Entrepreneurial Management

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Origin and Nature of Entrepreneurship

Module 001 Origin and Nature of

Entrepreneurship

At the end of this module, you are expected to:

1. Learn how Entrepreneurship came to be;
2. Identify the famous people who were instrumental to what
entrepreneurship has become now;
3. Discover the factors that lead individuals to entrepreneurship;
4. Develop the essential knowledge base considerations and experiences
that will help them succeed in their business development efforts.

Origin of Entrepreneurship
The word “Entrepreneur” etymologically derived from the old French verb,
“esntreprendre” which means to undertake, and its participle form, entrepri.
Entrepreneur, a masculine noun, describes a “manager or promoter of theatrical
production and indicates someone who undertakes an activity.
Introduction to Entrepreneurship
“Do not go where the path may lead, go instead where there is no path and leave a
trail.” - Ralph Waldo Emerson.
Introduction to Entrepreneurship is intended to provide students with a solid
foundation on how entrepreneurs and entrepreneurship play a key role in the 21st-
century global economy. Entrepreneurship is the act of transforming innovations,
finance, and business acumen into economic goods.
What leads a person to strike out on his own and start a business? An individual may
start his own company or maybe part of revitalizing mature companies in response
to a perceived opportunity. Oftentimes it is a proactive response to a negative
situation. A person may have been laid off more than once in his life that he thinks it’s
better to start up his own to ensure tenure. Too much job frustration may be difficult
to handle; it may come to a point where you don’t see any better career prospects on
the horizon. Some are tired of promoting a product, service, or way of doing
business outside the mainstream operations of a large company. Strong-willed
people actually think that they are not cut to work for someone else and might as
well be their own “boss”.

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 Entrepreneurs are their own bosses. They call in the shots and make the decision.
They get to choose whom to do business with and what work they will do. They have
the flexibility of time, as well as what to pay and whether to take vacations.
Entrepreneurship offers a greater possibility of earning more than when working for
someone else. It provides access and the ability to be involved in the total operation
of the business, from concept to design and creation, from sales to business
operations and customer response. It offers the honor of being the person in charge.
What makes it more satisfying is having the opportunity to build equity, which can be
kept, sold, or passed on to the next generation. Entrepreneurship creates an
opportunity for a person to have his own brand and make it a household name. The
ability to create ideal jobs for people like him is the most rewarding of all.

Evolution of Entrepreneurship

Source: http://psychology.wikia.com/wiki/Entrepreneurship; July 27, 2018

Peter Ferdinand Drucker, 1985

Peter Drucker wrote about the Practice of Innovation. He mentioned that innovation is the
specific tool of entrepreneurs, the act by which they see change as an opportunity for a
different business or a different service. He believes that not every new small business is
entrepreneurial or represents entrepreneurship.
Ducker believes that for one to be called an entrepreneur, you must have applied
innovation to make it your brand. If, for example, one who has financial capability decides
to open another Mexican restaurant in the American suburb, surely he takes a risk. But that
did not make him an entrepreneur because what he did is not something no one has ever
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done yet. He may have taken a gamble in a new venture, but he did create neither a new
satisfaction nor new consumer demand.
McDonald’s is an example of entrepreneurship. Its product is the same as the most decent
restaurant served years ago. Surely it did not invent anything.
What McDonald’s did differently is to apply management concepts and management
techniques. By giving importance to what their customers value the most and
standardizing the “product,” designing processes and tools, and basing training on the
analysis of the work to be done, McDonald’s created a new market, and a new customer is
what entrepreneurship is all about.

Mark Christopher Casson 1982 Theory of the Entrepreneur

The essence of the theory of the entrepreneur is to explain firm success or failure, firm
creation and growth, economic growth and development, and income distribution. Its
essence should be both the rationalization of success and the explanation of failure.
Casson defines an entrepreneur as “someone who majors in taking judgmental decisions
about the coordination of scarce resources.
The theory emphasizes the importance of good judgment in economic success.
Entrepreneurs are expected to be people who specialize in the application of judgment to
economic decisions. Good judgment is vital as it leads to timely innovation and profitable
arbitrage; it is designed to eliminate waste caused by the misallocation of resources and
reduces the risks associated with major projects.
Entrepreneurs establish firms through which they can practice their superior judgment,
although they may take over the control of existing firms instead. Entrepreneurship is for
both big and small firms. Successful entrepreneurs may be employed as salaried strategic
managers – they do not always have to own the firms for which they work.

