Chapter 1

Introduction to Entrepreneurship

Entrepreneurship - is the process of designing, launching, and running a new business, which is often initially a small business. The people who
create these businesses are called entrepreneurs. It is also the capacity and willingness to develop, organize, and manage a business venture
along with any of its risks in order to make a profit.

Importance of Entrepreneurship

1. Growth of Entrepreneurship - Entrepreneurship the advent of new venture particularly small ventures in order to
materialize the innovative ideas of the entrepreneurs

2. Creation of job opportunities - Entrepreneurship firms contributed a large share of new jobs. It provides entry-level jobs so
necessary for training or gaining experience for unskilled workers. The small enterprises are the only sector that generates a large
portion of total employment every year. Moreover, entrepreneurial ventures prepare and supply experienced labor to the large
industries.

3. Innovation - Entrepreneurship is the incubator of the innovation. Innovation creates disequilibria in the present state of
order. It goes beyond discovery and does implementation and commercialization of innovations. Entrepreneurship nurses innovation
that provides new ventures, products, technology, market, quality of goods, etc. to the economy that increases Gross Domestic
Product and standard of living of the people.

4. Impact on community development - A community is better off if its employment base is diversified among many small
entrepreneurial firms. It retails abundant retail facilities, a higher level of home ownership, fewer slums, better sanitation standards,
and higher expenditure on education, recreation and religious activities. Thus, entrepreneurship leads to a more stable and higher
quality of community life.

5. The consequence of business failure - The collapse of large industry almost has irresistible damage to the development of
state and to the state of the economy and to the financial condition of the relevant persons. The incumbent lost their jobs; suppliers
and financial institutions face a crisis of recovery. Customers are deprived of goods, services, and the government losses taxes. This
could not happen in the case of failure of entrepreneurship.

6. Political and economic integration of outsiders - Entrepreneurship is the most effective way of integrating those who feel
disposed and alienated into the economy. Minorities, migrants, and women are safely integrated into entrepreneurship that will help to
develop a well-composed plural society.

7. Spawns entrepreneurship - Entrepreneurship is the nursing ground for new inexperienced adventurists. It is the field where
a person can start his/her idea of the venture, which may be ended up in a giant enterprise. All the large industrial ventures started as a
small entrepreneurial enterprise. Therefore, entrepreneurship provides a wide spectrum of ventures and entrepreneurs in every
economy. The vast open arena of entrepreneurship thus acts as an incubator to entrepreneurs.

8. Enhances standard of living - Standard of living is a concept built on increasing amount of consumption of a variety of
goods and services over a particular period by a household. So it depends on the availability of diversified products in the market.
Entrepreneurship provides enormous kinds of product of various natures by their innovation.

9. Promotes research and development - Entrepreneurship is innovation and hence the innovated ideas of goods and service
have to be tested by experimentation. Therefore, entrepreneurship provides funds for research and development with universities and
research institutions. This promotes the general development, research and development in the economy.
Types of Entrepreneurs

1. The Skeptical Entrepreneur - This entrepreneur sees of others and immediately starts to question it. They examine that
person’s business and looks for the “lucky” breaks, or inheritance they think that successful entrepreneur received. They are skeptical
of success and don’t believe it’s possible without all the stars falling into place.

2. The Copycat Entrepreneur - This entrepreneur sees the success of others and tries to copy them exactly. Their website is
the same, their business cards are the same, and the way they present themselves is the carbon copy of a leader in their industry. There
is nothing wrong with modelling success – it’s actually very smart. There is a fine line, however, between modelling and copying.
Modelling success means you see what works and figure out how to make it relevant to your business, and who you are a person. If
you have been copying, get honest and switch from copying to modelling.

3. The Research Entrepreneur - This entrepreneur loves to learn. They research every possible scenario and outcome for
strategies to start or grow a business. There is nothing wrong with learning, but when it’s all that you do, it becomes a problem. While
you should always strive to learn what works, and what could help your business, you have to implement.

4. The Determined Entrepreneur - This entrepreneur hasn’t “made it” but they will, no matter what. They see the value in
entrepreneurship, they see that success is possible without copying, and they do everything they can to start or grow their business.
Starting and growing a business is hard, and it takes time, but there is no proof that it’s possible to thrive. To get there, you need to
change your mindset from focusing on what too many people consider “reality” to what you know your reality can be. Successful
entrepreneurs have determination as their backstory.

5. The Accomplished Entrepreneur - This entrepreneur has gone through all the stages of entrepreneurship and building a
business and has reached success. They are now focused on scaling their business and leaving a legacy that extends beyond their
lifetime. The accomplished entrepreneur has figured out the things that helped them to reach success. They have figured out how to
connect with their customer and how to solve their biggest struggles. They understand their time is their most valuable resource so
they used it wisely.

