Concepts and Characteristics of

Entrepreneurship

Broadly speaking, entrepreneurship refers to a person working for

himself or herself. And because this definition paints a picture of a
selfish man, thus, the narrower concepts were developed, highlighting
certain characteristics of entrepreneurship. So let us revisit the
definition of entrepreneurs and entrepreneurship.

Entrepreneurship

An ​entrepreneur​ is a person who undertakes a ​venture​ with some

profit potential and involving a considerable amount of risk and
therefore, entrepreneurship is the venture undertaken by the
entrepreneur. The most obvious example of entrepreneurship is the
starting of a new business.

Entrepreneurship can be of varying degrees and is not necessarily

alike. It can be categorized into various subcategories, starting with
small and home businesses​ to multidimensional industries that were
started from the ground level.
Ideally speaking, anyone who has the capacity to start a venture and
undertake risks can become an entrepreneur. But not all entrepreneurs
are successful. There are certain characteristics of entrepreneurship
that make for a successful venture. So let us talk a little about these
traits that an entrepreneur must possess in order to be successful.

Characteristics of Entrepreneurship

While there can be as many characteristics of entrepreneurship as

there are people in this world with opinions, there are some
characteristics that are considered indispensable or necessary in an
entrepreneur. These are listed here as follows.

Ability to take Risks

This is the first and foremost trait of entrepreneurship. Starting any

business involves a considerable amount of ​risk​ of failure. Therefore,
the courage and capacity to take the said risk are essential for an
entrepreneur.

Understand ​the Nature of Business Risk here in detail​.

Innovation

In a world, where almost everything has been done, innovation is a

priceless gift to have. ​Innovation​ basically means generating a new
idea with which you can start a business and achieve a substantial
amount of profits. Innovation can be in the form of a product, i.e.,
launching a product that no one is ​selling in the market​. It can also be
in the form of process, i.e., doing the same work in a more efficient
and economical way.

An easy example of product innovation could be the launching of

touch screen cell phones when the world was still using a keypad on
cell phones.

Process innovation can be seen in capital-intensive industries that have

to replace manual labour with machines, therefore, increasing their
production and reducing their costs.
Another type of innovation can be the one concerned with usage. For
examples, cell phones are now used for various functions such as
viewing, creating and editing various files and documents, thus,
eliminating the need for computers to a large extent.

Visionary

Every entrepreneur needs to be a visionary. Without a vision for the

future of his ​venture​, he or she would just be working aimlessly
without reaching any point of success.

Leadership

An entrepreneur has a vision. However, it takes a lot of resources to

turn that vision into reality. One of these resources are the people that
the entrepreneur hires to perform various functions like production,
supplying, ​accounting​, etc.

A single person cannot perform all the tasks and therefore it is

important to bring some more people to do it. This also makes
leadership very important as a leader provides the required direction to
the efforts of the ​employees​. Without proper ​leadership​, everyone
would be working independently without achieving the desired results.

Open Minded
A good entrepreneur realizes that every situation can be a​ business
opportunity​. Thus can be utilized for the benefit of the organization.
For example, ​Paytm ​realized the significance of ​demonetization​ and
recognized that the need for ​online transactions​ was more than ever
during this time and so it utilized and grew massively during this
period.

Confident and Well Informed

An entrepreneur needs to be confident about his ideas and skills. This

confidence also inspires the confidence of the people working for him
as well as the other ​stakeholders​ involved in his business.

Learn more about ​Stakeholders and their Information Requirement

This confidence comes from being well informed about the industry
and environment. Various legal and political ​policies​ enhance business
and ​trade​ opportunities, while some hinder them. Having knowledge
about these can really help an entrepreneur make the right decision at
the right time.

Solved Question for You

Q: Are the characteristics of entrepreneurship inherent or can they be
learned?

Answer: It is often debated that some entrepreneurial qualities like

leadership and confidence are inherent. Many believe that these can be
learned over time with learning, practice, and application in real world
situations.

The most practical example of this could be that no one is born a

leader or confident. They become so over time. This is due to their
family and social surroundings. It can also be because of the situations
that they have been exposed to in their respective lives.

Functions of Entrepreneurs in the

Economy

As we all know, entrepreneurs are their own bosses and work towards
achieving profits by satisfying the need of the economy. An
entrepreneur does a little more than that. You must have often
wondered why the government keeps coming up with new policies
and ideas to promote entrepreneurship in India (like the mudra
yojana). What could the entrepreneur provide to the country that
makes him qualified for this special treatment?

Well, you might be surprised to know that there are quite a few
functions of the entrepreneurs in our economy that we will discuss in
this article. A little clarification can be found by understanding what
the economy actually means.

