A Brief History of Entrepreneurship

the noun comes from French roots means one who undertakes

The term entrepreneur was first introduced by the early 18th century French economist Richard Cantillon.
In his writings, he formally defines the entrepreneur as the agent who buys means of production at certain prices in order to combine them into a new product (Schumpeter, 1951).

Introduction to Entrepreneurship
History and Development of Entrepreneurship - Entrepreneurship evolved from French word entreprendre meaning to undertake - Other referrals include middleman, director of resources, tax contractor - Richard Cantillon maintains entrepreneurs as middlemen in his postulation of agents of economy (landowners, entrepreneurs, hirelings - In mid 20th century definition of entrepreneurship were based on economic situations

Shortly thereafter, the French economist J.B. Say added to Cantillos definition by including the idea that entrepreneurs had to be leaders.

Say claims that an entrepreneur is one who brings other people together in order to build a single productive organism (Schumpeter, 1951).

Over the next century, British economists such as Adam Smith, David Ricardo, and John Stuart Mill briefly touched on the concept of entrepreneurship, though they referred to it under the broad English term of business management. Whereas the writings of Smith and Ricardo suggest that they likely undervalued the importance of entrepreneurship, Mill goes out of his way to stress the significance of entrepreneurship for economic growth. In his writings, Mill claims that entrepreneurship requires no ordinary skill, and he laments the fact that there is no good English equivalent word to encompass the specific meaning of the French term entrepreneur (Schumpeter, 1951).

The necessity of entrepreneurship for production was first formally recognized by Alfred Marshall in 1890. In his famous treatise Principles of Economics, Marshall asserts that there are four factors of production: land, labor, capital, and organization. Organization is the coordinating factor, which brings the other factors together, and Marshall believed that entrepreneurship is the driving element behind organization. By creatively organizing, entrepreneurs create new commodities or improve the plan of producing an old commodity(Marshall, 1994).

In order to do this, Marshall believed that entrepreneurs must have a thorough understanding about their industries, and they must be natural leaders. Additionally, Marshalls entrepreneurs must have the ability to foresee changes in supply and demand and be willing to act on such risky forecasts in the absence of information (Marshall, 1994).

Later 18th &19th Century France

Quesnay, Baudeau and Turgot in mid 18th Century (France) Focused on: The ability of the entrepreneur to Innovate and Organize J.B Say in late 18th and early 19th said: Entrepreneur is not a force in invention but rather the Commercializer of the Invention Thus the planner for its production

Some Definitions
An entrepreneur is a necessary destabilising force bringing economic growth through the disequilibrium of constant change and innovation.
-Joseph Schumpeter

Individual who undertook formation of an organisation for commercial purposes.

- Adam Smith

It is possessing the know-how to find, marshal and control resources (often owned by others)
- Timmons

 Is the process of risking resources based on an idea (or series of ideas) to develop the idea or ideas into goods and/or services that people perceive as valuable and are willing to pay for, in such a way as to maximise profit for the enterprise risking the resources

Risk
is directly proportional to

Returns/Profits

Entrepreneurship as a process
Entrepreneurial process begins with an idea which develops into an opportunity or viceversa. Idea and opportunity are intertwined by size of willing patronisers Idea must remove an existing pain Key resources risked include time, human and capital resources One Cycle Entrepreneurship vs Repeated Cycle

Joseph Schumpeter in the early 30s-50s resurrected more completely the entrepreneur. Saw the Entrepreneur as Combining existing goods He referred to the Entrepreneurs as Creative destroyers.

Later 20th Century

Entrepreneur is viewed as a Change Agent Leaders as Change Makers Entrepreneurship as Process

General Consensus on Entrepreneur

Creative Innovative
Promoter and marketer Assumes risk which others see as greater than they do.

Entrepreneur
Decision maker
Organizer but special type of Manager Re-allocator or accessor of various resources.

Both Leader and Proprietor

Here is a popular one, the E is a BIG Risk Taker

Any innovation is somewhat risky, the Entrepreneur takes his or her Analysis quite carefully: does research, and manages the risk, through experience, special knowledge or enlisting the aid of others

And finally, is the world of the E. Unstructured and Chaotic

The world is Chaotic The Entrepreneur usually finds opportunity in that arena and is quite good at dealing with uncertainty.