Israel Kizner 1973 Competition and Entrepreneurship

One of the insights that Kirzner has highlighted is that the essence of entrepreneurial
activity is “alertness,” an attention to scanning the market horizon for opportunities and
innovations that can result in making better goods, or new goods, or bringing less-
expensively manufactured goods to the market place. The more entrepreneurs introduce
something that others have neither seen nor thought of before, the wider the option to get
better items at a lesser price. The customers were introduced to the consciousness that
thinking and seeing things “outside the box” is the process of discovering new knowledge
and possibilities that no one has previously imagined or noticed.

Innovations have made the products become even better, and the supply becomes more
than the prices remain stable.

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Harvey Lebenstein 1968 Entrepreneurship and Development
The theory of competition has given an impression that entrepreneurship is no longer
needed if both inputs and outputs are marketed, and prices are known, making profits
predictable for every input that transforms into output.

Leibenstein believes that when an input is not used effectively, the difference between the
actual output and the maximum output attributable to that input is a measure of the degree
of X- efficiency. It arises because the firm resources are used incorrectly or because they
are wasted or not used at all.

Frank Knight 1968 Risk Uncertainty and Profit

Frank Knight was known for his Risk Uncertainty and Profit, a monumental study of the
role of the entrepreneur in economic life.

In his book, Risk Uncertainty, and Profit, Knight carefully distinguished between economic
risk and uncertainty. He identified situations with risk as those where the outcomes were
unknown but governed by probability distributions known at the outset. He stressed that
these situations, where decision-making rules such as maximizing expected utility can be
applied.

The “uncertain” ones, which are the outcomes and even the probability models that
governed them, were unknown. Knight believes that uncertainty gave rise to economic
profits that perfect competition could not simply disregard.

Let’s take this as an example:

At two points, there are two highways, one of which is broad enough to accommodate
approximately 100 vehicles at a time without crowding or traffic but is poorly graded and
surfaced, while the other is a much better road, but narrow and quite limited in capacity.
The moment big trucks approach the intersection, they are free to choose either of the two
routes, they will tend to distribute themselves between the roads in such proportions that
the cost per unit of transportation, or effective returns per unit of investment, will be the
same for every truck on both routes. As more trucks use, the better but narrower road,
congestion developed. At a certain point, it becomes equally profitable to use the broader
but poorer highway.

Joseph Alois Schumpeter 1932 Theory of Economic Development

In the complex and dynamic world we live in, innovation and entrepreneurship occupy a
decisive role in economic development.

Joseph Alois Schumpeter believes that “carrying out innovations is the only function which
is fundamental in history”. He argued that It is entrepreneurship that “replaces today’s
Pareto optimum with tomorrow’s different new thing”.

Jean Baptiste Say 1803 Treatise of Political Economy

Say believes that an entrepreneur is someone who does the “setting in motion of every
class of industry whatever; that is to say, the conversion of acquired knowledge to the
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creation of a product for human consumption.” He was one himself. Since the term
“entrepreneur” had not yet passed into the English language, it was also referred to as
“adventurer” – the same term that Adam Smith used.

Richard Cantillon 1755

Richard Cantillon defined the entrepreneur as a person who assumes the risk, by buying at
a certain price and selling at an uncertain price. He developed one of the early theories of
entrepreneurship in 1725 focused on the individual involved in an enterprise. Cantillon’s
famous contribution to economic thought is that he was the first to stress and analyze the
entrepreneur.

Contemporary views on Entrepreneurship

Today, entrepreneurship is celebrated like never before, and it is referred to in so many
ways–social entrepreneurship, intra-entrepreneurship, knowledge entrepreneurship,
micro-entrepreneurship–you name it.
Looking back, in 1975, Harvard professor Howard Stevenson sees entrepreneurship as “the
pursuit of opportunity without regard to resources currently controlled.” “Resources
currently controlled” can be interpreted as limited resources. From that point of view,
almost all of us have some level of entrepreneurial challenges.
In our daily lives, we encounter difficult situations, and at times, we fall down only to rise
again once we regain strength then get up and find a way to fight again.
Steven’s description of the warrior’s virtues describes the practice of entrepreneurship
quite well. At some stages, most entrepreneurs try to overcome adversity to pursue
opportunities with limited resources.

Get out of the building

Steve Blank, the father of customer development, reveals that “getting out of the
building” and talking to customers is the key to building a successful start-up.

Blank argues that no business plan survives at the first contact with customers; he
stressed that getting out of the building is the oxygen of start-up survival. The idea
of getting out of the building changes with the experiment and start-up stage. To get
your business known- one must reach out to promote.

