Chapter 1

ADMAS UNIVERSITY
DEPARTMENT OF ICT Entrepreneurship and Free
Enterprise

Lecturer: Zakeria Eid Ismail

MSc of Economics

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 OBJECTIVES:
At the end of this unit you should be able to;
 Discuss an over view of the various definitions of
Entrepreneur and Entrepreneurship Discuss the history
of entrepreneurship
 Differentiate between Entrepreneur and
Entrepreneurship.
 State types of entrepreneurs.
 List the characteristics of successful a entrepreneur.
 Roles of Entrepreneurs in the economy
 Obstacles faced by entrepreneur
 Forms of Entrepreneurship 2
 INTRODUCTION
• In this study session, is concerned with developing a
predominant and integrated perspective of the
entrepreneur and entrepreneurship. It reviews the great
variety of definitions given for the word entrepreneurship
and also the different activities performed by the
entrepreneur
• The word ‘entrepreneur’ is widely used, both in everyday
conversation and as a technical term in management and
economics.
• Entrepreneurial is an adjective describing how the
entrepreneur undertakes what he or she does.
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 DEFINITIONS OF
ENTREPRENEURSHIP
• Entrepreneurship is the process of creating incremental wealth.
The wealth is created by those individuals who assume the major
risk in terms of equity and time or providing value for others.
• Entrepreneurship is the process of identifying business
opportunities and getting necessary resource to start a business for
the purpose of getting benefit.
• Entrepreneurship can also be defined as the process of creating
something different and better with value by devoting the
necessary time and effort by assuming the accompanying
financial, psychic and social risks and receiving the resulting
monetary reward and personal satisfaction.

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• The third definition views the term from three perspectives; i.e.
from the economist, psychologist and capitalist philosophers
point of view.
• To an economist an entrepreneur is one who brings resource,
labor, materials, and other assets into combination that makes
their value greater than before and also one who introduces
changes innovations.  
• To a psychologist an entrepreneur is 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 the capitalist philosopher an entrepreneur is one who creates
wealth for others as well, who finds better way to utilize
resources and reduce waste and who produce job others are glad
to get.

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 HISTORICAL PERSPECTIVE
• Entrepreneur was originally a French word. The
word appeared for the first time in the 1437
“Dictionnaire de la Langue Francais”. Three
definitions were listed in this dictionary:
The most common meaning was a person who is
active and achieves something
The corresponding verb is “entrepreneur” which
means to undertake something
Lastly, when the risk taking component become
more apparent, an entrepreneur was understood as a
person who took risk .
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• Basically, the concept entrepreneur is derived from
the French concept “entreprendre” which literarily
is equivalent to the English concept “to undertake”.
From the business point of view, to undertake
simply means to start a business (QuickMBA,
2010).
• During the 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 stipulated products or to perform service
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• In this case the contract price is fixed so any resulting
profit or loss reflects the effort of the entrepreneur.
• In his 1776 book entitled ‘Wealth of Nations’, Adam
Smith spoke of the enterpriser as an individual who
undertook the formation of an organization for
commercial purposes.
• He then viewed the entrepreneur as a person with
unusual foresight who could recognize potential
demand for goods and services.
• In the 18th Century the first theory of entrepreneur
has been developed by Richard Cantillon. He said
that an entrepreneur is a risk taker.
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• 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.
• The other development during the 18 th Century is the
differentiation of the entrepreneurial role from capital
providing role. The later role is the base for today’s
endeavor capitalist.
• In the late 19th and early 20th Century an entrepreneur was
viewed from an economic perspective. The entrepreneur
organizes and operates an enterprise for personal gain.
• In the middle of the 20th Century the concept/notion of an
entrepreneur as an inventor has established
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• “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 producing new commodities or producing
an old one in a new way or opening a new outlet for
products by reorganizing a new industry.”
• The concept of innovation and newness are at the heart
of the above definition. 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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 TYPES OF ENTREPRENEUR
Based on the interaction with the business environment,
various types of entrepreneurs can emerge. To this effect,
Rockstar (2008) identifies the four types of entrepreneurs as
Innovative, Imitating, Fabian and Drone.

Innovative
• This type of entrepreneur is preoccupied with introducing
something new into the market, organization or nation.
• They are interested in innovations and invest
substantially in research and development.
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 Imitating
• These are also referred to as ‘copy cats’. They observe an
existing system and replicate it in a better manner.
• They could improve on an existing product, production
process, technology and through their vision create
something similar but better.
• This is the case of the student becoming better than the
master!

