EDS 111

HISTORICAL BACKGROUND OF EN-

TREPRENEURSHIP
COURSE OBJECTIVE
 The objective of this topic is to ensure that
the students will be able to;
 Explain the historical background of en-
trepreneurship
 Define entrepreneurship
 Define an entrepreneur
HISTORICAL BACKGROUND OF EN-
TREPRENEURSHIP

 The word entrepreneur was coined from a

French word called ‘entrepredre’ which
means a person who voluntarily head the mil-
itary expedition.
 It was first used during the French military
history in the seventeenth century.
 Literally, the word entrepreneur was trans-
lated to mean ‘between-taker’ or ‘go-between’
CONT’
 The concept of laissez-faire capitalism pro-
pounded by Adam Smith around 1776 which
permitted free entry and free exit of mer-
chants to the market actually helped in the
development of entrepreneurship.
 However, prior to this period, different people
had been identified to exhibit the characteris-
tics of an entrepreneur.
EARLIEST PERIOD
 During this period, a good example of an en-
trepreneur (who acted as a go-between) was
Marco Polo who attempted to establish trade
route to the far East.
 As a go –between, he signed a contract with
a venture capitalist to sell his goods.
 As a merchant, he undertook the risk involved
in the adventure both physical and emotional
aspects in ensuring that the goods were sold.
MIDDLE AGES
 During this period, the word entrepreneur was used
to describe a person who managed large production
projects who may not necessarily be a risk taker but
a manager of a project using the resources provided
to him.
Cont’
 An entrepreneur was also seen as an archi-
tect or a handler of government contract.
 Note: Middle age is the period of European
history from the fall of the Roman Empire
(476) AC to the late 15th Century.
17TH CENTURY
 This century witnessed the gradual applica-
tion of the entrepreneurial concept to busi-
ness environment and development.
 This was used in connection with profit mak-
ing according to John Law, a notable French
businessman who established the Royal
Bank.
CONT’
 During this period, Richard Cantillion an
Irishman, first adopted the word entrepreneur
to describe a risk bearer when he observed
that merchants (farmers, fisher men, crafts-
men) and others actual buy their goods at a
certain known price and sell at unknown price
bearing the risk involved.
18TH CENTURY
 In the 18th century, entrepreneurship began
to assume a greater application to business
development and environment particularly as
fund demanders and users increased in
business transactions.
Cont’
 This period coincided with the industrial era.
Many inventors such as Thomas Edison,
Whitney and other inventors were identified
as entrepreneurs.
 As inventors, they need capital for the com-
mercialization of their inventions.
Cont’
 Here the inventors attempted to invent and
turn their inventions into products in commer-
cial quantities but lacked the capital to do so.
 This created a situation where a capital/fund
provider is separated from the fund or capital
demander.
CONT’
 Fund demander in this case is the entrepren-
eur (inventor) while the fund provider is the
venture capitalist.
 In this century, Jean Baptize Say (1803) was
able to recognise two types of profit (profit of
capital and residual profit).


CONT’
 While the profit of capital goes to the fund
providers (the venture capitalists), the resid-
ual profit goes to the fund demanders (the en-
trepreneurs).
19TH CENTURY
 In the 19th century, the concept of entrepren-
eurship assumed an economic and mana-
gerial perspectives.
 In economics, it was discovered that the hu-
man factor as a co-ordinator of other factors
of production is important.
Cont’
 The entrepreneur was seen as someone who
combines the factors of production (such as
land, labour, and capital) for profitable re-
wards.
 Here, the entrepreneur was identified as the
fourth factor of production.
Cont’
 The entrepreneur co-ordinates the other
factors of production (land, labour, and cap-
ital) which now include other resources such
as information, time, knowledge, human
skills, ability, capability, initiative, ingenuity,
etc.)
20TH CENTURY
 The concept of entrepreneurship in the 20th
century was that of innovation.
 Schumpeter propounded the concept of in-
novation.
 He saw an entrepreneur as an innovator and
not just a capital demander.
CONT’
 Joseph Schumpeter (1934) described en-
trepreneurship as an engine of economic de-
velopment.
 He saw innovation as the main purpose of en-
trepreneurship for economic development.
Cont’
 Innovation means the introduction of new
methods, new machines, new materials, new
markets, new products, new processes, and
new organisational structures.
 That is doing new things or doing old things in
a new way.
CONT’
 According to Hisrich and Peters (1998) the
entrepreneur is viewed “as an innovator; an
individual who develops something that is
unique.”
 They pointed out that the function of an en-
trepreneur is to reform or revolutionise pat-
terns of production or production process.
21 CENTURY
ST

