices
 Seek advice from others
Innovation - is the process of doing new thing. It is defined as the process that transforms those
forward-looking new ideas into real world (commercial) products, services, or processes of enhanced
value. Innovation is the process of bringing the best ideas into reality, which triggers a creative idea,
which generates a series of innovative events.
Innovation is the creation of new value. Innovation is the process that transforms new ideas
into new value- turning an idea into value. You cannot innovate without creativity. It is the
presence of innovation that distinguishes the entrepreneur from others.
Entrepreneurship is an innovative function as it involves doing things in a new and better way.
Innovation is the process through which the entrepreneur converts market opportunities into
workable, profitable, and marketable ideas.

Why Innovation is important?

How to develop Innovative Skills?

To develop these, it is very important to experience and visit bazaars and trade fairs, engage in
innovative activities, reading innovative books, asking expertise, participating in conferences in other
areas, developing new hobbies, taking training, etc is very important.
What is opportunity?
What makes the difference between successful entrepreneur and other people is a matter of seeing their
environment. For the matter of fact, where successful people see the opportunities, the other people
see the problems.

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Successful entrepreneurs are opportunity hunters and they take the first step to utilize the
opportunities. They are good not only in identifying the problems (the market gap) and underutilized
resources, but also good at converting to business opportunities. Successful entrepreneurs can convert
to business even other people already considered as useless or problem.
To succeed in your business, you must always watch out your environment, scan the market, seek for
market information, open your eye to see the problems and underutilized resources, develop plan to
convert to business opportunities.
Successful entrepreneurs erect their ear as antenna to hear the information and have the eagle eye to
scan their environment. An entrepreneurial mind typically is opportunity focused.
Opportunities are situations that lie outside the entrepreneur or in the external environment. The
environment may include the market place and the situations (defined by a need/gap or challenge) can
arise out of various reasons-a new need, an underserviced need, an unmet need, etc.
4 dot exercise:
Connect using no more than three straight lines that must not cross each other

. .
. .
Questions;
Have you correctly connected the dots? If not,
What prevented you from solving the four dot puzzle immediately? “You have got to learn to think out
of the box.”
What lessons did you learn from the puzzle that might help you in future problem solving situations?
Naturally, when people are doing this exercise they trapped themselves with the net of paradigm
(which is common perception/common understanding or common attitude) adopted from the age of
childhood up to death. This paradigm could be adapted from our families, neighborhood, friends,
society, school and colleagues at work place.
Please remember these common attitudes are not always bad, however, if they are prohibiting to think
outside the box, successful entrepreneurs develop diverging thinking to penetrate out the box.
Group Exercise on identifying problems, underutilized resources and business opportunity
Enterpreneour vs Business man
What is the basic difference between idea and business opportunity? Though there is no empirical
study, which one is mostly practical to most of Ethiopian?
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Risk-bearing - Risk is an inherent and inseparable element of entrepreneurship. A business man,
who simply behaves in a traditional ways, cannot be an entrepreneur. The entrepreneur makes
decision under uncertainness and has to take actions with unknown and unpredictable results.
Successful entrepreneurs always take calculated or moderated risk. How?
Successful entrepreneurs never engaged in activities in which they cannot control the outcome like the
gambling game, contraband trade. People may be successful in gambling or contraband not because of
their hard work rather it is because of chance.

