Republic of the Philippines

NORTHERN ILOILO STATE UNIVERSITY

VICTORINO SALCEDO CAMPUS
Sara, Iloilo

Course Code : THC 10

Descriptive Title : ENTREPRENEURSHIP IN TOURISM AND HOSPITALITY
Term and Academic Year : 2nd Semester, AY 2022-2023
Department and Year Level : BSHM III
Professor : DIANNA MAE C. DE JULIAN

Module 2, Lesson 1
The Entrepreneur and his Personality
I. Introduction
In this lesson, you shall be introduced to the different definitions of entrepreneur from various people, the
different roles, characteristics and contributions of an entrepreneur as well as the advantages and disadvantages of an
employee and self-employment.
In order to gain a thorough understanding of this lesson, you have to read the discussion and you are also
tasked to answer the assessment and submit requirements found in the “Learning assessment” section.

Time Frame: 6 hours Date of Submission:

II. Learning Outcomes At the end of the lesson, you must have:
1. identified various people and their definition of entrepreneur;
2. understood the different traits, roles and contributions of entrepreneurs; and
3. discussed the advantages and disadvantages of self-employment and employee.

III. Learning Contents

The Entrepreneurs
An economy grows when the resources, or factors of production, are put to work. Land, Labor and capital are
the three basic factors of production. The fourth are entrepreneurs those people of vision and originality who create
new enterprises or business as. They are the ones who:
 Raise money (capital) to run new business.
 Organize the business
 Manage the business
 Make business policy decisions
One of the most important elements of being a successful entrepreneur is to understand and anticipate
whether or not the market will buy a product or services. In other words, entrepreneurs must be able to guess
accurately whether or not people will buy he has to sell.
Definitions of Entrepreneur to Various People
Entrepreneur according to Cantillon
Richard Cantillon (1697-1734) is an Irish economist of French descent. He defines entrepreneur as some who
organizes and assumes the risk of a business in return for the profits. This term came into much wider use after John
Stuart Mill popularized it in his 1948 classic, Principles of Political Economy, but then all but disappeared from the
economics literature by the end of the nineteenth century. (Osorno,R., Bajao,G. ,2020)
According to Cantillon’s original formulation, the entrepreneur is a specialist in taking on risk. He “insures”
workers by buying their products (or their labor services) for resale before consumers have indicated how much they
are willing to pay for them. The workers receive an assured income (in the short run, at least), while the entrepreneur
bears the risk caused by price fluctuations in consumer markets. To illustrate, a room attendant or a waiter of a hotel
gets paid by the “entrepreneur” in exchange for the services rendered. However, the “entrepreneur” bears the risk. The
risk would be if nobody would like to stay the hotel or people do not want to dine out in that restaurant. (Osorno, R.,
Bajao,G. ,2020)
Entrepreneur according to Frank H. Knight
The idea of Cantillon was further refined by the U.S. economist Frank H. Knight (1885-1972), who distinguished
between risk, which is insurable, and uncertainty, which is not. Risk relates to recurring events whose relative frequency
is known from past experience, while uncertainty relates to unique events whose probability can only be subjectively
estimated. In a case of a restaurant owner, the risk is whether people would like to eat in that restaurant thus making a
profit. (Osorno, R., Bajao,G. ,2020)
Changes affecting the marketing of consumer products generally fall in the uncertainty category. Individual
taste, for example, are affected by group culture, which in, depends on fashion trends that are essentially unique.
Insurance companies exploit the law of large numbers to reduce the overall burden of risks y “pooling” them. For
instance, no one knows whether any individual forty-year-old will die in the next year. But insurance companies do
know with relative certainty how many forty-year-olds in a large group will die within a year. Armed with this
knowledge, they know what price to charge for life insurance, but they cannot do the same when it comes to
uncertainties. (Osorno, R., Bajao,G. ,2020)
Knight observed that while the entrepreneur can “lay off” risks much like insurance companies do, he is left to
bear the uncertainties himself. He is content to do this because his profit compensates him for the psychological cost
involved. (Osorno, R., Bajao,G. ,2020)
For Knight (1967) and Peter Drucker (1970) entrepreneurship is about taking risk. The behavior of the
entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in