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It’s all about experimentation: mastering the pivot and spike
Start-ups are expected to be chaotic. The frequent shifts in the business model are
what differentiates a start-up from an established company. Pivots are the essence
of entrepreneurship and the key to start-up success. Pivots are why start-ups must
be aggressive and opportunistic and why their cultures are different from large
companies. If you can’t pivot or pivot quickly, chances are you will fail.

Iterate early and often

Customer development and Agile development are the two methodologies that
support a modern theory of software entrepreneurship. Build/Measure/Learn cycle
refers to running experiments against the business model canvas and running
development iterations exposed to users to understand the capabilities of the
product development team and the viability of proposed features.

Develop a compelling value proposition

It is a great advantage if you are able to address most of the customer’s needs and
wants. It is not a one-size-fits-all. There is a specific audience that needs special
care. Once a perfect match is found, success is just within your reach

Even a start-up has a business model: Develop it!

If you are confident that your product is of value, someone must be willing to pay for
it. Run your experiment and gain more cash.

Entrepreneurial Process
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Discovery:
An entrepreneurial process begins with the conception of an idea. At this stage, the
entrepreneur already knows where he wants to venture. He then identifies and
evaluates business opportunities. It is quite a difficult task, he can’t just trust his
own judgment; he has to reach out to some random people, family, other employees,
consumers, channel partners, technical people, etc., to come up with an optimum
business opportunity. Once the opportunity has been decided upon, the next step is
to evaluate it.
The efficiency of an opportunity can be evaluated by continuously asking certain
questions to oneself, such as whether the opportunity is worth investing in, is it
sufficiently attractive, are the proposed solutions feasible, is there any competitive
advantage, what is the possible risk associated with it. Above all, whether these
coincide with the entrepreneurial goals or not, the entrepreneur’s personal skills
and hobbies play an important role.

Developing a Business Plan:

Creation of a comprehensive business plan is critical to the success of any new
venture since it acts as a benchmark and the evaluation criteria to see if the
organization is moving towards its set goals. It needs ample time and must be done
meticulously; its major components are the mission and vision statements, goals
and objectives, capital requirement, product description, and services.

Resourcing:
The third step in the entrepreneurial process is resourcing. Here, the entrepreneur
identifies where the resources will be coming from, be it finance and/or human
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resources. The entrepreneur determines if there is a need for an investor and
personnel to carry out the business activities.

Managing the company:

The funds have been raised, and employees are hired; the next step is for the
entrepreneur to decide the management structure or hierarchy that is essential in
solving operational problems when they arise. Then, you are set. You may now
initiate the business operations to achieve the set goals.

Harvesting:
The final step in the entrepreneurial process is harvesting. The entrepreneur
reviews the venture and compares actual growth against the planned growth, and
then the decision regarding the stability or the expansion of business operations is
undertaken accordingly by an entrepreneur.
The cycle repeats when the entrepreneur decides on a new venture.

A Profile of Filipino Entrepreneur

Filipinos do have a flair for business. According to the data from the Department of
Trade and Industry DTI, 99.6 percent of registered businesses in the Philippines are
micro, small, and medium enterprises (MSMEs), and these provide 63.2 percent of
total jobs in the country. Filipino entrepreneurs open a large chunk of job
opportunities and contributed so much to the country’s economy.
Research reveals Filipino traits and qualities that make Filipinos good
entrepreneurs. Here goes:

Practicality and common sense

Successful Filipino entrepreneurs nowadays are not from the elite groups or
those who have the best education or have impressive academic records. The
majority have not even finished grade school; what sets them apart is that
they are what we might call street-smarts and have a great deal of common
sense. They are practical thinkers and make decisions based on what they
know about human nature from experience. Aside from the good products
they make, they have a great way of relating to their customers and providing
them with what they really need. It is something that is not in the textbooks
or taught in the classroom.

Passionate about business

Filipino entrepreneurs choose a business closest to their heart. Filipino
entrepreneur gives out a strong commitment and involvement in his
enterprise. They establish a business related to something he is passionate
about and learn everything possible about the products or services he is
offering to customers.
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Confident and self-reliant

The Filipino entrepreneur is self-reliant and very much hands-on in the
business. During the early part, when the business is just starting out, he is a
one-man-band. He does everything involved in running it-from finding the
best suppliers to renting the place of business, to marketing, selling and
customer relations, and even accounting.
Filipino entrepreneurs trust their own judgment, and their own capacity to
run their businesses can be single-handedly if there is a shortage of
manpower.

