Evolution of the word Entrepreneur

The word ‘entrepreneur’ is derived from French word ‘Entrependre’ which means
undertaking the risk of enterprise and further it was used to designate an organizer of musical or
other entertainments. Later in 16th century it was used for army leaders. It was extended to cover
civil engineering activities such as construction in 17th century. But it was Richard Cantillon, an
Irishman living in France who first used the term entrepreneur to refer to economic activities.
According to Cantillon “An entrepreneur is a person who buys factor services at certain prices with
a view to selling its product at uncertain prices

Meaning of Entrepreneur

Entrepreneur is a person who tries to create something new, searches new opportunities, bears risk,
unites various factors of production like land, labour and capital carries innovations and from his
skill and farsightedness faces unforeseen circumstances and thereby earns profits. Entrepreneurs are
the pioneers who are instrumental in the economic development, growth and development of and
prosperity of a country.

Definition of Entrepreneur

There are various views about entrepreneur which are broadly classified into three groups, namely
risk bearer, organizer and innovator.

Entrepreneur as Risk Bear : Richard Cantilon defined entrepreneur as an agent who buys factors
as production at certain prices in order to combine them into a product with a view to selling it at
uncertain prices in future. He illustrated a farmer who pays contractual incomes, which are certain
to land owners and labourers and sells at prices that are ‘uncertain’. He includes, merchants also
who make certain payments in expectation of uncertain receipts. Hence both of them are risk-
bearing agents of production. F.H. Knight described entrepreneur to be a specialized group of
persons who bears uncertainly. Uncertainty is defined as risk, which cannot be insured against and is
incalculable. He made distinction between certainty and risk. A risk can be reduced through the
insurance principle, where the distribution of outcome in a group of instance is known, whereas
uncertainty cannot be calculated.

Entrepreneur as an Organizer : According to J Baptist Say “an entrepreneur is one who combines
the land of one, the labour of another and 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/her profit”. Say made distinction between the role of capitalist as a financer
and
the entrepreneur as an organizer. This concept of entrepreneur is associated with the functions of
coordination, organization and supervision.

Entrepreneur as an Innovator : Joseph A. Schumpeter Peter in 1934 assigned a crucial role of

‘innovation’ to the entrepreneur. He considered economic development as a dynamic change
brought by entrepreneur by instituting new combinations of factors of production, i.e. innovations.
The introduction of new combination according to him, may occur in any of the following forms.

(a) Introduction of new product in market

(b) Use of new method production, which is not yet tested.

(c) Opening of new market.

(d) Discovery of new source of raw materials.

(e) Bringing out of new form of organization.

Some more important definitions of entrepreneur

1. According to F.A. Walker : “Entrepreneur is one who is endowed with more than average
capacities in the task of organizing and coordinating the factors of production, i.e. land, labour
capital and enterprises”.

2. Marx regarded entrepreneur as social parasite.

3. According to Gilbraith : “An entrepreneur must accept the challenge and should be willing
hard to achieve something”.

4. Peter F. Drucker defines an entrepreneur as one who always searches for change, responds to
it and exploits it as an opportunity. Innovation is the basic tool of entrepreneurs, the means by
which they exploit change as an opportunity for a different business or service.

5. According to E.E. Hagen : “An entrepreneur is an economic man who tries to maximize his
profits by innovation, involve problem solving and gets satisfaction from using his capabilities
on attacking problems”.

Concept of Entrepreneurship:
Entrepreneurship is the ability and readiness to develop, organize and run a business enterprise, along with
any of its uncertainties in order to make a profit. The most prominent example of entrepreneurship is the
starting of new businesses.
In economics, entrepreneurship connected with land, labour, natural resources and capital can generate a
profit. The entrepreneurial vision is defined by discovery and risk-taking and is an indispensable part of a
nation’s capacity to succeed in an ever-changing and more competitive global marketplace.
“Entrepreneurship is meant the function of seeing investment and production opportunity,
organizing an enterprise to undertake a new production process, rising capital, hiring labour,
arranging for supply of raw materials and selecting top managers for day to day operations of the
enterprise”.
 - Higgins

“Entrepreneurship is essentially a creative activity or it is an innovation function. The

process of innovation may be in the form of

(a) Introduction of a new product

(b) Use of a new method of production

(c) Opening of a new market

(d) The conquest of new source of supplying raw material

(e) A new form of organisation” - Joseph A. Schumpeter

“Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge

base.Knowledge in entrepreneurship is a means to an end. Indeed, what constitutes

knowledge in practice is largely defined by the ends, that is, by the practice”.- Peter F.