Entrepreneurship
Entrepreneurship, is having an idea or introducing something new or something different, having ambition and be highly motivated , turning ideas to reality, both mindset and skill-set. Seeing opportunities, being creative and taking a chance. Business and expanding business, having that extra something as well as having strong beliefs, thinking outside the box, accepting a high level of personal, professional or finance risk to pursue that idea, that opportunity with enthusiastic passion and uncertainty.

Development of new markets, financial gain as well as social gain, creating for yourself more job satisfaction and flexibility and creating employment for others. Innovation, social satisfaction and profit, stimulating production, this creates demand for goods and services. Conclusion, its business, having an idea and doing something about it, research, finance, the goods, the services, great thought and risk is taken. You could think of entrepreneurship as an engine for job creation and economic growth. Risk, ambiguity and uncertainty is a big part of entrepreneurship.

New Idea

Strong Belief

Innovation

Creative

Invention Selfemplo yment Passion Resourceful

Market A Decision Maker

Enterprise

Leadership

Profit Challenge Risktaker

Entrepreneur

Who is an Entrepreneur???

Talent Brought @ Whole Sale & Sold @ Retail

Who Builds a Giant Venture???

OPM
OPK

Giant Venture
(Google)

OPE

Entrepreneurship as a state of mind or series of attributes Entrepreneurship as a characterisation of attributes that enable people to exploit opportunities for financial reward - Motivation factor is the individuals state of mind Entrepreneurship as a pattern of behaviour Ability to build a vision from nothing Complementing ones skills by building a venture team

Forms of entrepreneurship
Social Entrepreneurship
o Creating social change through an enterprise o Enterprises include non-profit organizations and businesses set up with a social purpose o Examples Grameen Bank, Teachers Fund Financial Services etc.

Intrapreneurship
o Formation of new idea within an existing organisation o Entrepreneurial concept belongs to the organisation and not the intrapreneur. o Financial rewards also go to the company (Intrapreneurs reward is limited) o Examples Google (3M), Reliance life Insurance etc.

Extrapreneurship
o Break off from existing company o New company may carry similar idea from parent company o May have financial and social support from parent company o New enterprise may be in the same business line as the existing company or a supplier to it

Opportunity entrepreneurship vs. Necessity entrepreneurship

o Opportunity entrepreneur develops an idea to exploit an existing opportunity o Necessity entrepreneurs result from lack of alternatives Entrepreneur vs. Businessman o All entrepreneurs are businessmen but not all businessmen are entrepreneurs o A Businessman establishes a business for personal goals while an entrepreneur establishes an enterprise for profit and growth.

Role of entrepreneurship in a countrys economy development

Creates jobs Drives economic growth Frees up states resources Fosters competition Fosters innovation Increases productivity Provides a tax base for government

Challenges facing Indian Entrepreneurs

Access to finance Low incomes and corresponding low savings culture Little initiative by banks to be creative Human Capital Unfriendly government machinery Political and economic instability Access to information

Disadvantages of Entrepreneurship
Entrepreneurship is risky. Entrepreneurs face uncertain and irregular incomes. Entrepreneurs work long hours. Entrepreneurs must make all decisions by themselves.

Factors favouring entrepreneurship

Political stability Macro-economic stability Secure property rights Ease of starting a business Free flow of information The rule of law and mechanism for contract enforcement Availability of human capital Access to finance Size of the market in terms of numbers and income levels Regulation of businesses Culture

Why become an entrepreneur?

Most graduate students take regular executive or civil service career paths while Some, after a few years of experience quit to start their own enterprise or buy one. Appeal for joining Corporate or civil service: o More security o Certainty of income o Greater training opportunities o Lower levels of stress o Smaller personal risk o Responsibility o Autonomy & desire to control ones own destiny

Cont.....
Others still prefer entrepreneurship because; Autonomy & Desire to control own destiny Flexibility Opportunity to reap unlimited profits Unemployment & Underemployment Family

Entrepreneurial Careers & Education

Life-cycle approach
Education & Childhood work experience Childhood influences on personality, values, and interests Childhood family environment Employment history Adult development history Adult family/ nonwork history Current work station Individuals Current Perspective Current family/ nonwork situation

Entrepreneurial Education
Colleges Major skill sets
Technical Business Personal

MBA?

