Entrepreneurship and Business

Development

MGMT 102
CHAPTER 1: THE NATURE OF ENTREPRENEURSHIP

1.1 Introduction
• The word ‘entrepreneur’ is widely used, both
in everyday conversation and as a technical
term in management and economics.

• Its origin is from a French word, en-

treprendre, where an entrepreneur was an
individual commissioned to undertake a par-
ticular commercial project.
• Entrepreneurship is then what the entre-
preneur does.

• The entrepreneurial process in which the

entrepreneur engages is the means through
which new value is created as a result of
the project: the entrepreneurial venture.
1.2 Historical Origin of Entrepreneurship

What is entrepreneurship?
• Offering a specific and unambiguous def-
inition of the term entrepreneurship /entre-
preneur presents a challenge.

• This is not because definitions are not

available, but because there are so many.
• During the ancient period the word entre-
preneur was used to refer to a person man-
aging large commercial projects through
the resources provided to him.
• In the 17th Century a person who has signed
a contractual agreement with the gov-
ernment to provide stipulated products or to
perform service was considered as entre-
preneur.
• In this case the contract price is fixed so
any resulting profit or loss reflects the ef-
fort of the entrepreneur.
• In the 18th Century the first theory of entre-
preneur has been developed by Richard
Cantillon.
• He said that an entrepreneur is a risk taker.
• If we consider the merchant, farmers and /or
the professionals they all operate at risk.
• For example, the merchants buy products
at a known price and sell it at unknown
price and this shows that they are operating
at risk.
• In the late 19th and early 20th Century an en-
trepreneur was viewed from economic
perspectives.

• The entrepreneur organizes and oper-

ates an enterprise for personal gain.

• In the middle of the 20th Century the notion

of an entrepreneur as an inventor was
established.
• “The function of the entrepreneur is to reform
or revolutionize the pattern of production
by exploiting an invention or more generally
untried technological possibility for pro-
ducing new commodities or producing an
old one in a new way or opening a new
outlet for products by reorganizing a new in-
dustry.”
• The concept of innovation and newness
are at the heart of the above definition.

• From the historical development it is possi-

ble 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.
1.3 Definitions of Entrepreneurship and En-
trepreneur
• Common attributes of the definitions of en-
trepreneurship and entrepreneur.
• Entrepreneurship is the process of identify-
ing opportunities in the market place, ar-
ranging the resources required to pursue
these opportunities and investing the re-
sources to exploit the opportunities for long
term gains.
• It involves creating incremental wealth by
bringing together resources in new ways to
start and operate an enterprise.
 1.Entrepreneurship is the processes
through which individuals become aware of
business ownership then develop ideas for,
and initiate a business.

2.Entrepreneurship can also be defined as the

process of creating something different
and better with value by devoting the neces-
sary time and effort by assuming the accom-
panying financial, psychic and social risks and
receiving the resulting monetary reward and
personal satisfaction.
 3.In this case an individual should come up
with something different and better in or-
der to be named as entrepreneur.
4.Entrepreneurship is the art of identifying
viable business opportunities and mobiliz-
ing resources to convert those opportuni-
ties into a successful enterprise through cre-
ativity, innovation, risk taking and pro-
gressive imagination.
• Entrepreneurship is a practice and a process
that results in creativity, innovation and
enterprise development and growth.
• It refers to an individual’s ability to turn
ideas into action involving and engaging in
socially-useful wealth creation through appli-
cation of innovative thinking and execution to
meet consumer needs, using one’s own la-
bor, time and ideas.
• Engaging in entrepreneurship shifts peo-
ple from being “job seekers” to “job cre-
ators”, which is critical in countries that
have high levels of unemployment.
• It requires a lot of creativity which is the
driving force behind innovation.
• In general, the process of entrepreneurship
includes five critical elements. These are:
1.The ability to perceive an opportunity.
2.The ability to commercialize the perceived
opportunity i.e. innovation
3.The ability to pursue it on a sustainable
basis.
4.The ability to pursue it through system-
atic means.
5.The acceptance of risk or failure.
• Based on the above concepts of en-
trepreneurship, an entrepreneur can be de-
fined as follows:
• 1.An entrepreneur is any person who creates
and develops a business idea and takes
the risk of setting up an enterprise to pro-
duce a product or service which satisfies cus-
tomer needs.
• 2.An entrepreneur can also be defined as a
professional who discovers a business op-
portunity to produce improved or new
goods and services and identifies a way in
which resources required can be mobilized.
• 3. An entrepreneur is an individual who:
has the ability to identify and pursue a busi-
ness opportunity; undertakes a business
venture; raises the capital to finance it;
gathers the necessary physical, financial
and human resources needed to operate
the business venture; sets goals for him/
herself and others; initiates appropriate ac-
tion to ensure success; and assumes all or
a major portion of the risk!
• 4.An entrepreneur is a person who: cre-
ates the job not a job-seeker; has a
dream, has a vision; willing to take the
risk and makes something out of nothing
• 5.Other definition, views the term entrepre-
neur from three perspectives; i.e. from the
economist, psychologist and capitalist
philosopher’s point of view.
1.4 Types of Entrepreneurs

• Entrepreneurship can take three different

forms. They are:
1.The individual entrepreneur: An individ-
ual entrepreneur is someone who started;
acquired or franchised his/her own inde-
pendent organization. The major portion of
this module is also devoted to describe the
basic features and activities of the individual
entrepreneur.
• 2.Intrapreneur: An Intrapreneur is a person
who does entrepreneurial work within
large organization. The process by which
an intrapreneur affects change is called In-
trapreneurship.

