Theories & Concept of Entrepreneurship

ENT/ETR300 – FUNDAMENTALS OF ENTREPRENEURSHIP
THEORIES & CONCPET OF ENTREPRENEURSHIP
THEORIES & CONCEPT OF

ENTREPRENEURSHIP
Assoc. Prof. Dr Nawawi B Mohd Jan

Dato’ Dr. Adnan Alias
THEORIES & CONCEPTS OF

ENTREPRENEURSHIP
Session Objectives
At the end of the session, students
should be able to:
• understand the various theories and
concepts on entrepreneurship
• have a deeper understanding of the
discipline of entrepreneurship
THE EVOLUTION OF
ENTREPRENEURSHIP THEORY
Definition of an Entrepreneur :
• “ An entrepreneur is a person who
undertakes to do a job ” Richard
Cantillon (1755). The term entrepreneur
is a French word first coined by Richard
Cantillon.
• In Malaysia the term “usahawan” is
used for entrepreneur.
THE EVOLUTION OF
Definition of Entrepreneurship:
• Entrepreneurship involves not only the
process that leads to the setting up of a
business entity but also the expansion
and development of an on going
concern.The study of entrepreneurship
is concerned with the entrepreneurial
behavior, the dynamics of business set
up and expansion and development.
THE EVOLUTION OF
• Adam Smith (1776) - An entrepreneur is
a person who acts as agent in
transforming demand into supply.
• Jean Babtiste Say (1803) - An
entrepreneur is a person who shifts
resources from an area of low
productivity to high productivity.
THE EVOLUTION OF
• John Stuart Mill (1848) - An entrepreneur is a
prime mover in the private enterprise.The
entrepreneur is the fourth factor of production
after land ,labor and capital.
• Carl Menger (1871) - The entrepreneur acts
as an economic agent who transforms
resources into products and services.The
entrepreneur transforms and gives added
value.
THE EVOLUTION OF
• Joseph Aloysius Schumpeter (1934) - An
entrepreneur is an innovator. The economy
moves through leaps and bounds and the
prime mover is the entrepreneur through the
process of creative destruction.
• Alfred Marshall (1936) - The process of
entrepreneurship or business development is
incremental or evolutionary . It evolves from
sole proprietorship to a public company.
THE EVOLUTION OF
• Ibnu Khaldun (Abdul Rahman Mohamed
Khaldun) - The entrepreneur is seen as a
knowledgeable individual and is instrumental
in the development of a city-state where
enterprise will emerge.
• David McClelland - The entrepreneur is a
person with a high need for achievement.
This need for achievement is directly related
to the process of entrepreneurship.
DEFINITION OF ENTREPRENEURSHIP
 It is more than mere creation of business
 Entrepreneurship is a process of innovation
and new venture creation through four major
dimensions – individual, organizational,
environmental and process.
 The entrepreneurship process is aided by
collaborative networks in government,
education and institutions.
DEFINITION OF ENTREPRENEURS
• Functional definition of entrepreneurs

offers the following definition:
• Entrepreneurs are individuals who actively
form or lead their own business and
nurture them for growth and prosperity.
THE IMPORTANCE OF ENTREPRENEURSHIP TO

MALAYSIAN ECONOMY
1. Entrepreneurship is the symbol of business

steadfastness and achievement. Entrepreneurial
revolution is critical to economic growth.
Entrepreneurship may affect our future in many
ways:
a. Innovative creation of opportunity
Example: Portable phones linked to faxes and
laptop will turns cars, train, and airport terminal
into offices.
THE IMPORTANCE OF ENTREPRENEURSHIP TO

MALAYSIAN ECONOMY
d. Entrepreneurship not only affect our lives

through innovation but represent the working
future for many of us due to lays off by large
organization and shrinking of job opportunities
for graduates.
e. Entrepreneurship is synonymous to creation of

new venture and small businesses. SMIs have
been important contributors to local economic
growth.
f. The entrepreneurial SMIs provide services

that the large corporation has neglected or lack of
economy of scale for the large corporation to
serve.
g. Contribution of SMIs to Malaysian Economy

-
In Malaysia the SMIs employed 90% of the
total labor force in manufacturing sector and
contributed to about 26% of total value added in
the sector.
ISLAMIC ENTREPRENEURSHIP
ISLAMIC ENTREPRENEURSHIP FOCUS ON
EIGHT PRINCIPLES OF THOUGHTS :-
1.Entrepreneurship is an integral parts of Islamic religion.
2.By virtue of human nature , the Moslem entrepreneurs
are ‘khalifah’ and have the reponsibilities develop
prosperity and sees business as part of ibadah or good
deed.
3.Motivation – success in Islam is not merely measured
by the end result but also the way and means of
achieving them.
4.Ibadah – business activity is part of ibadah or “good
deed”
5. Position of Entrepreneurship and business in Islam