Characteristics of Successful Entrepreneurs

Successful entrepreneurs are independent are self-confident have determination and perseverance are goal-oriented have a need to achieve and to set high standards for themselves are creative are able to act quickly

The Individual Entrepreneur

Entrepreneurial Feelings
Locus of Control
Needs
Independence Achievement

Risk Taking

Background/Characteristics
Childhood/Family

Education Personal Values

Age Work History

Motivation/Support Systems
Motivation Role Models Support Networks
Moral Professional

Entrepreneur & Diversity

Male vs. Female
Characteristics Comparison

Minority
Low Participation- African American High Participation- Asians Growing Participation- Hispanics (Latin Americans)

Male Entrepreneur Characteristics

Motivation Departure Point Fund Sources
Occupational Background
Make things happen, Desire to be in control
Dissatisfied With Present Job, Sidelines, Discharged/Laid-Off, Acquisition Opportunity Personal assets/savings, Bank, Investors, Family/Friends loans

Experience, Recognized Specialist, Competent in Business Functions

Opinionated/Persuasive, Goal-Oriented, Innovative/Idealistic, Self-Confident, Energetic Age = 25-35, Father Self-Employed, CollegeEducated, Firstborn Child Friends, Professional Acquaintances (Lawyers, Accountants), Associates, Spouse Manufacturing/Construction

Personality
Background

Support Groups
Business Started

Female Entrepreneur Characteristics

Motivation Departure Point
Fund Sources
Occupational Background
Accomplishment of Goal, Do it Alone Job Frustration, Recognition of Opportunity, Change In Personal Circumstance
Personal Assets/Savings, Personal Loans

Experience, Mid-Management/Administrative Experience, Service Occupation

Flexible/Tolerant, Goal-Oriented, Creative & Realistic, Self-Confident, Energetic, Social Age = 35-45, Father Self-Employed, College Educated (Liberal Arts), Firstborn Child Friends, Spouse, Family, Womens Prof. Groups, Trade Associations Service-Related

Personality

Background
Support Groups
Business Started

U.S. Minority Business Ownership

6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Hispanic American Asian American African American American Indian

Entrepreneur Vs. Inventor

Inventor Creates Something For The First Time.

Entrepreneur Falls In Love With New Venture.

Difficult Personality Types

Shotgun Sam Simplicity Sue
Quickly Identifies New/Promising Opps. But Rarely Follows Through Thinks Everything Is A Lot Simpler Than Is, Feels Can Create Business Easily

Prima Donna Paul

Ralph The Rookie

So In Love With Own Idea Feels Everyone Out to Steal It And Take Advantage Of Him
Well-Grounded In Theory But Lack Real-World Business Experience

Meticulous Mary
Underdog Ed Hidden Agenda Harry Inventor Irving

Used To Having Things Under Control, Cant Handle Catastrophe, Ambiguity

Not Comfortable Actually Transforming Invention Into Tangible Business Success Does Not Have Right Motives/Objectives For Developing Expediting New Enterprise More Inventor Than Entrepreneur. More Concerned With Invention Itself.

International Entrepreneurship Opportunities

Questions about International Business

Different from Domestic Business?

Strategic issues?
Options available? Decision to enter?

Strategic Issues
Speed of Entry Joint Venture
Competitive Advantage Reduce Expropriation Chances

Responsibility Allocation Standardization Possibilities Systems to be used Organizational Structure

International vs. Domestic

Economics Stage of Development Balance of Payments

Type of System- Barter?

Political/Legal Environment

Culture
Technology

Strategic Planning
Marketing
Decisions Target Markets

Products
Needs Benefits Use Ability to Buy CompetitionStrengths & Weaknesses

Balance of Payments & Currency Political Climate Opportunity, Risk, Capability

Structure
Objectives Skills & Resources Responsibility

Operational Marketing
Implement Effective Plan Plan
Product Price Channels Communication Target Market Control (Measure/Monitor)

Country Data Analysis

Market Characteristics

Marketing Institutions
Industry Conditions Legal Environment

Resource Availability
Political Environment

International Market Entry

Exporting
Indirect Direct

Direct Foreign Investment

Minority Interests Joint Ventures Majority Interest Mergers
Horizontal Vertical Product Extension Market Extension

Nonequity
Licensing Turn-Key
Management Contracts

Partnering

Barriers to International Trade

General Agreement on Tariffs and Trade (GATT)- 1947 Increasing Protectionism Trade Blocs & Free Trade Areas Strategy & Barriers