Hard-working and goal-oriented

A Filipino entrepreneur’s involvement in his business is nearly absolute, to
the point that his personal time for himself and his loved ones is
compromised. He is willing to take time to ensure success and has the
discipline to set smaller goals that he will accomplish in order to meet his
final objective.

A leader and an innovator

The most successful Filipino entrepreneurs can lead by example. He brings
out a positive attitude and is able to convince and influence his employees
and his customers positively. As a good leader, he also is able to innovate to
come up with novel solutions when a challenging situation arises.

Value-oriented
Lastly, Filipino values guide the entrepreneur in doing business. The greatest
value for a Filipino entrepreneur is his family. He never loses sight of why he
is striving to make his business thrive and grow—he is doing it for the well-
being of his family.

The Challenge to Entrepreneurs

Contrary to what one may think, being an entrepreneur is not that glamorous lifestyle you
see on Instagram and Facebook. It’s a lifestyle that only the toughest can pursue because it
comes with many difficult and humiliating challenges that many can’t even fathom dealing
with.

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If you want your business to succeed, you need to be fully engaged, and being an
entrepreneur means dirty hard work and continuous hustle.
Here are some of the challenges entrepreneurs will encounter in their journey, and some
recommendations on how to win over them:

1. No Steady Paycheck
If you have been an employee before starting your own business, you may get frustrated
when you do not have a steady income for quite some time. The return of investment (ROI)
will take a long while. Don’t panic; remember that when you’re building something
enormous, it takes time, effort, energy, and lots of patience.
Any brand new project or business will not turn you into a millionaire overnight. If you’re
consistently working on your start-up, you will reap results; just be patient and remain
steadfast.
If your fund is limited, it is best if you have another job aside from the business. You need to
sustain your needs. Your personal money that will sustain your needs must be separated
from the business fund.

2. Always On The Clock

Your start-up is like a newborn baby. It needs all the time that you can give. Being an
entrepreneur is more of a lifestyle that is not designed for everybody. Sometimes, even
when you’re not physically at work, you are mentally or virtually there. You just can’t live
without your laptop and your smartphone. You monitor and facilitate through them.
You don’t overcome this lifestyle; somehow, you will master the art of focus working
amidst a noisy environment. Entrepreneurs never stop working. You enjoy it, and it
becomes your work, your safe haven, your vacation, and your time off.

3. Failure is Inevitable
As an entrepreneur, you hope for success to be your destination. As you go along, you
realize that failure becomes a part of the process, and it is inevitable.
Entrepreneurs are risk-takers and never fear failure; they dive in 120% with the utmost
confidence and go-getter attitude regardless of the outcome and the circumstances.
Accepting that you are bound to fail at some point along your journey is the only way to
overcome failure.

4. It’s a Lonely Road

The moment you made the decision to take that leap of faith, you have embraced the idea of
working around the clock with no steady paycheck that will one day take a toll not only on
you but also on your friendships and relationships.
As an entrepreneur, you know how much your business may earn or lose by the hour, and
you want to be there to make things go in your favor. Even if you try to go out with friends,
you will not be having fun because you will never be with them 100% mentally, your
thoughts will be preoccupied, and your phone will not stop bothering you.
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It will be a lonely road for a while until you get stable and have someone that you can
entrust your business with. In the meantime, regardless, stay focused, positive and
consistent, one day at a time.

5. No Blueprint
The idea of entrepreneurship is making your business an improved version of what the
norm is. When you find your niche, you plan and design an ideal structure. Since you’re
setting out on a unique journey, an innovative route that no one has taken before, you’ll
find the good and the bad that comes along with it. Unfortunately, you won’t find a
blueprint for what you’re doing; not many people might be able to help direct you on the
right path. They may give helpful generic guidance, but it might not be relevant to you or
your niche field in any sort of way. You need to strive your hardest to survive and invent a
new path. Do not forget that you’ll be carving out your own road. You’ll fix, fine-tune, and
re-adjust as needed, it may be difficult, but you’ll be pretty much the creative director of
your own path, and you never say die.

Entrepreneurship Education in the Philippines

The educational system in the Philippines is highly patterned after the United States of
America. English is the medium of instruction used in every classroom. There are three
government agencies that cater to the education requirements of its citizens, namely:
Department of Education (DepEd) from elementary to secondary level. Commission on
Higher Education (CHED) operation of higher education (baccalaureate to postgraduate
studies); and Technical Education and Skills Development Authority (TEDSDA) serving the
non-degree training program needs of the population.
Entrepreneurship education in the Philippine higher education is a formal baccalaureate on
Entrepreneurship, as mandated by CMO No 17 Series of 2005 (CHED,2005) which main
focus is to train students on how to start up a business and prepare business plans. The
lack of focus in managing the enterprise for growth and sustainability in the educational
program did not go unnoticed. Entrepreneurship has become part of the MBA curriculum.
Government agencies like the Department of Trade and Industries, TESDA, and non-
government agencies that are mostly involved in lending and financing projects have
provided non-formal entrepreneurship education.