• 3.The Entrepreneurial Organization: The

entrepreneurial function need not be em-
bodied in a physical person. Every social
environment has its own way of filling the
entrepreneurial function.
1.5 Role of Entrepreneurs in Economic De-
velopment
• Entrepreneurial development is the most
important input in the economic devel-
opment of any country.
• The objectives of industrial development,
balanced regional growth, and genera-
tion of employment opportunities are
achievable through entrepreneurial devel-
opment.
• The entrepreneurs serve as a key to the
creation of new enterprises, thereby reju-
venating economy and sustaining the
process of economic development in the
following ways:
1.Improvement in per capita Income/
Wealth Generation
2.Generation of Employment Opportunities
3.Inspire others Towards Entrepreneurship
4.Balanced Regional Development
5.Enhance the Number of Enterprises
6.Provide Diversity in Firms
7. Economic Independence
8. Combine Economic factors
9. Provide Market efficiency
10. Accepting Risk
11. Maximize Investor’s Return
1.6 Entrepreneurial Competence and Envi-
ronment

• Entrepreneurial Mindset
Who Becomes an Entrepreneur?
The Young Professional
The Inventor
The Excluded
• Qualities of an Entrepreneur
Opportunity-seeking
Persevering
Risk taking
Demanding for efficiency and quality
Information-seeking
Goal setting
Planning
Persuasion and networking
Building self-confidence
Listening to others, Demonstrating leadership
• Entrepreneurial Skills:

• General Management Skills- Strategy Skills,

Planning Skills, Marketing Skills, Financial
Skills, Project Management Skills, Time
Management Skills

• People Management Skills- Communication

Skills, Leadership Skills, Motivation Skills,
Delegation Skills, Negotiation Skills
• 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
1.7 Creativity, Innovation and Entrepreneurship

• Creativity, innovation and entrepreneurship,

have been recognized as important contribu-
tors to a nation’s economic growth.

• These three terminologies are chronologically

interrelated and it is very important to look into
them to get their full picture.
• Creativity- Creativity is defined as the ten-
dency to generate or recognize ideas, al-
ternatives, or possibilities that may be use-
ful in solving problems, communicating with
others, and entertaining ourselves and oth-
ers.
• Steps in the Creative Process
Step1: Opportunity or problem Recogni-
tion: A person discovers that a new oppor-
tunity exists or a problem needs resolution.

Step2: Immersion: the individual concen-

trates on the problem and becomes im-
mersed in it. He or she will recall and collect
information that seems relevant, dreaming
up alternatives without refining or evaluating
them.
 Step 3: Incubation: the person keeps the
assembled information in mind for a while.
He or she does not appear to be working on
the problem actively; however, the subcon-
scious mind is still engaged.

Step 4: Insight: the problem-conquering so-

lution flashes into the person’s mind at
an unexpected time, such as on the verge
of sleep, during a shower, or while running.
Insight is also called the Aha! Experience.
Step 5: Verification and Application: the
individual sets out to prove that the cre-
ative solution has merit. Verification pro-
cedures include gathering supporting evi-
dence, using logical persuasion, and ex-
perimenting with new ideas.
• Innovation

• Innovation lies at the heart of the entre-

preneurial process and is a means to the
exploitation of opportunity. It is the imple-
mentation of new idea at the individual,
group or organizational level.
• There are four distinct types of innovation,
these are as follows:
• Invention - described as the creation of a
new product, service or process
• Extension - the expansion of a product,
service or process
• Duplication - defined as replication of an
already existing product, service or process
• Synthesis - the combination of existing
concepts and factors into a new formulation
• The Innovation Process
1.Analytical planning: carefully identifying
the product or service features, design as
well as the resources that will be needed.
2.Resources organization: obtaining the
required resources, materials, technology,
human or capital resources
3.Implementation: applying the resources in
order to accomplish the plans
4.Commercial application: the provision of
values to customers, reward employees and
satisfy the stakeholders.
• From Creativity to Entrepreneurship

Creativity is the ability to develop new

ideas and to discover new ways of looking at
problems and opportunities.
Innovation is the ability to apply creative
solution to those problems and opportuni-
ties in order to enhance people’s lives or to
enrich society.
Entrepreneurship = creativity + innovation.