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 Republic of the Philippines
NORTHERN ILOILO STATE UNIVERSITY
VICTORINO SALCEDO CAMPUS
Sara, Iloilo

the name of an idea, spending much time as well as capital on an uncertain venture, Knight classified three types of
uncertainty.
 Risk, which is measurable statistically (such a the probability of drawing a red color ball from a jar
containing 5 red balls and 5 white balls).
 Ambiguity, which is hard to measure statistically (such as the probability of drawing a red ball from a
jar containing5 red balls but with an unknown number of white balls).
 True Uncertainty or Knightian Uncertainty, which is impossible to estimate or predict statistically (such
as the probability of drawing a red ball from a jar whose number of red balls is unknown as well as the
number of colored balls).
Entrepreneur according to Joseph A. Schumpeter
Joseph A. Schumpeter (1883-1950) took a different approach, emphasizing the role of innovation. According to
Schumpeter, the entrepreneur is someone who carries out “new combinations” by such things as introducing new
products or processes, identifying new export markets or sources of supply, or creating new types of organization
Schumpeter presented a heroic vision of the entrepreneur as someone motivate by the “dream and the will to find a
private kingdom”; the “will to conquer: the impulse to fight, to prove oneself superior to others”; and the joy of
creating,” (Osorno, R., Bajao,G. ,2020)
In Schumpeter’s view the entrepreneurship leads the way in creating new industries, which in turn, precipitate
major structural changes in the economy. Old industries are rendered obsolete by a process of creative destruction”. As
the new industries compete with established ones for labor, materials, and investment goods, they drive up the price of
these resources. The old industries cannot pass on their higher costs because demand is switching to new products. As
the old industries decline, the new ones expand because imitators, with optimistic profit expectations based on the
innovator’s initial success continue to invest. (Osorno, R., Bajao,G. ,2020)
Eventually, overcapacity depresses profits and halts investment. The economy goes into depression, and
innovation stops. Invention continues, however, and eventually there is a sufficient stock of unexploited inventions to
encourage entrepreneurs to begin innovation again. In this way Schumpeter used entrepreneurship to explain
structural change, economic growth, and business cycles, using a combination of economic and psychological ideas.
(Osorno, R., Bajao,G. ,2020)
Schumpeter was concerned with “high-level” kind of entrepreneurship that, historically, has led to the creation
of railroads, the birth of the chemical industry, the commercial exploitation of colonies, and the emergence of the
multidivisional;, multinational firm. His analysis left little room for the much more common, but no less important, “low-
level” entrepreneurship carried on by small firms. (Osorno, R., Bajao,G. ,2020)
Entrepreneur according to Hayek and Kirzner
The essence of this low-level activity can be explained by the Austrian approach of Friedrich A. Hayek and Israel
M. Kirzner. In a market economy, price information is provided by entrepreneurs. While bureaucrats in a socialist
economy have no incentive to discover prices for themselves entrepreneurs in a market economy are motivated to do
so by profit opportunities. Entrepreneurs provide price quotations to others as an invitation to trade with them. They
hope to make a profit by using cheap and selling. In the long run, competition between entrepreneurs arbitrages away
price differentials, but in the short run such differentials once discovered generate a profit for arbitrageur. (Osorno, R.,
Bajao,G. ,2020)
The difficulty with the Austrian approach is that it isolates the entrepreneur form the firm. It fits an individual
dealer or speculator far better than it fits a small manufacturer or even a retailer. In many cases (and in almost whether
a salaried manager, too, can be an entrepreneur. Frank Knight maintained that no owner would ever delegate a key
decision to a salaried subordinate, because he implicitly assumed that subordinates cannot be trusted. Uncertainty
bearing, therefore, is inextricably vested in the owners of the firm’s equity, according to Knight. But in practice
subordinates can win a reputation for being good stewards, and even though salaried, they have incentives to establish
and maintain such reputations because their promotion prospects depend upon it. In this sense, both owners and
managers can be entrepreneurs. (Osorno, R. .,Bajao,G. ,2020)
The title of entrepreneur should, however, be confirmed to an owner or manager who exhibits the key trait of
entrepreneurship noted above: judgment in decision making. Judgment is a capacity for making a successful decision
when no obviously correct model or decision rule is available or when relevant data is unreliable or incomplete.
Cantillon’s entrepreneur needs judgment to speculate on future price movements, while Knight’s entrepreneur requires
judgment because he deals in situations that are unprecedented and unique. Schumpeter’s entrepreneur needs
judgment to deal with the novel situations connected with innovation. (Osorno, R., Bajao,G. ,2020)
The insights of previous economist can be synthesized. Entrepreneurs are specialists who use judgment to deal
with novel and complex problems. Sometimes they own the resources to which the problems are related, and
sometimes they are stewards employed by the owners. In times of major political, social, and environmental change,
the number of problems requiring judgment increases and the demand for entrepreneurs rises as a result. For supply to
match demand, more people have to forgo other careers in order to become entrepreneurs. They are encouraged to do
so by the higher expect pecuniary rewards associated with entrepreneurship, and perhaps also by increase in the social
status of entrepreneurs, as happened in the eighties. (Osorno, R., Bajao, G. ,2020)
What is entrepreneurship?
Entrepreneurship is a special element of the economic system that figures out tomorrow’s needs. There is
always a risk for entrepreneurs because they can never be a hundred percent sure about what the marketplace needs
will be.
Because entrepreneurs must always keep in mind that they will fail if they do not make a profit, it sometimes
seems that their only motive is greed. Just because they are concerned with money does not mean that they do not
have a social conscience. Capitalism is a way of satisfying everyone’s basic needs for food, shelter and clothing. But
when these needs are met, people find that they also have other needs-that is , needs for protection, for roads, for
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 Republic of the Philippines
NORTHERN ILOILO STATE UNIVERSITY
VICTORINO SALCEDO CAMPUS
Sara, Iloilo