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Entrepreneurship in the Philippines is basically a necessity or accidental entrepreneurship
meaning the people turned entrepreneurs due to non-stable work available and the need to
provide for one’s family.
The aim of the entrepreneurship program is to help solve the unemployment program by
creating a job for one’s self.
Philippine Entrepreneurship lacks role models in the form of entrepreneurs with high
opportunity-high growth undertakings. Most success stories are the product of passion,
hard work, and, more often, luck. These are from non-formal training, unlike those from
developed countries whose successful entrepreneurs have gone through formal training.
There are very little or no financial resources to support the entrepreneurial undertaking
students would like to exploit.
Qualification of faculty members is another area where entrepreneurship education is
another issue that we have to focus on. As entrepreneurship is better learned through
experience, teachers should be able to share theirs with the students.

Socio-Economic Benefits from Entrepreneurship

The following are the benefits we get from entrepreneurship:
Entrepreneurship creates employment
Every time an entrepreneur opens his own business, a door of employment opens to
the neighborhood. The advantage of getting employed in a newly opened business is
the possibility of career advancement. Once the business becomes bigger- the
managerial posts will be filled in by the existing employees.

Entrepreneurship improves the quality of life.

Having a stable job allows one to afford to buy his necessities. If he works harder
and earns better, he can afford better things to make life more comfortable for him
and his family.

Entrepreneurship contributes to a more equitable distribution of income.

Lesser people will migrate if the community can provide every household a source
of living.

Entrepreneurship utilizes resources

Entrepreneurs have the ability to see things differently. What appears to be trash to
us may possibly be another business venture to their eyes.

Entrepreneurship brings social benefits through the government.

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The government supports the people who want to start their own businesses. The
Department of Trade and Industries (DTI) and Technical Education and Skills Development
Authority (TESDA) provides training for livelihood products.

Glossary

bureaucracy: Structure and regulations in place to control activity. Usually,

in large organizations and government operations.
entrepreneur: A person who organizes and operates a business venture and
assumes much of the associated risk.
intra-preneurship: When entrepreneurship is describing activities within a
firm or large organization it is referred to as intra-preneurship.
seniority: A measure of the amount of time a person has been a member of
an organization, as compared to other members, and with an eye towards
awarding privileges to those who have been members longer.
start-up: a new organization or business venture

References and Supplementary Materials

Books
Asor, Winefreda T. (2015) .Entrepreneurship in the Philippine Setting. Rex Book Store, Inc.:
Manila.

Baron, R. A. (2014). Essentials of Entrepreneurship: Evidence and Practice. Edward Elgar

Publishing.

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Donald F. Kuratko, (2017). Entrepreneurship: Theory, Process, and Practice. Cengage
Learning.

Torr, Mark A., (2014).The Small Business Start-Up Workbook: A Step-By-Step Guide to
Successful Small Business Ownership. BlackBull and Learning Inc.
Journal:
Swedberg, R. (n.d.). Social Entrepreneurship: The View of the Young
Schumpeter. Entrepreneurship as Social Change. doi:10.4337/9781847204424.00010
July 27, 2018
Http://ljournal.ru/wp-content/uploads/2017/03/a-2017-023.pdf. (2017).
doi:10.18411/a-2017-023 July 29, 2018

Online Supplementary Reading Materials

1. B. (n.d.). Boundless Business. Retrieved from
https://courses.lumenlearning.com/boundless-business/chapter/introduction-to-
entrepreneurship/ July 27, 2018
2. Inquirer, P. D. (n.d.). A profile of Filipino entrepreneurs. Retrieved from
http://business.inquirer.net/69655/a-profile-of-filipino-entrepreneurs
July 29,2018
3. Socio-Economic Benefits from Entrepreneurship. (n.d.). Retrieved from
https://hubpages.com/business/Socio-Economic-Benefits-from-
Entrepreneurship July 29,2018

Online Instructional Videos

Contemporary Issues in Entrepreneurship & Innovation

(2015, June 08). Retrieved July 28, 2018, from
https://www.youtube.com/watch?v=WskIB8xg9Kk