Drucker
“Entrepreneurship is the purposeful activity of an individual or a group of associated
individuals, undertaken to initiate, maintain or organize a profit-oriented business unit for the
production or distribution of economic goods and services”. - A. H. Cole

Difference between Entrepreneur and Entrepreneurship

Basis Entrepreneur Entrepreneurship

Entrepreneurship refers to the process

An entrepreneur is someone of creating and managing a new
Meaning who takes the initiative to create business venture to achieve financial
a new business venture. success and make a positive impact on
society.

Entrepreneurship involves the process

Entrepreneurs make critical
of making informed decisions
decisions about their
Decision- throughout the life of the business. It is
businesses. The decisions are
Making mostly ongoing decision-making to
focused on the initial creation
ensure the long-term success of the
and growth of their business.
business.

Entrepreneurs have an impact Entrepreneurship has an impact on the

on the market by creating new economy by creating jobs, generating
products or services. Its impact wealth, and driving innovation. It
Impact
is focused on the creation of includes the broader impact of creating
their specific product or service. and managing a successful business on
the economy and society.

Growth Entrepreneurs focus on growing Entrepreneurship involves creating a

their businesses through business that can sustain growth over
innovation and expansion. Their the long term. It includes the ongoing
main focus is on the initial management and maintenance
 Basis Entrepreneur Entrepreneurship

necessary to ensure that growth is

growth of their business.
sustainable.

Entrepreneurship involves the process

Entrepreneurs own and manage of starting and managing a business,
their businesses. They have a regardless of who owns it. It is focused
Ownership
personal stake in the success of on the processes necessary to make a
their business. business successful, regardless of who
owns it.

Entrepreneurs take calculated Entrepreneurship involves assessing

risks to achieve their goals. and managing those risks throughout
There is a willingness to take the process of creating and managing a
Risk-Taking
risks. Risk-taking is an essential business. It requires ongoing risk
element of creating a successful management to ensure the business’s
business. long-term success.

Entrepreneurs are known for

Entrepreneurship is focused on creating
their ability to innovate and
a business that can sustain that
develop new products or
Innovation innovation. It includes the processes
services. Their primary focus is
necessary to support innovation over
on developing new ideas and
the long term.
bringing them to market.

Entrepreneurship involves various

Entrepreneurs bear the
processes and activities involved in
responsibility for the success or
creating and managing a business. It
Responsibility failure of their businesses. So,
includes broader responsibilities such
they have the ultimate
as financial management, marketing,
responsibility for their business.
strategic planning, and leadership.

Entrepreneurs focus on
identifying business Entrepreneurship is focused on creating
opportunities and turning them and managing a successful business. It
Focus
into profitable ventures. They includes the long-term management
have a narrower focus on the and growth of that business.
initial creation of a business.

TYPES OF ENTREPRENEURSHIP

There are various types of entrepreneurship which are as follows :-

(i) Small business entrepreneurship

Today, the overwhelming number of entrepreneur and startups in the United States are still
small business. There are 5.7 million small business in the U.S. They make up 99.7% of all
companies and employ 50% of all non-governmental workers.

Small businesses are grocery stores, hair dressers, consultants, travel agents, internet
commerce store fronts, carpenters, plumbers, electricians, etc. They are any one who runs his/her
own business. They hire local employees or family. Most are barely profitable. The definition of
success is to feed the family and make a profit not to take over an industry or build a 100 mn
business. As they can’t provide the scale to attract venture capital they fund their business via
friends/family or small business loans.
(ii) Scalable startup entrepreneurship

Unlike small business, scalable startups are what silicon valley entrepreneurs and their
venture investors do. These entrepreneurs start a company knowing from day one that their vision
could change the world. They attract investment from equally crazy financial investor – venture
capitalists. They hire the best and the brightest. Their job is to search for a repeatable and scalable
business model when they find it, their focus on scale requires even more venture capital to fuel
rapid expansion. Sealable startups in innovation clusters make up a small percentage of
entrepreneurs and startups but because of the outsize returns, attract almost all the risk capital.

(iii) Large company entrepreneurship

Large companies have finite life cycles. Most grow through sustaining innovation, offering
new product that are variants around their core products, shares in customer tastes, new
technologies, legislation, new competitors, etc. can create pressure for more disruptive innovation –
requiring large companies to create entirely new products sold into new customers in new markets.
Existing companies do this by either acquiring innovative companies or attempting to build a
descriptive product inside. Ironically, large company size and culture make disruptive innovation
extremely difficult to execute.

(iv) Social entrepreneurship

Social entrepreneurs are innovators who focus on creating products and services that solve
social needs and problems. But unlike scalable startups their goal is to make the world a better place
not to make market share or to create to wealth for the founders. They may be non-profit, for profit,
or hybrid.

ENTREPRENEURIAL TRAITS OR COMPETENCIES.