transportation, for education, for better health and more comforts, for entertainment, for a better environment, and so
forth.
When higher needs are expressed, successful entrepreneurs will meet them.
The needs of the market change with how developed a nation is and how well-off its people are. Today’s and
tomorrow’s entrepreneurs will have to anticipate those changing need if they are to be successful. And, the health of
our nation, now and in the future, depends on how healthy our economy is. Entrepreneurs are the vital part of our way
of life and partners in making our lives better.
The Entrepreneurial Function
The entrepreneur is not simply a middleman or someone who is engaged in selling. The entrepreneur is much
more than this. He is someone who lives an entrepreneurial way of life which combines creativity, challenge, hard work
and satisfaction for doing things. The entrepreneur:
 Perceives opportunities in the environment;
 Takes risk to make use of these opportunities;
 Mobilizes capital for a business;
 Introduces innovations;
 Organizes labor and production;
 Plans ahead; and
 Sells these products at a profit.
Roles of the Entrepreneur
Entrepreneurs perform three key roles that make their activities special. These roles are:
The Innovator’s Role. Entrepreneurs undertake the introduction, promotion, and sale for something new to the market.
This something new may be a product or service, a method of production, a source of raw materials or a market that
they want to build their enterprise on. It is through innovation that entrepreneurs respond to opportunities perceived
in their environment.
The Capitalist’s Role. Entrepreneurs organize the different factors of production such as land, labor, and capital. More
often than not, Entrepreneurs are also the source of all or most of these resources. It is in performing the capitalist’s
role that Entrepreneurs manifest their willingness to take the risks involved in establishing a business.
The Manager’s Role. Entrepreneurs coordinate and direct the process of production with the use of available human
and non-human resources. As managers, they make decisions, plan ahead, and see to itthat all their efforts bring the
enterprise enough profits to make the risk worthwhile. It is through the role of manager that Entrepreneurs bear the
responsibility of running the enterprise.
Characteristics of Successful Entrepreneurs
The personality characteristics of successful entrepreneurs have been analyzed by many experts. But many of
them are quick to point out that the problem with any formula for success as an entrepreneur is that success relies on
unique ability to see “new” patterns. So, one should be careful about evaluating his own entrepreneurial ability based
on general established patterns.
The traits that are most often thought to be characteristics of successful entrepreneurs are:
 A degree of tough-mindedness that enables entrepreneurs to make and stick by decisions that are based on
some amount of intuition. Tough-minded entrepreneurs are not frightened by the unknown. They lead the way
for the rest to follow.
 A willingness to work a little harder and a little longer. Successful entrepreneurs work not only for reward, but
also for the pleasure of creating the enterprise.
 A degree of self-confidence that let entrepreneurs makes firm decisions and keep them from worrying
afterwards. Self-confident entrepreneurs feel that the decisions are probably right-but not, adjustments can
make it work.
 A willingness to take “reasonable” risk. Entrepreneurs feel that results are controllable, not strictly up to
chance.
 A high degree of flexibility to meet changing goals, pressures, technologies, and competitions. Entrepreneurs
feel that their own flexibility will allow a chance to change things if decisions turn out badly.
 A sense of long-term goals. Entrepreneurs envision the future possibilities and results of today’s efforts.
 Good problem-solving ability that uses problems as a road map. Each problem solved helps entrepreneurs
chart a course for future success.
 A desire for profit with which they measure their successes. Because of profit motive, entrepreneurs will tend
to find efficient use of resources.
 An underlying enthusiasm that keeps up their spirits. Enthusiasm helps entrepreneurs maintain the level of
creative thinking and focused activity necessary to carry out the successful venture.
Contribution of Entrepreneurs
1. Develop new market. Under the modern concept of marketing markets are people who are willing and able to satisfy
their needs. In Economics, this is called effective demand. Entrepreneurs are resourceful and creative. They can create
customers or buyers. This makes entrepreneurs different from ordinary businessmen who only perform traditional
functions of management like planning, organization, and coordination.
2. Discover new sources of material. Entrepreneurs are never satisfied with traditional or existing sources of materials.
Due to their innovative nature, they persist on discovering new sources of materials to improve their enterprises. In
business, those who can develop new sources of materials enjoy a comparative advantage in terms of supply, cost and
quality.
3. Mobilize capital resources. Entrepreneurs are the organizers and coordinators of the major factors of production,
such as land, labor and capital. They properly mix these factors of production to create goods and service. Capital

