Chapter One: The Nature of Entrepreneurship
Chapter One: The Nature of Entrepreneurship
THE NATURE OF
ENTREPRENEURSHIP
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1.1 INTRODUCTION
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In ancient period, the word entrepreneur was
used to refer to a person managing large
commercial projects through the resources
provided to him.
In the 17th Century a person who has signed a
contractual agreement with the government
to provide products or service was
considered as entrepreneur.
In the 18th Century the first theory of
entrepreneur has been developed by Richard
Cantillon and He said that an entrepreneur is
a risk taker.
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The other development during the 18th Century is
the differentiation of the entrepreneurial role
from capital providing role.
In the late 19th and early 20th century, the
entrepreneur was defined as one who organizes
and operates an enterprise for personal gain.
In the middle of the 20th Century, the notion of
an entrepreneur as an inventor was established.
From the historical development it is possible to
understand the fact that the perception of the
word entrepreneur was evolved from managing
commercial project to the application of
innovation (creativity) in the business idea.
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1.3 Definitions of Entrepreneurship and Entrepreneur
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It refers to an individual’s: ability to turn ideas
into action involving and engaging in socially-useful
wealth creation through application of innovative
thinking and execution to meet consumer needs,
using one’s own labor, time and ideas.
In General, the process of entrepreneurship
includes five critical elements. i.e:
The ability to perceive an opportunity.
The ability to commercialize the perceived
opportunity i.e. innovation
The ability to pursue it on a sustainable basis.
The ability to pursue it through systematic means.
The acceptance of risk or failure.
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Definition of Entrepreneur from different
perspectives i.e. from the economist, psychologist and capitalist
philosopher’s point of view.
• To an economist, one who brings resource, labor, materials,
and other assets into combination that makes their value
greater than before.
• To a psychologist, a person typically driven by certain
forces need to obtain or attain something, to experiment, to
accomplish or perhaps to escape the authority of others.
• For capitalist philosopher, one who creates wealth for
others, who finds better way to utilize resources and reduce
waste and who produce job others are glad to get.
• In general, entrepreneur refers to the person and
entrepreneurship defines the process.
• All entrepreneurs are business persons, but not all business
persons are entrepreneurs.
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1.4 Types of Entrepreneurs
The individual entrepreneur: is someone who
started; acquired or franchised his/her own
independent organization.
Intrapreneur: is a person who does entrepreneurial
work within large organization.
The Entrepreneurial Organization: An organization
that create an environment in which all of its
members can contribute in some function to the
entrepreneurial function.
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1.5 Role of Entrepreneurs in Economic Development
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1.6 Entrepreneurial Competence and Environment
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1.6.1.2 Qualities of an Entrepreneur
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People Management Skills
Communication Skills
Leadership Skills
Motivation Skills
Delegation Skills
Negotiation Skills
• All these different people skills are interrelated.
• Here entrepreneurial performance results from
a combination of industry knowledge, general
management skills; people skills and personal
motivation.
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1.6.1.4 The Entrepreneurial Tasks
Owning Organizations
Founding New Organizations
Bringing Innovations to Market
Identification of Market Opportunity
Application of Expertise
Provision of leadership
The entrepreneur as manager
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1.6.1.5 Wealth of the Entrepreneur
Wealth is money and anything that money can buy.
Who Benefits from the entrepreneur’s Wealth?
Employees:
Investors: stockholders/lenders.
Suppliers
Customers
The local community
Government
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1.6.2 Entrepreneurship and
Environment
1.6.2.1 Phases of Business Environment
Business environment may be classified into two broad
categories; namely external and internal environment.
External Environment
Economic Environment
Legal Environment
Political Environment
Socio-Cultural Environment
Demographic Environment
Internal Environment;
Raw Material
Production/Operation
Finance
Human Resource
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Entrepreneurship
1.6.2.2 Environmental Factors Affecting Entrepreneurship
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• Ideological and social conflicts.
• Unreliable supply of power, materials, finance,
labor and other inputs.
• Rise in the cost of inputs.
• Unfavorable market fluctuations.
• Non-cooperative attitude of banks and
financial institutions.
• Entrepreneurship is environmentally
determined.
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1.7 Creativity, Innovation and Entrepreneurship
Entrepreneurship = creativity + innovation.
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Con’t…
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