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 Fabian
• These are entrepreneurs that are very careful and cautious
in adopting any changes. Apart from this, they are lazy
and shy away from innovations.

Drone
• These are entrepreneurs that are resistant to change. They
are considered as ‘old school’. They prefer to stick to
their traditional or orthodox methods of production and
systems.
• Entrepreneurs occupy three roles, namely as agent of
(1) economic change (2) social change and
(3) technological change 13
 CHARACTERISTICS OF THE SUCCESSFUL
ENTREPRENEUR
1. Hard Work
• Entrepreneur put a lot of physical and mental effort in to developing
their venture.
• They often work long and anti-social hours. Balancing the needs of the
venture with other life commitments such as family and friends is one
of the great challenges which face the entrepreneur.
2. Self Starting
• Entrepreneurs do not need to be told what to do.
• They identify tasks for themselves and then follow them through
without looking for encouragement or direction from others.
3. Setting of Personal Goals
• Entrepreneurs tend to set themselves clear, and demanding, goals. They
benchmark their achievement against these personal goals.
• As a result, entrepreneur tend to work to internal standards rather than
look to others for assessment of their performance. 14
4. Resilience (Readily recovering from shock or depression)
• Not everything goes right all the time. In fact, failure may be
experienced more often success.
• Must not only pick themselves up after things have gone wrong
but must learn positively from the experience and use that
learning to increase the chances of success the next time around.
5. Confidence
• The entrepreneur must demonstrate that they not only believe in
themselves but also in the venture they are pursuing. After all if
they don’t, who will?
6. Receptiveness to New Ideas
• The entrepreneur must not be overly confident. They must
recognize their own limitations and the possibilities that they
have to improve their skills.
• They must be willing to revise their ideas in the light of new
experience. 15
7. Assertiveness
• Entrepreneurs are usually clear as to what they want to gain
from a situation and are not frightened to express their wishes.
Being assertive does not mean being aggressive.
• Assertiveness means a commitment to outcomes, not means.
True assertiveness relies on mutual understanding and is
founded on good communication skills.
8. Information Seeking
• Entrepreneurs are not on average are more intelligent than any
other group.
• They are however characterized by inquisitiveness.
• They are never satisfied by the information they have at any
one time and constantly seek more.
• Good entrepreneurs tend to question more than they make
statements when communicating. 16
9. Eager to Learn
• Good entrepreneurs are always aware that they could do things
better.
• They are aware of both the skills they have and their limitations,
and are always receptive to a chance to improve their skills and
to develop new ones.
10. Attuned to Opportunity
• The good entrepreneur is constantly searching for new
opportunities.
• In effect, this means that he or she is never really satisfied with
the way things are any moment in time.
11. Receptive to Change
• The entrepreneur is always willing to embrace change in a
positive fashion, that is, to actively embrace the possibilities
presented by change rather than resist them. 17
12. Commitment to Others
• Good entrepreneurs are not selfish. They cannot afford to be! They
recognize the value that other people bring to their venture and the
importance of motivating those people to make the best effort they
can on its behalf. This means showing a commitment to them.
• Leadership is not just about giving people jobs to do, it is also
about offering them the support they need in order to do those jobs
13. Comfort with Power
• Entrepreneurs can become very powerful figures.
• They can have a great impact on the life of other people. Power can
be one of the great motivations for the entrepreneur.
• Effective entrepreneurs are aware of the power they possess and
recognize it as an asset. They are not afraid to use it and never let
themselves be intimidated by it.
• However, the true entrepreneur uses power responsibility as a
means to an end and not as an end in itself. 18
 THE ENTREPRENEURIAL PROCESS
Entrepreneurs make decisions and engage in the following
activities:
1. Exploring the entrepreneurial context
• Entrepreneurs can discover the unexploited opportunities
and competitive advantage that may lead to the
development of a potentially successful entrepreneurial
venture only through exploring the context.
2. Identifying opportunities and possible competitive
advantage.
• A crucial aspect of entrepreneurship is the pursuit of
perceived opportunities. 19
• Opportunities are positive external trends or changes that
provide unique and distinct possibilities for innovating and
creating value.
• A competitive advantage is what sets an organization apart;
it’s an organization’s competitive edge.
3. Starting the venture.
In this phase of entrepreneurial process the following
activities are included;
 researching the feasibility of the venture,
 planning the venture,
 organizing the venture, and
 launching the venture.
Each of these activities is important to being an entrepreneur.
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4. Managing the venture.
An entrepreneur also must effectively manage the venture by
managing:
• Processes,
• People, and
• Growth.