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 Republic of the Philippines
NORTHERN ILOILO STATE UNIVERSITY
VICTORINO SALCEDO CAMPUS
Sara, Iloilo

resources, from a layman’s view, refer to money. However, in economic, capital resources represent machines,
buildings, and other physical productive resources. Entrepreneurs have initiative and self-confidence in accumulating
and mobilizing capital resources for new business expansion.
4. Introduce new technologies, new industries and new products. Aside from being innovators and reasonable risk-
takers, entrepreneurs take advantage of business opportunities, and transform these into profits. So they introduce
something new or something different. Such entrepreneurial spirit has greatly contributed to the modernization of
economies. Every year, there are new technologies and new products. All of these are intended to satisfy human needs
in more convenient and pleasant way.
5. Create employment. The biggest employer is the private business sector. Millions of jobs are provided by factories,
service industries, agricultural enterprises, and the numerous small-scale businesses.
Considering an Entrepreneurial Career
If you have decided that going into business for yourself might be a possible career choice, the first step is to
find out as much as you can about entrepreneurship.
What kind of business would you like to own? Do you believe you have some special qualities or knowledge
that will make your own business a success? Would you prefer to work for yourself? Examine the disadvantages on the
issue to help you decide.
Advantages of Being an Employee
Being employed for a salary has some advantages. For one thing, it is generally safer to be a salaried employee.
As an employee you will probably have less personal financial responsibility or risk. If the business has debts, you won’t
lose your personal savings because you are not responsible for the debts. (You would be if you are one of the owners.)
Many employees put in regular hours and are paid overtime if extra work is required. Not all employees, of
course work regular hours, many put in time over beyond the job’s working hours. However, most employee have
guaranteed vacation time and fringe benefits, such as life insurance and health plans.
Generally speaking, they can count on a somewhat stable life style. They have fairly good idea of what their
income will be from year to year, as well as what the job requirements will be.
A certain satisfaction or pride can result from working for large, successful companies. Working for large,
successful companies do fulfill certain needs.
Disadvantages of being an Employee
Being a salaried employee also has number of disadvantages. Advance salary may become limited. By the time
many people reach the middle of their careers, they are on the top of the salary scale. In some careers, the older, more
experienced, higher-paid employees may be laid off during a recession while younger, “less expensive” employees are
hired.
In industries governed by union contracts, all the low seniority employees may be laid off during a recession
when there is not enough work. Companies may relocate and require employees to make job transfers. Mandatory
retirement is also something to consider.
Advantages of Self-Employment
Self-employment has many advantages. The possibility of making money is an overwhelming reason that
people start their own business. There is a chance to make a profit in addition to a reasonable salary. Once the business
has been successfully established, there may be financial security. In fact, statistics show that the lifetime earnings of
most employees are less than the lifetime earnings of most successful entrepreneurs.
Other Advantages of Entrepreneurship
Every successful entrepreneur brings about benefits not only for himself/herself for the municipality, region,
and country as a whole. The benefits can be derived from entrepreneurial activities are as follows:
1. Enormous personal financial gain
2. Self-employment, offering more jobs satisfaction and flexibility of the workforce
3. Employment of others, often in better jobs.
4. Development of more industries, especially in rural areas or regions disadvantaged by economic changes, for
example due to globalization effects.
5. Encouragement of the processing of local materials into finished goods for domestic consumption as well as for
export.
6. Income generation and increased economic growth.
7. Healthy competition thus encourages higher quality products.
8. More goods and services available.
9. Development of new markets.
10. Promotions of the use of modern technology in small-scale manufacturing to enhance higher productivity
11. Encouragement of more researches/studies and development of modern machines and equipment for
domestic consumption.
12. Development of entrepreneurial qualities and attitudes among potential entrepreneurs to bring about
significant changes in the rural areas.
13. Freedom from the dependency on the jobs offered by others.
14. The ability to have great accomplishments
15. Reduction of the informal economy.
16. Emigration of talent may be stopped by a better domestic entrepreneurship climate.
Disadvantages of Self-Employment
Entrepreneurs can easily tell some of the disadvantages of self-employment. The risk involved in owning a
business may cause real headache. Economic failure is of course the biggest risk of all, and is the greatest disadvantage
of self-employment. Being ‘beaten out” by competition is another factor to consider. Complying with government
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 Republic of the Philippines
NORTHERN ILOILO STATE UNIVERSITY
VICTORINO SALCEDO CAMPUS
Sara, Iloilo