 The concept of entrepreneurship in 21st

century was further expanded to include the
emergence of several authors and theorists
who viewed an entrepreneur from different
perspectives.
CONT’
 McClelland (1961) saw an entrepreneur as
someone who is out to satisfy an identified
needs. He classified these needs as;
 Need for achievement
 Need for power
 Need for affiliation.
CONT’
Among these needs, desire or need for
achievement is more relevant to entrepreneur-
ship.
He saw an entrepreneur as someone who has
desire for achievement of a particular need (‘n’
achievement). ‘An achiever’.
CONT’
 These needs may include the following;
 to obtain or attain some height in
someone’s business pursuit.
 to experiment something new in business.
 to accomplish a particular task.
 to escape an unpleasant situation.
Cont’
 Peter Drucker (1970) saw an entrepreneur as
someone who maximizes opportunity and
wealth of a nation through creativity and in-
genuity.
Cont’
 Shapero (1975) saw an entrepreneur as someone
who exhibits a kind of behaviour which include:
 Taking Initiatives.
 Organising and re-organising social and economic
mechanisms to turn resources and situations to prac-
tical profitable ends.
 Acceptance of risk or failure.
CONT’
 Vesper (1980) viewed an entrepreneur from
the following perspectives:
 The economist perspective
 The psychologist perspective.
 The business perspective
CONT’
 (a)The economist sees an entrepreneur as
someone who combines resources such as
labour, materials and other assets together,
introduces changes, innovations and new
orders for a profitable and rewarding ends.
CONT’
 (b) The psychologist on the other
hand sees an entrepreneur as
someone who is being driven by certain
forces which are in built. This per-
spective claims that entrepreneurs are
born
 (c) The business man sees an entre-
preneur as someone who maximizes
profit.
CONT’
 1983- Gifford Pinchot introduced the concept
of intrapreneur as an entrepreneur within an
established organization.
 According to him, an intrepreneur must not
necessarily own an enterprise but can exhibit
the characteristics of an entrepreneur even
an existing company.
CONT’
 1985- Robert Hisrich saw entrepreneurship
as the process of creating something different
with values by devoting the necessary time
and effort to it.
 He suggested that classical theories of en-
trepreneurship can be applied to current
business practices through the concept of en-
trepreneurial team.
CONT’
 There are many other contributors to the his-
torical perspective of entrepreneurship, such
as;
 Max Weber
 Carl Menger,
 Casson
 Ludwig von Mises
 G. L. Shackle
CONT’
 Peter Kilby
 Friedrich von Hayek
 Ludwig M. Lachmann
 Israel Kirzner
 Frank H. Knight
Summary of the History of En-
trepreneurship
 The word entrepreneurship came from a French word
‘entreprendre’ which mean ‘to do something’ in a mili-
tary expedition as a strategy to win war.
 In the middle age –an entrepreneurship was used to
describe an actor.
 17th Century described an entrepreneur as a risk
bearer.
 18th Century (1725) Richard Cantillion used the word
entrepreneur to describe a self employed person.
 Historical Development of
the Concept

The word entrepreneurship came

from a French word ‘entreprendre’
which means ‘to do something’ in a
military expedition as a strategy to
win war.
In the middle age –an entrepreneur
was used to describe an actor.
17th Century described an entrepre-
neur as a risk bearer.
18th Century (1725) Richard Cantillion
used the word entrepreneur to de-
scribe a self employed person.
 Contd.
19th Century (1803) Jean Baptise Say
used the word entrepreneur to de-
scribe someone that separated profits
of capital from profits of the enterprise
and a person who possesses man-
agerial skills.