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 FUNCTIONS OF ENTREPRENEURS

• Innovation
• Bears all the risks and enjoy all benefits
• Idea Generation
• Organizing and Management
• Decision Making
• Leading
• Managing Growth
• Support to Social Environment
• Economic Development 22
 THE CURRENT IMPORTANCE OF
ENTREPRENEURSHIP

This can be shown in three areas:

• Innovation,
• Number of new start-ups, and
• Job creation and employment.

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 ROLE OF ENTREPENEUR WITHIN
THE ECONOMY
• Entrepreneurs play a critical role in maintaining and
developing the economic order we live under. Some
important economic effects of entrepreneurial activity are
listed below.
1) Combination of economic factors
• All the products bought and sold in an economy are a
mix of three primary economic factors (the raw materials
nature offers up (land), the physical and mental effort
people provide (labor) and money (capital).
• Now value is created by combing these three things
together in a way which satisfies human needs.
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2) Providing Market efficiency
• Efficient means resources are distributed in an optimal way, that
is, the satisfaction that people can gain from them is maximized.
• An economic system can only reach this state if there is
competition between different suppliers. If a supplier is not
using competition then they will tend to demand profit in excess
of what the market would allow and reduce the overall
efficiency of the system.
3) Accepting Risk
• Risk is the potential variation in terms of future outcomes. We
do not know exactly what the future will bring. This lack of
knowledge creates uncertainty.
• No matter how we plan there is always a possibility of adverse
deviation from what we expect or hoped for. Here the primary
function of the entrepreneur is to accept risk on behalf of other
people. 25
4) Maximizing investor’s return
• Entrepreneurs create and run organizations which
maximize long-term profit on behalf of the investors
which in turn generates overall economic efficiency.
5) Processing of market information
• The entrepreneur keeps an eye out for information that is
not being exploited. By taking advantage of this
information they make markets more efficient and are
rewarded out of the revenue generated.
• This information is information about opportunities.

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 FORMS OF ENTREPRENEURSHIP

 Entrepreneurship can take three different forms. They are:

1. The individual entrepreneur: is someone who started,
acquired or franchised his/her own independent organization.
The major portion of this text is also devoted to describe the
basic features and activities of the individual entrepreneur.
2. Intrapreneur: is an employee who is tasked with developing
an innovative idea or project within a company. The
Intrapreneur may not face the outsized risks or reap the
outsized rewards of an entrepreneur. However, the Intrapreneur
has access to the resources and capabilities of an established
company.
The term "Intrapreneur" is a portmanteau of the two words
"internal" and "entrepreneur.
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3. A Technopreneur is a person who begins by
brainstorming ideas that challenge the traditional systems
and practices and comes up with a better, more creative
and different way of doing things.
Technopreneur defies the present economic order by
ideating a product or service that uses technological
solutions to change the traditional way of doing
something.
Generally speaking, a technopreneur is a tech-savvy,
creative, driven, innovative and dynamic person who
thinks out of the box.
Technopreneur, continually and persistently, look for
scope of improvement in the ways of working of people,
companies, industries and countries as a whole 28
 MISCONCEPTIONS ABOUT ENTREPRENEURSHIP

1. Successful entrepreneurship needs only a great idea.

• Having a great idea is only part of the question for
successful entrepreneurship. Understanding the demands
of the different phases of the entrepreneurial process,
taking an organized approach to developing the
entrepreneurial venture, and coping with the challenges
of managing the entrepreneurial venture are also key
ingredients of successful entrepreneurship. 29
2. Entrepreneurship is easy.
• Be forewarned that entrepreneurship is not easy! It takes
commitment, determination, and hard work.
• And even if you have these qualities, it still isn’t effortless!
Entrepreneurs often encounter difficulties and setbacks, but
the successful entrepreneurs are those who push on in spite
of the difficulties.

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3. Entrepreneurship is a risky gamble.
• don't think that because entrepreneurship involves
pursuing new and untested approaches and ideas, it must
be a gamble.
• Although entrepreneurs are not afraid to take risks,
entrepreneurship involves calculated risks, not
unnecessary ones.
• In fact, there are times when successful entrepreneurship
means avoiding or minimizing risks.
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4. Entrepreneurship is found only in small businesses.
• Many people have the mistaken idea that entrepreneurship
is associated only with small organizations.
• The truth is that entrepreneurship can be found in any size
organization.
• On the other hand, just because an organization is small
doesn’t automatically make it entrepreneurial.