regulations and standard business practice, working longer (unpaid) hours, and finding the capital to start a business are
other possible disadvantages.
The Need to Achieve
Many entrepreneurs put need for achievement first on the list of reasons for starting their own business. They
have strong desire to make things happen. They thrive on creative challenges. Such persons are highly motivated. They
like to do well, to excel. Psychologists who have studied achievement motivation have found that persons with a high
need to achieve enjoy the following:
 Competition with self-imposed standard,
 Competition with others,
 Unique accomplishment,
 Long-term involvement
Independent-Mindedness and Self-Employment
Persons with this high need to achieve also want to take responsibility for their own successes or failures. They
prefer to take moderate risk. They like situations that provide immediate feedback on how well they are doing. They are
motivated by a deep sense of personal achievement rather than by the recognition from others. Independence is
another motive as well as advantages of self-employment. Persons who own and prepare their own business do have
more freedom to do what they want. They can experiment with ideas and let their creativity flow.
Creativity and Self-Employment
The desire to express creativity and inventiveness are also part of what motivates entrepreneurs. Starting
anew business is a creative act. Creativity enters into every part of setting up, planning, marketing and maintaining a
business.
Having a creative imagination is not a sacred possession or birthright of only a few people.
Creativity is a talent that can be developed by anyone who is willing to take the risk necessary to see their
ideas made into reality.

IV. Learning Assessment

Answer the following questions:
1. Compare and contrast the various views of economist about entrepreneur.
2. How important are the roles of an entrepreneur? Discuss elaborately.
3. Discuss the different characteristics of an entrepreneur and how it affects in the success of a business.
4. If you have to choose, would you rather be an employee or an entrepreneur? Discuss your answer.

Scoring Guide:
Each answer shall be evaluated using these criteria:
Content 10 pts.
Organization of ideas 5 pts.
Language facility 5 pts.
Total score: 20 pts

V. Enrichment Activities/Outputs
1. Entrep Learning Activity
Instructions:
 In a short bond paper, give at least one entrepreneur you knew and discuss his contribution to your
community.
 List down the characteristics that made him successful as an entrepreneur.
Scoring Guide:
Organization of ideas ---------------30 %
Relevance to the topic ------------------ 30 %
Content--------------------------------------- 40 %
Total: 100%
VI. References

Osorno, R., & Bajao, G. (2020).Entrepreneurship in tourism and hospitality.Quezon,City:Wiseman’s Books

Trading, Inc.
Sorolla, L., & Sorolla, R. (1996). Entrepreneurship for beginners. La Paz, Iloilo City: Seguiban Printers and
Publishing House

----End of Module 1, Lesson 2----

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 Republic of the Philippines
NORTHERN ILOILO STATE UNIVERSITY
VICTORINO SALCEDO CAMPUS
Sara, Iloilo

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