CHAPTER ONE

Introduction to Entrepreneurship
 The concept of entrepreneurship,
definition and historical development

■ Entrepreneurship is one of the four mainstream economic factors:

– land, labor, capital and
entrepreneurship.

 The word which is derived from French in 17th century

‘entreprendre’, refers to individuals who were “undertakers”,
meaning those who “undertook” the risk of new enterprise.
■ Example
o In the earliest period:
o An entrepreneur was viewed as the one who attempt to establish
trade routes and signed contracts with many persons (forerunners
of today's venture capitalist) to sell goods.
o In the Middle Ages:
o The term entrepreneur used to describe a person managing large
production projects.
o In the 18th century,
o The Irishman named Richard Cantillon, who was living in
France, credited to being the first to use the term entrepreneur as a
risk taker, seeing the merchants, farmers, crafts men, and other
sole proprietors buy products at certain price –therefore, operating
at a risk condition.
■ Karl Vesper: has researched entrepreneurship and explained that its
nature is a matter of individual perception.

– To an economist: an entrepreneur is one who brings

resources; labor, materials, and other assets in to combination
that makes their value greater than before.
– To a psychologist: such a person is typically driven by
behavioral forces like need to obtain, to experiment, to
accomplish something, or perhaps to escape authority of
others.
– To capitalist philosophers: an entrepreneur is the one who
creates wealth for others as well, who finds better ways to
utilize resources and reduce waste and who creates job that
others are glad to get.
■ And there have been hundreds of definitions of
entrepreneurs in dozens of books. Such definitions
include:

 A decision maker whose entire role arises out of his

alertness to previously unnoticed opportunities
(kirzner-1973).

 Who uses available resources in novel ways

(Schumpteter-1934).

 Is someone who always searches for change,

responds to it, and exploits it as an opportunity
(Peter Drucker).
1.2 Personality Traits of Successful Entrepreneurs
A). Need for Achievement:
B). Willingness to take risk:
C). Self-Confidence:
D). Innovation and creativity:
E). Total commitment:
F). Effective time management:
G). An Ability of leadership:
H). An ability of decision making:
I). Desire for Independency:
1.3 Entrepreneurial motivation: why people
consider setting up their own businesses?
“Pull' Influence "Push" influence
 Some individuals are
attracted towards  Many people are pushed into
business ownership by founding a new enterprise by
positive motives such as: variety of factors including;
 Independence:
 Market opportunity:  Unemployment:
 Disagreement with previous
 Financial incentives: employer
 Challenge: Overcoming
 Community service: Challenge gives psychological
satisfaction
 Entrepreneur vs. Owner manager
■ Entrepreneur:
– The entrepreneur combines various factors of production,
processes the raw material, creates utility in the product, and
converts the raw material in to a finished product, organizes the
marketing function and sells the product in the market in order
to earn profit.
– Decision-making and calculated risk bearing:
 While organizing the production function, an entrepreneur plays a
significant role in decision making. Every decision may result in
success or failure. However, the risk is limited and calculated.
– An entrepreneur has an all-round personality:
 An entrepreneur possesses knowledge and insight about the
quality and type of raw materials, machinery, work force and their
behavioral pattern, government machinery, labor laws, taxation,
production process and marketing network.
 Owner Manager
■ They may or may not be entrepreneurs. They usually own and
manage a small enterprise; which fits with their personal
motivations. They are concerned more about survival than seeking
innovative changes and growth.
 They are therefore, characterized by:
 Limited scope for innovativeness, creativity, and imagination

 Managerial jobs are transferable.

 Managers do not bear-risk.

 1.5. Classification of Entrepreneurs
■ The entrepreneurs have been broadly classified
according to:

 the type of business,

 use of personal skills,

 motivation,

 growth, and stages of development and

 gender.
 Entrepreneur according to the type of
business
1). Business entrepreneur;
─ are individuals who conceive an idea for a new
product or services and then create a business to
materialize their idea in to reality.
2). Trading entrepreneur:
─ is one who undertakes trading activities and is
not concerned with the manufacturing.
3). Industrial entrepreneur:
─ is essentially a manufacturer who identifies
the potential needs of the customers and tailors
a product or service to meet the marketing
needs.
4). Corporate entrepreneur:
─ is a person who demonstrates his innovative
skill in organizing and managing corporate
undertaking.

5). Agricultural entrepreneur:

─ is the entrepreneur who undertakes agricultural
activities such as raising and marketing of crops,
fertilizers and other inputs of agriculture through
mechanization, irrigation and application of
technologies for dry land agricultural products.
 Entrepreneurs based on technology
1.Technical entrepreneur
 is a "Crafts man" with skill in production
techniques.
2. Non-technical entrepreneur
 is a person who is concerned with developing
alternative marketing and distribution strategies
to promote his business.
3. Professional entrepreneur
 is a person who is interested in establishing a
business but does not have interest in managerial
or operating it once it is established.
Entrepreneurs based on motivation
1. Pure entrepreneur
 is an individual who is motivated by psychological and
economic rewards/personal satisfaction.
2. Induced entrepreneur
 is one who is induced to take up an entrepreneurial task
due to the policy measures of the government that
provides assistance, incentives, concessions and
necessary overhead facilities to start a venture.
3. Spontaneous entrepreneurs
 are persons with initiative, boldness, natural talents
and confidences in their ability, which motivate them
to undertake entrepreneurial activity.
 Entrepreneurs based on stage of
development
1. First-generation entrepreneur
- starts an industrial unit by innovative skill and
combining different technologies to produce a marketable
product or service.
2. Modern entrepreneur
– is a person who undertakes ventures that go well along
with the changing demand in the market which suit the
current marketing need.
3. Classical entrepreneur
- is a person concerned with customers and
marketing needs through the development of a self-
supporting venture/without an element of growth.
Entrepreneurs based on Idea generation
1. Technological entrepreneur
- a one who innovates using a technology to
produce new products or new process for
producing old product.
2. A geographical entrepreneur
- is one who moves technology, products, and
process that go with it from one place to
another.
3. A sociological entrepreneur
- is one who finds a new situation in which to
sell an old product (existing products).
Based on source of capital
1. Private entrepreneurs
─ is when an individual on the basis
of his or her own property start up
a new venture.
2. Collective entrepreneurs
─ when a venture is created in a
grouped based on collective
property or contribution.
Entrepreneurs based on the reason
to start-up
1. Opportunity-driven entrepreneurs
─ they start a company because they see
clear market opportunities to exploit.
2. Necessity-driven entrepreneurs
─ go in to business to create self-
employment and to win a living.
Success factors of entrepreneurs
1.The entrepreneurial team
2.Venture product and service
3.Marketing and timing
4. Business Ideology
Benefits and Limitations of Entrepreneurship
Benefits Potential Limitations
Opportunity to:
1. Uncertainty of income
1. gain control over your
2. Risk
own destiny
A. Financial Risk
2. reach your full potential B. Career Risk
C. Family and Social Risk
3. reap unlimited profits D. Psychic Risk
3. Long hours and hard work
4. contribute to society and 4. Lower quality of life until the business
recognized for your effort gets established
5. High level of stress
5. do what you enjoy
6. Complete Responsibility
Role of entrepreneurship in economic development

■ Capital formation:

■ Improvement in per capita income:

■ Generation of employment

■ Balanced regional development

■ Improvement in living standards

■ Economic independence

■ Backward and forward linkages

 Entrepreneurship, creativity, and innovation
■ Creativity can be defined as the production of novel and useful
ideas,
■ while innovation refers to the implementation or transformation
of a new idea into a new product or service, or an improvement
in organization or process.
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