Entrepreneurship (Mgmt 3042)

04/14/24 Getnet H. (PhD) CoBE, Mgt Department 1

 Chapter One
Nature and Development of Entrepreneurship
1.1. Historical Development of Entrepreneurship
Originally, entrepreneur is derived from French term
“entreprendre” which means undertakers/go b/n
Historically, the concept of entrepreneurship is viewed from
the following aspects:
1. Time dimension
 In the middle age (13th and 14th century), entrepreneur
was considered as a person who manages large
production projects such as big buildings, castles, dams,
etc.
 No risk taking only managing.
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Cont’d…
In the 17th century, entrepreneur was seen as the
person who enters into a contract with the
government to provide a certain product/service with
a fixed price-without considering the fluctuation of
price of the inputs.
•Here risk is involved-due to the fluctuation of
price.

In the 18th century, entrepreneur was described

as the person different from the capitalist venture
but he/she has the idea and needing capital to
put their idea into practice.

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Cont’d…

In the late 19th and early 20th century,

entrepreneur was equated with manager- viewed
from the economic point of view organize and
manage resources or combine means of
production.
In the middle of 20th century, entrepreneurship
was attached with innovation-the act of
introducing something new into the economy.

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2. Developed and developing countries
perspectives
Developed countries view- entrepreneur is the
person who
-produce new product
-Introduce new method of doing things
-Finds new sources of inputs
-Opens new market
Developing countries view-entrepreneur is the
individual who
-start a business-old or new
-undertake risk
-bear uncertainty/live in uncertain condition
-perform managerial functions
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3. Different economic system perspectives
Capitalist/free market economic system’s view-
entrepreneur is the person who has the freedom
to start business, save and invest.
See entrepreneurs as the catalyst for economic
growth.
Mixed economic system-entrepreneur is
considered as one agent of economic growth-
produce and distribute goods/services
-government produce capital goods and provide
basic social services.
Socialist/communist economic system’s view-
entrepreneur was considered as parasite of
economic growth-assume private
sector/entrepreneur exploit resources unwisely.6
04/14/24 Getnet H. (PhD) CoBE, Mgt Department
4. Different discipline’s view
Economist’s view-entrepreneur is the one who brings
resources/combine to make greater value than the value
before.
introduce innovation and bring change
Joseph Schumpeter, noted economist viewing
entrepreneurship as new
combinations of resources, in the form of a) a new good, b) a
new method of production, c) opening of a new market, d)
discovery of new sources of supply, and e) development of a
new venture.
Sociologist’s view- entrepreneur is the person who is
sensitive to business and social environment- addressing
the society’s problem/filling the gap
Psychologist’s view-entrepreneur is the person who has
the derive/motive to attain/achieve something/self
confident/initiative.
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Definition
Thus, What is Entrepreneurship?
No single universal definition. but it is
Process of creating something different, with
value, by devoting necessary time and effort, by
assuming the accompanying financial,
psychological, and social risks, and receiving the
resulting rewards of monetary and personal
satisfaction (Bowen and Hisrich, 1986).

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 So Who is an entrepreneur?

Person conducting own business (Webster)

Person who sets up business deals in order to
make profits (Collins Cobuild)
Organizer of resources, one who owns,
organizes, manages, and assumes the risks of the
business (Chandrashekhar)

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cont’d…

Capacity to take risks/accept moderate risk

Desire to be their own boss
Special skills and abilities
Ability to own and organize
Desire and capability to innovate and diversify
i.e.
Entrepreneur----entrepreneurship---enterprise
(Person) (process) (Institution)
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 1.2 Traits of Entrepreneur
ENTREPRENEURS ARE MORE

Persistent Self-confident
curious Creative
Energetic Optimistic
Goal-oriented Competitive
Independent

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 Cont’d….
ENTREPRENEURS HAVE
Problem-solving skills/quick decision maker
Tolerance for ambiguity
Strong integrity
Personal initiative
Strong need for achievement
Ability to secure resources
Capability to learn from failure
Strong internal locus of control
Willingness to work hard
Strong desire to be their own boss-don’t need to work in
other company
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Getnet H. (PhD) CoBE, Mgt Department
1.3 Motivation for Starting a business
Motivation is the basic drive for all of our actions and it directs
our behaviours
A motive is a need for specific experiences
Motives are stimulated by the situation
Thus, based on the motivation/driving force, we can classify
entrepreneurs as:
1. Opportunity driven entrepreneurs /by pulling factors
An opportunity is a favorable set of circumstances that creates a need for a
new product, service or business.
- want to exploit a perceived business opportunity
- strive for independence, self-actualisation
- on average they rise higher than necessity driven entrepreneurs

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Cont’d...

2. Necessity driven
entrepreneurs/pushing factors
are pushed into entrepreneurship because all
other options for work are either absent or
unsatisfactory
- dissatisfaction with working conditions,
contents and time
- pursue entrepreneurship to secure their own
existence

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Cont’d...
In general, the opportunities/pulling/positive factors can be:
Conducive government rules/regulations
Ease of access to resources
Skill and knowledge such as marketing know how
Availability of market/demand for product/services
Advice from role model
Influence from peer, family, relatives
Influence of background such as age, education, family
occupation
Influence of culture/ attitude/value of the community towards
self employment
The pushing/negative factors can be:
Unemployment/lack of job in the formal sector
Dissatisfaction in employment situation, salary
School dropout, retirement
Conflict in the work environment/loss of job/work disruption

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1.4 Terms related with Entrepreneurship
Some of the terms related to entrepreneur are:
1. Intrapreneur- is an employee in an organization and
brings new idea to improve product/service/working
method/systems within the framework of an existed
organization.
2. Innovator /Inventor- an individual who creates
something new for the first time-highly creative and
educated.
3. Professional manager-the person who works and
manages an organization within the framework of
policies/rules formulated by others.
-manage resources to achieve the goal of the organization.
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Cont’d…
Entrepreneur involves the activity of innovation through
SCAMPER-different
SCAMPER- way of thinking. i.e.

Substitute-substituting the products by other with similar value/service

Combine-Using the pen: Combine - writing with cutting, holding with opening
Adapt/imitate
What can you adapt for to use as a solution?
Modify/magnify
Can you change the item in some way? Change meaning, color, motion, sound, smell,
form, shape? Other changes?
Put to another use--- use the pen to write on wood
Eliminate/minify
What can you eliminate? Remove something? Eliminate waste? Reduce time?
Reduce effort? Cut costs?
Reverse/Rearrange
What can be rearranged in some way? Interchange components? Other pattern?
Other layout?

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 1.5 Role of the Entrepreneur
Entrepreneur as an Economic Pioneer is important for:
As an innovator who combines-Sources of innovation and
creativity
Important role in producing competitive products, processes, and
services-Important sources of competition for large firms;
challenge their economic power
Generation of new employment
Local and regional economic development
Improved allocation of resources and transfer of technologies

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Cont’d….
Entrepreneurship is especially critical in small businesses
because:
Offer a wide range of choice to consumers
Good career opportunities to work in an unstructured
environment of a small company
Industrial re-organization
Introduction of new goods and products
Introduction of new processes and methods of production,
Opening up of new markets

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 Questions
1.What is the difference between entrepreneur and inventor ?
2. What is the difference between innovation and creativity ?

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