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The Ring Toss Exercise
Suppose there are three rows of gifts and prizes. The first raw is closest and with least attractive gifts
followed by the second row with more attractive gifts, but placed at a greater distance than the first row
and the third with the most attractive gifts, but placed farthest of the three rows. You have a ring to
throw. Which row you will target as an effective entrepreneur? Support your answer with legible reason.
Source: Madhurima Lall and Shikha Sahai (2008)
In the other situation, successful entrepreneurs are not risk averters. The reason is there is no risk free
business in the world. If you are trying to search risk-free business, it is only not to do business.
Sometimes, some people do business which does not need big effort and the rerun is not big enough.
These people are not entrepreneurs.
Successful entrepreneurs, motivated by their effort and result, even in the situations which could seem
trivial and game, they always calculate their risk; evaluate the pros and cons of it. They critically
investigate the market opportunities, seek relevant information, set good plan even before venturing,
then they continuously seek information and revise their plan to minimize the level of risk.
Persistence/perseverance - never give up. Nothing can take the place of persistence. Talent will
not; nothing is more common than unsuccessful men with talent. Genius will not; Education will not;
Remember, all of life is a test. For you to have great success, you must pass the “persistence test.”
The difference between successful entrepreneurs and other people here is, successful entrepreneurs
never give up, never quit their journey when facing obstacles and challenges, where as others do not.
For the matter of fact entrepreneurial life is not comfortable as bed of rose. There is ups and downs in
the business journey. However, this needs your persistent action, but it does not mean be rigid for your
decision. This does not mean, these people never revise their plan, see their action why they could not
be successful if they are not successful. There are 26 English alphabets; if your plan A fails you have
another 25 options. Try again and again! If you cannot pass it, do not change your goal, change your
plan, and make extraordinary effort and personal scarifies towards your goal.
Determination - It includes persistence and the ability to bounce back after rough times. It per-
suades the entrepreneur to make the 10th phone call, after nine have yielded nothing. For the true
entrepreneur, money is not the motivation. Success is the motivator; money is the reward.
Independence - an entrepreneur needs independence in work and decision making. They don’t follow
the rules of thumb but make their own rules.
Dedication/commitment - is what motivates the entrepreneur to work hard, 12 hours a day or more,
even seven days a week, especially in the beginning, to get the endeavor off the ground. Dedication
makes it happen.
Self-confidence - believe in themselves. Self-confidence gives the entrepreneur the ability to listen
without being easily swayed or intimidated.

1.5. Factors that influence Entrepreneurial development

1) Background Factors
(a) Educational, Training and Experience: the type of education, training and experience an individual
has acquired influences his/her choice of setting up an enterprise.
(b) Family, Role Model and association with similar type of individuals: If an individual has a
supportive family, has role models who have been successful or are in association with the same

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 name or similar type of business activity the individual is engaged in, they add vigor to his desire to
set up a new venture.
(c) Financial Condition: Both adverse and supporting financial conditions can motivate an individual to
set up new ventures. When an individual is unemployed or is not able to support his family demands,
or if he has surplus funds, he may start looking for a new business
2) Motivational Factors
a) Need for Achievement: Need for achievement means the drive to achieve a goal. Entrepreneurs have
a compelling drive to succeed. They strive for personal achievement. This has been identified as the
most important reason for entrepreneurial motivation.
b) Personal Motives/Expectation: These individuals have an internal locus of control i.e. they
consider themselves responsible for their growth and development.
c) Business Environment: Supportive business environment like low rate of competition, high profit
margin, good economic condition of the region, high demand-all contribute towards motivating an
individual to set up a new venture.
d) Risk Taking Abilities – Risk taking ability is one of the pillars of entrepreneurial spirits.
e) Desire for Success (Capitalistic View) – Fire in the belly and dreams of riches is what drives most
entrepreneurs on this risky path.
3) Economic Factor
a) Supportive government policies: From time to time, the government keeps formulating policies and
programs to promote entrepreneurs in different fields.
b) Availability of financial assistance from various funding bodies: An entrepreneur needs funds to set
up a business and may not be having the required funds to support the requirements of the business
set up. In such situation, he/she can obtain assistance from financial institutions.
c) Ancillary support: Ancillary support from suppliers, distributors, retailers etc.
d) Availability of technical factors/factors of production like premises, electricity, and labor:
4) Reward
a) Recognition:
b) Social status: Entrepreneurship is the way to get large profit margins which salaried employees
cannot even think of.
Class discussion:
Is entrepreneurs born or made?