Functions of Entrepreneurs in the Economy

In layman’s terms, an economy can be defined as a general area of

production, ​distribution​, trade and consumption. It follows a simple
rule of demand and supply. Whatever the consumers need and demand
is produced and supplied by the producers in the economy.

As soon as a need is recognized in the society, an entrepreneur comes

into action to efficiently and profitably satisfy these needs. Let us see
some important functions an entrepreneur fulfils in the economy.

1] Contribution to the GDP

GDP refers to the monetary value of all final goods and ​services
produced in an economy during a specified period of time- usually a
year. These goods and services are provided by the entrepreneurs of
that particular economy

In a fast-growing economy like ​India​, the entrepreneurs play a vital

role in producing the optimum amount of products and services in
response to the ​demand​ by the people. If there were no entrepreneurs,
the country would be solely dependent on the imports and
multinational companies and the GDP would be adversely affected or
collapse. Therefore, the economy is hugely dependent on the
entrepreneurs for its GDP generation.

2] Foreign Exchange Earnings

Industries like the handloom and many other industries produce goods
not only to meet the domestic requirements but also export these
goods and earn valuable foreign exchange for the country. This adds
to the economic growth of the country.

3] Generates Employment

Starting new ventures inevitably means the requirement of various

resources including the very valuable human resource to get the work
done. People are required to perform various functions in an
organisation​. So one of the major functions of entrepreneurs is helping
the economy by generating employment.

4] Tax Generation

More employment to the people also results in more taxable income

for the government. This helps the government increase their tax
revenues that which they use for the development of the country and
improve the standard of living of the people.

5] Eradicating Poverty

India is a labour intensive ​economy​ because of the vast population in

the country. And since entrepreneurs help in generating employment,
they directly help the ​government​ in eradicating unemployment and
poverty in the economy. More income means that people are able to
afford more and better things.

6] Entrepreneurs Introduce New Technology

Since a long time, entrepreneurs have been introducing new

technologies in the economy. For example, Steve jobs introduced the
MAC software. Such technological advancements help to develop the
economy as a whole. This is one of the reasons that the government
supports and promotes the entrepreneurs

7] Entrepreneurs help other Industries in the Economy

A lot of industries use the ​products​ of other industries as a raw

material for their finished products, thus generating even more goods
and services as well as more revenue.

For example, while flour is a finished product for a person who owns
a flour mill, it is a raw material for the factory producing biscuits. In
this way, it goes on and on. One idea or product leads to the
development of another or complementary product or service.

8] Specific Tax Revenue

Entrepreneurs pay various direct and corporate taxes to the state
governments without which they cannot function in the states.
Therefore, the entrepreneurs help in additional tax revenue generated
in the country.

9] Bringing in FDI

A lot of start-ups are funded by various companies in foreign

countries. This helps the economy bring in more and more foreign
investments. In fact, RBI helps these start-ups by relaxing policies on
FDI.

In light of the above points, it is clear that an entrepreneur is a huge

asset for a country and the functioning of an economy greatly depends
on the existence of ​entrepreneurship​.

Solved Question for You

Q: What is the significance of entrepreneurs with concern to the GDP?

Answer: The entrepreneurs contribute a great deal to the GDP.

Entrepreneurship is concerned with the ​production​ of goods and
services in the economy. Thus, it directly affects employment, revenue
generation, and foreign exchange. Therefore, it affects the whole
economy in general.

Role of Entrepreneurs with Relation to

Enterprise

What is the role of a parent in their child’s growth? The answer is a bit
obvious, isn’t it? Similarly, the role of entrepreneurs in the
development of an enterprise is like the role of a parent in the growth
of their children. Let us take a look.

Role of Entrepreneurs

A lot of hard work goes into starting and eventually expanding an

enterprise. This hard work starts with the entrepreneur and trickles
down the entire ​organization​. But this is a very broad definition and
does not really appreciate and highlight the actual role of
entrepreneurs​ with respect to their enterprises.

So to explain it in a better way, let us break it down into points about

how an entrepreneur is vital to the enterprise.

Initiator

The entrepreneur is the one who initiates the process of creating an

enterprise by coming up with the idea for the ​business​ and ​planning
out how to turn that idea into a reality.

Risk Taker

In an enterprise, the entrepreneur, being the owner, is the biggest risk

taker. He is the one who finds the ​capital​ to back up his idea and also
the person who is accountable in the face of the failure of that
particular idea.

Reduces Risk

It is also one of the most important roles of entrepreneurs to reduce the

risk of an enterprise failure by bringing in people that can help the
organization grow. These people can be shareholders or investors that
have a stake in the ​company​ and therefore are motivated to help the
company succeed.

Learn more about​ Concepts and Characteristics entrepreneurship

here​ in detail

Allocator

An entrepreneur procures and allocates various resources in the

organization. The most important of these resources is manpower. The
entrepreneur is responsible for hiring an efficient staff to help him
carry out his business. This is important because a good ​manager​ can
take a business to new heights, while a bad manager can destroy the
business.