1876 -Francis Walker- distinguishes

between those that supplied funds
and those that supplied managerial
capabilities. This gave birth to ven-
ture capital.
 Contd.

1934- Joseph Schumpeter saw en-

trepreneurship as an engine of eco-
nomic development. He saw inno-
vation as the main purpose of en-
trepreneurship for economic devel-
opment.

1961- David MacCllend described

an entrepreneur as someone that
meets the needs of others for per-
sonal achievement
 Contd.

1964- Peter Drucker introduced an entre-

preneur as a maximizer of opportunity/
wealth and as someone that is highly cre-
ative.
1975- Albert Shapero saw an entrepreneur
as one that takes initiatives and organizes
social economic mechanism and accepts
risk and failure.
1983- Gifford Pinchot introduced the con-
cept of intrapreneur as an entrepreneur
within an established organization.
 Contd.

1985- Robert Hisrich saw en-

trepreneurship as the process of
creating something different with
values by devoting the necessary
time and effort to it.
He suggested that classical theories
of entrepreneurship can be applied
to current business practices
through the concept of entrepreneur-
ial team.
Defining Entrepreneurship

Entrepreneurship is the process by which

individuals or a group of individuals (entre-
preneurs) exploit a commercial/social op-
portunity, either by bringing a new product
or process to the market, or by substantially
improving an existing good, service, or
method of production.

This process is generally organized through

a new organization (a start-up company),
but may also occur in an established small
business that undergoes a significant
change in product or strategy.
Who is an Entrepreneur?

An entrepreneur is someone who

identifies a market opportunity for
products/services and creates a
business organization to pursue the
opportunity.

An entrepreneur has an unusual

foresight to identify the potential de-
mand for the goods and services.
AN ENTREPRENEUR

 An entrepreneur also has been defined differ-

ently by different authors. For instance;
 Schumpeter (1934) defined an entrepreneur
as an individual who develops something
new. (an innovator)
 Carland, et al (1984) defines an entrepreneur
as an individual who establishes and man-
ages a business for the principle purpose of
profit and growth.
CONT’
 Bagby (1988) defined an entrepreneur is a
person that utilizes the opportunity of instabil-
ity, turbulence, lack and want to produce
something new or modifies an existing one
for profit motive.
 Gartner (1989) defines an entrepreneur as
someone who creates an organization.
CONT’
 Herbert and Link (1989) viewed an entrepre-
neur as a person that has some comparative
advantage in the decision making process ei-
ther because he or she has better information
or different perception of events or opportuni-
ties.
Cont’
 Pickle & Abrahamson (1990) see an entre-
preneur as one who organizes and manages
a business, undertakes and assumes the
risks for the sake of profit.
Cont’
 An entrepreneur evaluates perceived oppor-
tunities and strives to make the decisions that
will enable the firm to realize sustained
growth.
Cont’
 According to Thomson (2002) entrepreneurs
are individuals who survey their potential
business environment, identify opportunities
to improve it, marshal resources and act to
maximize such operational opportunities.
Cont’
 An entrepreneur is therefore someone who
sees a gap or a need in his or her immediate
environment and brings resources together to
meet such need, taking the risks involved for
some rewards.
Cont’
 Because entrepreneurship covers all sphere
of life and different people view an entrepre-
neur from different perspectives, we therefore
have different types of entrepreneurs.
Cont’
 Today you hear different names relating to en-
trepreneurship such as an entrepreneur, in-
trapreneur, cyberpreneur, hobbypreneur, co-
entrepreneur, managerpreneur, politipreneur,
sportpreneur, familypreneur, homepreneur,
womanpreneur, agropreneur entertain-
preneur, youthpreneur, engineerpreneur,
acadapreneur, pastorpreneur, etc.
Conclusion
 Entrepreneurship is therefore the real and
key factor for every economic development
and growth and entrepreneurs are the brain
behind such development.
 THANKS
AND
GOD BLESS YOU