– Islam encouraged its ummah to venture into
business . Prophet Muhammad S.A.W expounded
that 9 out 10 source of rizque (reski) can be found in
business.
6. Islamic Economic System - Islamic
Entrepreneurship should operate within the domain
of Islamic Economic system and act as the vehicle
towards global acceptance of Islamic Economic
System.
7. Guiding Principles of Islamic Entrepreneurship is by

the al-Quran and al-Hadith
8. Entrepreneurial Ethics based on exemplary
conducts of Prophet Muhammad S.A.W
ISLAMIC ENTREPRENEURSHIP AS AS
INTEGRAL PART OF THE RELIGION
Islam is a complete way of life. There is no

separation between business and religion.
Islam has its own entrepreneurship culture
and guiding principles based on the Al-Quran
and Hadith to guide business operation .
HUMAN NATURE
(The fitrah of human being)
By virtue of the human nature, the person must
firstly be a Muslim, then an entrepreneur. He
has the responsibility to perform ‘ibadah’ and be
a ‘khalifah’. Muslim entrepreneur should search
for God’s blessings above all other factors. A
Muslim entrepreneur perform business not
solely for profit, but above all, to fulfill the
‘fardhu kifayah’.
MOTIVATION
• Most entrepreneurs have the desire to
achieve successful business venture.
• The successful path and means for
achieving success for Muslim
entrepreneurs are unique.
• Success in Islam is not merely
measured by the end result, but also
the means and ways of achieving them.
SUCCESS FORMULA BY AL-QURTUBI
• Halal – livelihood that are in accordance to

what is being outlined by Allah SWT and
syariah.
• Qanaah – be pleased and thankful with one’s
earning
• Taufiq - Asking for the blessing of Allah in
proportion to one’s expectation
• Sa’adah- Spiritual happiness
• Jannah – Worldly success should act as the
bridge to the ultimate success in the life
hereafter (paradise).
SEVEN STEPS TOWARDS A SUCCESS IN LIFE

ACCORDING TO IMAM AL-GHAZALI
 Level of Knowledge
 Level of Taubat or repentence
 Level of Temptation
 Level of Obstacles
 Level of Motivation
 Level of Handicap
 Level of Praise and Thankfulness
POSSESSION OF WEALTH IS ALLOWED BASED

ON THE FOLLOWING PRINCIPLES:-
• Allah s.w.t is the absolute owner of

wealth
• Allah created wealth in
abundance and sufficient for all
• Wealth is created for mankind
• Wealth is entrusted to mankind
IBADAH
In Islam, involving in business
is part of ibadah through the
fulfilment of fardhu kifayah.
POSITION OF BUSINESS AND ENTREPRENEUR

ISLAMIC ENTREPRENEURSHIP MODEL
Islam Proposed
(Business Venture)
E E
X X
A Allah Prepared
A
M (Facilities)
M
P P
L Islam Outlined
L
E (Rules and Regulation)
E
Allah Promised
(Reward)
ISLAMIC ECONOMIC SYSTEM
Islamic Entrepreneurship should

be in the framework of Islamic
Economic System and should
assist in establishing the Islamic
Economic System
GUIDING PRINCIPLES OF ISLAMIC

ENTREPRENEURSHIP
Guidelines for Islamic
Entrepreneurship and business
activities are wide and
comprehensive based on Al-
Quran and Al-Hadith.
MUSLIM ENTREPRENEURSHIP ETHICS

 To prevent laziness
 To eradicate fear
 To search for legitimate ventures
 To avoid forbidden sources of income
and property
 To show gratitude and thankfulness of
whatever has been acquired
 To grow and develop capital and profit
 To diversify business ventures
 To avoid greediness
THE ETHICAL BEHAVIOR OF MUSLIM

ENTREPRENEURSHIP
 To avoid malicious behavior
 To avoid squandering
 To avoid stinginess
 To pay alms (zakat)
 Trustworthy
 To pray consistently
 Tawakkal
 Patience
 Qana’ah
EXEMPLARY CONDUCTS OF GOOD MUSLIM

ENTREPRENEURS DURING THE PROPHET
MUHAMMAD S.A.W REIGN
 Business is secondary when being called

for other form of crusade
 Avoid using influence for self interest
 Afraid of accumulated wealth
 Leadership qualities in all aspects
 Practice moderate way of life
END OF MODULE 1

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ENT/ETR300 – FUNDAMENTALS OF ENTREPRENEURSHIP

THEORIES & CONCPET OF ENTREPRENEURSHIP

THEORIES & CONCEPT OF

Assoc. Prof. Dr Nawawi B Mohd Jan

THEORIES & CONCEPTS OF

• Functional definition of entrepreneurs

THE IMPORTANCE OF ENTREPRENEURSHIP TO

1. Entrepreneurship is the symbol of business

THE IMPORTANCE OF ENTREPRENEURSHIP TO

d. Entrepreneurship not only affect our lives

e. Entrepreneurship is synonymous to creation of

f. The entrepreneurial SMIs provide services

g. Contribution of SMIs to Malaysian Economy

5. Position of Entrepreneurship and business in Islam

7. Guiding Principles of Islamic Entrepreneurship is by

Islam is a complete way of life. There is no

SUCCESS FORMULA BY AL-QURTUBI

• Halal – livelihood that are in accordance to

SEVEN STEPS TOWARDS A SUCCESS IN LIFE

POSSESSION OF WEALTH IS ALLOWED BASED

• Allah s.w.t is the absolute owner of

POSITION OF BUSINESS AND ENTREPRENEUR

ISLAMIC ECONOMIC SYSTEM

Islamic Entrepreneurship should

GUIDING PRINCIPLES OF ISLAMIC

MUSLIM ENTREPRENEURSHIP ETHICS

THE ETHICAL BEHAVIOR OF MUSLIM

EXEMPLARY CONDUCTS OF GOOD MUSLIM

 Business is secondary when being called

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