He is also responsible for creating an organizational structure and

departments for a more efficient functioning of the enterprise.

Adhering to Legal Norms

To ensure that the enterprise adheres to legal norms and ​policies​, such
as obtaining a license is also the duty of the entrepreneur. Not
pertaining to these can mean serious legal consequences for the
enterprise. These could be in terms of financial losses for the
organization or something even more serious such as shutting down of
an enterprise.

Forecasting

Last but far from least, the role of entrepreneurs involve acting as a
forecaster. The enterprise works in a business environment and is
affected by changes occurring in various aspects of this ​environment​.
It could be internal, such as strikes, machinery breakdowns, ​budget
cuts etc. or these could be external, such as legal policy changes,
political or social unrest, technological advancements, etc.

An entrepreneur must be able to correctly forecast these changes and

prepare the organization to deal with these changes.

Solved Question for You

Q: Is an entrepreneur the same as a manager?

Answer: There are a lot of similarities between an entrepreneur and a

manager with respect to the allocation of resources, decision making
and guiding the employees. so, in a way, every entrepreneur can be a
manager. However, the reverse is not necessarily true.
This is because, essentially, to be an entrepreneur, you must be the
owner of the business and in a lot of cases managers work for
someone else’s business.

Process of Entrepreneurship
Development

In a very general sense, development refers to enhancing an existing

potential or asset through the process of learning and application. It is
a process of evolving one’s skills in a systematic manner. Therefore,
same goes for the process of entrepreneurship development. But
before we dive headfirst into the process of entrepreneurship
development, let us first shed some light upon what the term
entrepreneurship development entails.

Definition of Entrepreneurship Development

Basically, entrepreneurship development is basically the process of

improving the skill set as well as the knowledge of the entrepreneurs.
This can be done through various methods such as classroom sessions
or ​training programmes​ specially designed to increase the
entrepreneurial acumen.

Another definition of this term could be the process of enhancing the

capacity to develop, manage and organize a business venture while
keeping in mind the ​risks​ associated with it.

But instead of complicating things with big words and sophisticated

terminologies, let us understand it simply. The process of
entrepreneurship development is nothing but helping the entrepreneurs
develop their skills through training and application of that training. It
instils in them the quality of making better decisions in the day to day
business​ activities.

Now that we understand the meaning of entrepreneurship

development, let’s discuss the process of entrepreneurship
development.

Browse more Topics under Entrepreneurship Development

● Concept and Characteristics of Entrepreneurship
● Functions of Entrepreneurs in Economic Development
● Role of Entrepreneurs in Relation to Enterprise
 ● Relationship between Entrepreneurship and Management and
Need for Entrepreneurship

Process of Entrepreneurship Development

Clear View of the Objective of the Program

Before you get into ​training​ the prospective entrepreneurs, it is very

important to have a clear objective and plan in mind about what the
program is going to encompass.

Without a proper ​plan​ and direction, the training would not yield the
desired results. This would lead to a loss of time, money, effort and
most of all, valuable potential.

Selecting the Potential Targets

It is important to select the potential targets who are willing to
enhance their skills and who can be identified as the people who have
some amount of business acumen. These can be further divided into
two categories- the educated target audience and the uneducated target
audience.

Educated audience refers to the target people who have a decent

educational background and want to be entrepreneurs. These people
have the motivation to put their education to use by starting a venture
and working for themselves.

Uneducated audience refers to the people who are not as privileged as

others in terms of education about the market and have the potential to
become entrepreneurs. These people are constantly looking for
alternative ways to earn ​money​ and support their families. Therefore
they are highly motivated and, given the right training and direction,
can prove to be exceptional entrepreneurs.

Identifying Local Talents and Markets

The process of ​entrepreneurship​ development program can be seen as

most effective and efficient when it is applied in the ​local markets​ and
on the local entrepreneurs who know about it. These people
understand and absorb the knowledge way more quickly and can
apply it in the current scenario because of which the results of the
program can be seen more quickly and effectively.

Choosing the Right Location

In India unfortunately, these programs can only be launched where

support institutions and ​resources​ are available, but ideally, these
programmes should be planned and launched in the areas where most
people are interested and willing to take advantages of these
programmes so that this opportunity can be used most effectively and
there is no loss of resources.

Learn more about the ​Role of Entrepreneurs with Relation to

Enterprise here

Tying up with Institutions

A lot of times these programmes involve tying up with various

institutions like universities, ​NGO​ and some private institutions. This
is done to give a real-world experience to assist the program and give
the people some idea of the situations in the real world.