5. Entrepreneurial ventures and small businesses are the

same thing.
• This misconception is so widespread that we are going to
address it more completely in the next section.
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• Many people think that entrepreneurial venture and
small business are one and the same. However, there
are some important differences between the two
• A small business isn’t necessarily entrepreneurial in
nature just because it is small.
• To be entrepreneurial means being innovative and
seeking out new opportunities.
• Even though entrepreneurial ventures may start
small, they do pursue growth.
• Some new small firms may grow, but many will
remain small businesses, by choice or by default.33
 Creativity and Innovation
• 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 opportunities in
order to enhance people’s lives or to enrich society.

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 INNOVATION

Innovation is a way of doing something differently and

better.
That is, it is a means of exploiting a business opportunity.
It is also a new combination of three things (land, labor and
capital). In short innovation is invention (act of creating
something) plus commercialization (putting the new
creativity into the market place.
The relationship between business idea and innovation is
only new and modified ideas are innovative.
An old idea is not innovative because it is an imitation of
existing business concept.
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AREAS OF INNOVATION 
• The following are some of the major areas in which valuable
innovation might be made.
1) New product: A new product can be developed through new or
existing technology. The new product may offer a radically new
way of doing something or it may simply be an improvement on
an existing item. The new product must offer the customer an
advantage if it is to be successful.
2) New Services: A service is an act which is offered to undertake a
particular task or solve a particular problem.
3) New Production Techniques: Innovation can be made in the way
in which a product is to be manufactured. A new production
technique should allow the end user to obtain the product at a
lower cost, or a product of higher quality or better service in the
supply of the product.
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4. New Way of Delivering the Product /Service to Customer:
Customer can only use product/service they can access. A
common innovation is to take a more direct routine by cutting out
distributors or middlemen.
5. New Operating Practices: As with innovations in the production
of physical products, innovation in service delivery must address
customers need and offer them improved benefits, for example
easier access to the service, a higher quality service, a more
consistent service, a faster or less time consuming service etc.
6. New Means of Informing the Customer about the Product:
People will only use a product or service if they know about it.
Demand will not exist if the offering is not properly promoted to
them. Promotion consists of two parts; a message what is said and
a means – the route by which that message is delivered.

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7. New Means of Managing Relationship within the
Organization: Any organization has a wide variety of
communication channels running through it. The
performance of the organization will depend to a great
extent on the effectiveness of its internal
communication channels. These communication
channels are guided by the organization’s structure.
8. New Ways of Managing Relationships between
Organizations: Organizations sit in a complex web of
relationships to each other. The way they communicate
and relate to each other is very important

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 CREATIVITY
• There have been many debates over definitions of
creativity, its forms, possible effects, and its relation to the
firm.
• It is generally accepted that creativity describes ideas that
are novel and of value.
• Therefore, creativity is the capacity to produce novel or
original work that fits with task constraints (Lubart
1994) or the development of appropriate and novel
solutions (Ward, Finke & Smith 1995). Creativity, like
innovation, has been recognized as important contributors
to a nation’s economic growth.
• Creativity is the natural result of applying basic mental
operations to existing knowledge structures to form a new
product or service 39
• Creativity has been described as a combination of 6
distinct but interrelated resources - intellectual abilities,
knowledge, styles of thinking, personality, motivation
and environment.
• The difference between creativity and innovation lies in
this notion.
• That is, creativity is generating a new product or service
that has not been seen before but innovation can be
improving existing products or services.

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 Barriers of Entrepreneurship:
•Many entrepreneurs fail due to several barriers and
problems
 Inadequate Management of Finance:
 Lack of a viable concept.
 lack of Professional and Experienced
 Lack of market knowledge
Management Team
 Lack of technical skills.
 Weak Promotional Efforts
 Lack of seed capital.
 Unplanned Rapid Growth
 Lack of business know-how.
 Shortage Trained or Experienced
 Competency-lack of motivation.
Manpower
 Legal constraints and regulations.  Improper Price Management
 Monopoly and protectionism.  Lack of Appropriate Information
 Inhibitions due to patents  Narrow Vision
 Less Concerned about Management

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43
 Entrepreneur Entrepreneurship
Leader Leadership
Planner Planning
Programmer Action
Motivator Motivation
Risk-taker Risk-taking
Creator Creativity
Visionary Vision
Innovator Innovation
Technologist Technology
Initiator Initiative
Organizer Organization
Decision-maker Decision Making
Administrator Administration
Adopter Adopting
Delegator Delegating
Ethical Ethics
Goal Setter Goal Setting
Imagination Imagining
Skilled Skills
Transformer Transformation
Wealth Creator Wealth Creation
Economic Developer Economic Development 44
Promoter Promotion