Functions of the Entrepreneur

In general, entrepreneurs play two critical roles in the economy: (1) introducing new ideas and (2) energizing business processes.
Strictly speaking, the term entrepreneur, derived from the French words entre (between) and prendre (to take), referred to someone who acted as
a middleman in a business venture. Originally, the term was used to describe the activities of what we now call an impresario, a promoter, or a
deal maker. The entrepreneur first appeared as a distinct economic concept in France, twenty years before Adam Smith's Wealth of Nations was
published in 1776.

Figure 1: Business competition chain

In this case, the entrepreneur's role is to develop a business idea in the form of an innovation that can be successfully brought to
market and to find the resources to make this happen. The entrepreneur does not need to be skilled in design, production, or delivery (this is the
function of the firm), nor does he or she need to bear all or most of the risk (this is often assumed by the providers of finance or investors).
Indeed, the view of the entrepreneur as a risk-taking trader was challenged early on by the view of the entrepreneur as an adventurous
self-employed manager capable of combining capital and labor to personal advantage.

It is worth noting that today, the term "entrepreneur" refers to small property developers and owners of small business firms. It would
be incorrect to say that the element of risk-taking has vanished from the modern concept of the entrepreneur. Successful risk management is an
important entrepreneurial characteristic. However, it appears that the ability to perceive opportunities quickly and coordinate the activities of
others emerge as the more important economic skills of the modern entrepreneur.

Behavioral Characteristics of Entrepreneurs

Researchers have not been able to identify a core and necessary characteristics, or qualities that distinguish successful entrepreneurs
from the crowd of business owners. However, a widely cited empirical and desk research study of new venture start-ups that has stood the test of
time over the last quarter-century was conducted by Jeffrey Timmons and colleagues at the Massachusetts Institute of Technology (Timmons et al.
1977). They identified 14 important entrepreneurial characteristics which continue to appear in entrepreneurship research.
∙ drive and energy
∙ self-confidence
∙ high initiative and personal responsibility
∙ internal locus of control
∙ tolerance of ambiguity
∙ low fear of failure
∙ moderate risk taking
∙ long-term involvement
∙ money as a measure not merely an end
∙ use of feedback
∙ continuous pragmatic problem solving
∙ use of resources
∙ self-imposed standards
∙ clear goal setting

The Entrepreneur’s Task

Figure 2. The Entrepreneur’s Task

In the attempt to make profits, the entrepreneur performs the following

specific functions:
1. To supply the necessary capital;
2. To organize production by buying and combining inputs like materials
and labor;
3. To decide on the rate of output, in the light of his expectation about
demand; and
4. To bear the risk inherent to the venture.

New Ventures and Long-Term Enterprises

 A new venture cannot remain as such forever. The entrepreneur must develop it into a small business or make it grow into a mature
and bigger company if he is to recoup the cost of opening of new venture and take advantage of the opportunities presented by a mature business.
The transition from a new venture to a successful long-term enterprise consists of at least four major stages. These stages are as
follows:
1. The prestart-up stage – this stage happens when the entrepreneur starts to question the feasibility of an idea, product or service. He
seeks answers to questions regarding potential markets, productions, and financing. This is very important stage that the entrepreneur must
consider. If he errs in his evaluation, he will fail before considerable growth is attained.
2. The start-up stage – no full-scale activity must be undertaken at this stage for the simple reason that feasibility must be established
and verified. The following activities are undertaken under this stage:

1. Formation of the business;

2. Generation of necessary capital;
3. Purchase of facilities and equipment;
4. Constructing prototype products; and
5. Testing the market
3. The early growth stage – it follows after establishing feasibility. Activities will be on a small scale, i.e., selling to limited market
with limited resources. If losses occur, it will naturally be limited also. If the enterprise is successful at this stage, the option to move to the next
stage can be exercised.
4. The late growth stage – is the final stage before the new venture matures into a stable enterprise. This is when management is
structured, long-term financing is established, and facilities planning are undertaken. This is also the stage where the skills of the entrepreneur are
less needed. Instead, the skilled manager begins to take over.
Rewards for Successful Entrepreneurship
The use of any of the factors of production deserves to receive some form of compensation. The factors referred to as “things required
for making a commodity” consist of land, labor, and capital. To make them work, however, a fourth factor becomes necessary and this is the
entrepreneur.

Limiting Factor for Rewards Received

Factors of Production Economic Reward

Land Rent supply and demand

industry rates/ government mandated rates

Capital Interest

supply and demand legislation

Labor Wages/salary

Entrepreneur Profits skill of entrepreneurs

Figure 2. The Factors of Production and Their Rewards

Entrepreneurship and Business Size

To many people, entrepreneurship means running a small business. New business ventures, however, can also be undertaken on a large
scale. Both small and large businesses are confronted by problems that are entrepreneurial in nature.
To effectively compete, business of whatever size must adapt innovative approaches to its activities. Examples of innovations are the
following:
1. Offering business services during Sundays and holidays;
2. Manufacture and sale of new products; and
3. Selling on a deferred payment scheme.