Develop the Entrepreneurship Program as Needed

People and their skill ​sets​ are different and develop over time. Thus, it
is very important to keep developing the programs to suit the needs of
the people enrolled in it. Moreover, the focus must be on harnessing
their strengths and working to minimize their weaknesses.

Analyze the Result for Future Development

This is a very important and final step in the process of

entrepreneurship development. After the program has run its course, it
is very important to analyze the effectiveness of the program. This is
necessary to ensure that in future more effective programs can be
developed. For this one has to minimize the shortcomings of the
existing program.

Read the ​Characteristics of Entrepreneurs here​.

Solved Question for You

Question: Is entrepreneurship development important for existing

entrepreneurs?

Answer: Entrepreneurship development programs are developed for

both aspiring as well as existing entrepreneurs. This is because these
programs are also designed to help the entrepreneur expand their
existing enterprise. These programs are more effective on the existing
entrepreneurs. It is because they already know a lot about their
markets​ and ​industry​. Hence can effectively apply the learnings in
their business and analyze the results more quickly.

Relation between Entrepreneurship and

Management and Need for
Entrepreneurship

Asking whether there is a need for entrepreneurship in the country is

like asking whether you need air to survive. The answer is you just
cannot do without it! Entrepreneurs are an essential cog in the
machinery that is the economy, without which the ​economy​ will not
be able to function as efficiently.

Need for Entrepreneurship

Entrepreneurship does not only imply being able to start and manage
your own business but it also helps the economy in a lot of ways. For
starters, it contributes greatly to the GDP of the country as
entrepreneurship primarily involves production and supply of goods
and ​services​ with a profit motive in mind. This is one of the most
important need for entrepreneurship.

An entrepreneur also generates ​employment​ in the economy and helps

in reducing unemployment as well as in improving the standard of
living of the people. This is because more jobs mean more income
from the people and more revenue in the economy.
Moreover, it is because of the entrepreneurs in the economy that
realize the need of goods and services of the people that we do not
have to depend on western produced goods.

This, in turn, helps the country’s ​money​ stay within the country. It
also helps the country to earn foreign exchange by exporting the goods
that are produced in excess in the country to other countries that have
a ​demand​ for these goods and services.

Another need for entrepreneurship in the country is that it helps to

develop and nurture latent potential in the country. This is especially
important in a country like ​India​ which has a huge population. This
helps the overall growth of the country. It also improves the standard
of living of the people living in the economy.

Management and Entrepreneurship

Management​ refers to the art of getting things done by other people.

Entrepreneurship refers to the starting a venture with a profit motive in
mind. It also involves the ability to take considerable risks for that
venture. Now let us talk about the relationship between a manager and
an entrepreneur.
While an entrepreneur is the owner of the business and takes all the
risk of the business and procures the resources required to start and
run the business, a ​manager​ takes care of managing and allocating
these resources to various uses and making sure that work is being
done with efficiency and effectiveness.

Similarities between an Entrepreneur and

Manager

From the above explanation, it can be drawn out that while an

entrepreneur can be a manager, a manager is not necessarily an
entrepreneur. However, there are certain similarities between the two.

● Decision Making: ​A manager, just like an entrepreneur needs

to be a quick and effective decision maker at their respective
levels.
● People Person: ​Both the manager and the owner needs to be
good at social skills. This is necessary to convince people to
work with them. Further, it helps ensure that peace and order
are maintained within the ​company​.
● Confidence: ​Just as an entrepreneur, to be effective as a
manager, a person needs to conduct himself with confidence.
 This confidence inspires other people as well and makes them
want to work for the company.

Speaking of the need for entrepreneurs with respect to the

management, if the entrepreneurs didn’t exist, there would be nothing
for the managers to do. In other words, entrepreneurs are concerned
with starting a new business, while managers are concerned more with
managing the ongoing operations.

The need for entrepreneurship especially arises when there is a

particular need arising in the society that is not being met by the
existing players in the ​market​. In such situations, an opportunity
presents itself in the market for entrepreneurs to find a solution to
serve such needs and that becomes their business.

Governments also promote new businesses in the economy since it

directly affects their revenue. The government levies taxes in
respective states where the business is operational, to be paid by these
businesses. Another way the government makes revenues out of these
businesses is by charging them for licensing of their businesses. All
businesses operating in the country need a license to operate. It is a
legal formality that is mandatory for all functional businesses.

Solved Question for You

Question: What are the essential qualities of an entrepreneur?

Answer: There are a lot of qualities that make an entrepreneur

successful. But some can be categorized as a few of the ‘must have’
traits. These are mandatory traits if you want to be a successful
entrepreneur.

For example, the primary quality of an entrepreneur is that he should

be a risk taker. A very common saying in the world of business is-
bigger the risk, bigger the rewards. Other qualities are confidence and
a quick decision maker in the face of economic turbulence.