There has been a controversy on what it takes to be a successful entrepreneur. Some people
argue that entrepreneurs are born with the right personality attributes and others insist that any one
can be taught to be an entrepreneurs. In view of above controversy in order to understand clearly
what it takes to be a successful entrepreneurs research institutions and behavioural scientists through
their research studies have tried to resolve the interiorly on what makes a successful entrepreneur.
Following is a lot of major competencies as identified by the Entrepreneurship Development
Institute of India (EDI) Ahmedabad.

1. Initiative :- The entrepreneur initiates a business activity i.e. he takes the first step to start an
enterprise. He takes initiative that goes beyond enterprise establishment or the demand of the
situation. For example, he does things before being asked or forced by the situation.

2. Passion :- The entrepreneur should possess passion for his enterprise. He therefore, develop
more than a casual interest in the enterprise so that the could overcome various hurdles and
obstacles coming on the way of starting an enterprise. Available evidence indicate that without
passion or consuming interest, business will not succeed. Such a personal or emotional or
consuming commitment to do some thing by giving full try is an example of ‘passion’.

3. Tenacity despite failure

Because of the hurdles and obstacles that must be overcome, the entrepreneur must be
persistent and must not give up easily. Many successful entrepreneurs succeeded only after they had
failed several times. It has been said that successful entrepreneurs do not have failures. They have
learning experiences.

4. Self-confidence

Entrepreneur is a strong believer in his strength and abilities. He believes that he possesses
the ability to accomplish whatever he sets out to do and achieve. The confidence is not unfounded
however. The entrepreneur who believes that “He can” becomes successful.

5. Sheer grit and strong determination

The life history of successful entrepreneurs reveals that they are characterized by self
motivation and strong determination in their goal. They act out of choice. They are never victim of
fate. The entrepreneur believes that the success or failure depends on his own actions. This quality is
known as “internal locess of control’. A person who believes that fate and other outside factors
determine success has an external locus of control and is not likely to succeed as an entrepreneur.

6. Creativity

One of the reason that entrepreneurs are successful is that they have imagination and can
envision alternative scenarios. They have the ability to recognize opportunities that other people do
not see. Here again let us take the example of Henry Ford.

7. Change Seeker

To the most of people change is often frightening and is something to be avoided. But,
successful entrepreneurs see change as normal and necessary. Therefore, they search for change,
respond to it and exploit it as an opportunity. In fact, this exploitation of change is the basis of
innovation. In economics, change is considered a prerequisite for improvement and development.

8. High need for achievement

Many studies have shown that the successful entrepreneurs have ‘high need for achievement’
than the general population. David. C. McClelland considers it the most crucial element to become
an entrepreneur. It is the high need for achievement which makes entrepreneurs act on their ideas.
The achievement motive is converted into drive and initiative that results in accomplishment.

9. Team spirit
Successful entrepreneurs build team and work with teammates. In simple words, team is a
group of individuals who work in a face-to-face relationship to achieve a common goal. They share
collective accountability for the outcome of the team’s effort. Working in teams creates synergy and
achieves success in its endeavours. While appreciating the role of team spirit in success. Henry
Ford’s view seems worth citing “Bringing people together is beginning, keeping people together is
progress and working with people is success”.

10. Information Seeker. A successful entrepreneur always keep his eyes and ear open and is
receptive to new ideas which can help him in realizing his goals. He is ready to consult expert for
getting their expert advise.

11. Quality Consciousness. Successful entrepreneur always keep his eyes and ear open and is
receiptive to new ideas which can help him in relishing his goals. He is ready to consult expert for
getting their expert advise.

12. Proper Planning. Successful entrepreneurs develop or evolve future course of action
keeping in mind the goals to be realized. They believe in developing relevant and realistic plans and
ensure proper execution of the same in their pursuit of attaining their goals.

13. Problem Solver. Successful entrepreneurs take problem as a challenge and put in their best
for finding out the most appropriate solution for the same. They will first of all understand the
problem and then evolve appropriate strategy for overcoming the problem.

14. Assertive. An assertive person knows what to say, when to say, how to say and whom to
say. He believes in his abilities and ensures that others fall in line with his thinking, aimed at
promoting the interests of the organization.

15. Effective Monitoring. Top performers ensure that everything is carried out in their
organizations as per their wishes. They ensure regular monitoring of the working so that the goals of
the organization are achieved in best possible manner.

16. Employees Welfare. Future of the organisation depends on its employees. If the employees
are dedicated, committed and loyal, the organization is bound to perform well. A successful
entrepreneur tries to promote organization’s interests through promotion of interests of the workers.
He takes personal interest in solving problems confronting workers and generates the feeling that
there is interpendence of the interests for workers and the management.