CHAPTER/MODULE 1

INTRODUCTION TO ENTREPRENEURSHIP

Intended Learning Outcomes

By the end of this topic/chapter, you must be able to:

1. Discuss the theories of entrepreneurship.

2. Identify who is an entrepreneur.
3. Define the relationship between motivation and entrepreneurship
4. Enumerate the key factors affecting entrepreneurial viability
5. Distinguish the myths and legends among entrepreneurs
6. Express the truths about entrepreneurship

Definition of Entrepreneurship

Entrepreneurship is gearing toward self- employment. It generally pertains to

engaging in small and medium-sized businesses. An entrepreneur learns the tenets
of entrepreneurship to put up and operate his own business, whatever the size or
magnitude. In engaging with business, entrepreneurial skills are needed to deliver
sales and revenue for the company or organization. Entrepreneurship also refers to
the capacity and willingness to create, organize, and run a business, with all the risks
and uncertainties that come with it to make profit. The most visible form of
entrepreneurship is the establishment of new firms.

It is a science of converting processed ideas into a remarkable business

venture. According to Fajardo (2009), it is also a capacity for innovation, investment
and expansion in new market, products and techniques. This definition implies that
an enterprise is at work whenever an individual takes the risks and invests resources
to make something unique or something new, designs a new way of making
something that already exists, or create new markets.

Theories of Entrepreneurship

1. Theory is Economic Entrepreneurship dates back to the first half of the 1700s
with the work of Richard Cantillon, who introduced the idea of entrepreneurs
as risk takers. The classic, neoclassical and Austrian Market process schools
of thought all pose explanations for entrepreneurship that focus, for the most
part, on economic conditions and the opportunities they create. Economic
theories of entrepreneurship tend to receive significant criticisms for failing to
recognize the dynamic, open nature of market systems, ignoring the unique
nature of entrepreneurial activity, and downplaying the diverse contexts in
which entrepreneurship occurs. Entrepreneurship and economic growth take
place when the economic conditions are favorable. Economic incentives are
the main motivators for entrepreneurial activities.
2. Psychological Theories of Entrepreneurship describe on the individual and the
mental or emotional elements that drive entrepreneurial individuals.
Entrepreneurship gets a boost when society has sufficient supply of

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 individuals with necessary psychological characteristics. These include need
for high achievement, a vision or foresight, and ability to face opposition.
3. The Sociological Theory centers its explanation for entrepreneurship for the
various social contexts that enable the opportunities for entrepreneur’s
leverage. Entrepreneurship is likely to boost in a particular social culture.
Society’s values, religious beliefs, customs, and taboos influence the behavior
of individual in a society.
4. Anthropological Entrepreneurship Theory- This theory says that for someone
to successfully initiate a venture, the social and cultural contexts should be
examined or considered. Here emphasis is on the cultural entrepreneurship
model. The model says that new venture is created by the influence of one’s
culture. Cultural practices lead to entrepreneurial attitudes such as innovation
that also lead to venture creation behavior.
5. Opportunity-based Entrepreneurship Theory- Entrepreneurs do not cause
change (as claimed by Schumpeterian or Austrian School) but exploit the
opportunities that change (in technology, consumer preferences, etc.) creates
(Drucker, 1985). He further says “This defines entrepreneur and
entrepreneurship, the entrepreneur always searches for change, responds to
it, and exploits it as an opportunity. “
6. Resource-based Entrepreneurship Theory- This argues that access to
resources by founders is an important predictor of opportunity-based
entrepreneurship and new venture growth. This theory stresses the
importance of financial, social and human resources. Thus, access to
resources enhances the individual’s ability to detect and act upon discovered
opportunities.
7. Financial Capital/ Liquidity Theory- Empirical research shows that the
founding of new firms is more common when people have access to financial
capital. This theory suggests that people with financial capital are more able
to acquire resources to effectively exploit entrepreneurial opportunities and
set up a firm to do so.
8. Social Capital or Social Network Theory- Entrepreneurs are embedded in a
larger social network structure that constitutes a significant proportion of their
opportunity structure. Shane and Eckhardt (2003) says “ an individual may
have the ability to recognize that a given entrepreneurial opportunity exists,
but might lack the social connections to transform the opportunity into a
business start-up.
9. Human Capital Entrepreneurship Theory- underlies two factors: education and
experience. The knowledge gained from education and experience represents
a resource that is heterogeneously distributed across individuals and in effect
central to understanding differences in opportunity identification and
exploitation. Human capital theory explains further that investment in
knowledge, skills and abilities enhances the productive capacity and
competencies to engage in a more enterprising, innovative and flexible
manner in changing environment.
10. Cultural Entrepreneurship Theory- argues that propensity for an individual to
start a business venture is largely influenced by the prevailing culture.
11. Regional Entrepreneurship – is enhanced by training and education
interventions so that there is a growing acceptance that components of
entrepreneurship can be delivered and learned. The entrepreneurial culture is

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 key to motivating young people to take up business- related programs in
middle- level tertiary colleges
The following questions helps a potential entrepreneur in guiding himself or
herself before setting up a new business:

1. Am I planner, dreamer or a goal setter?

2. Do I offer a product that people want to buy?
3. Do I have enough resources to start the business?
4. Will my business plan allow cash to flow as soon as possible?’
5. Am I working around a tight budget for my expenses?
6. Do I have good credit status?
7. Am I expecting to much from my revenues as a result of my hard work?
8. Am I ready to assess and measure everything before putting it out for the
public?
9. Do I have strong people skills?
10. Do I enjoy making decisions and being in charge?
11. Am I good at short and long- range planning?
12. Am I willing to take the initiative when confronted with difficult situations?
13. Am I flexible and can adapt to changing circumstances?
14. Am I willing to take calculated risks?
15. Am I ready to learn and accept the mistakes that I might encounter along
the way?

If you could answer yes to most of the questions, then, you are probably
ready to become an entrepreneur. These ae some of the basic realities that
you must face when starting a business.

Who are the Entrepreneurs?

The word entrepreneur originated from the French word “entreprendre”

which means “to undertake”. An entrepreneur is a developer or a designer
who develops new ideas and business procedures in response to market
demands and personal interests. It is critical to have managerial skills and
strong team-building talents to be a successful entrepreneur.

The mindset of an entrepreneur is a barometer of his or her success.

One of the most essential determinants of success is motivation. As an
entrepreneur, motivation is defined as a mix of competency and willingness to
do tasks acquired through a combination of experiences, talents and
education.

1. Entrepreneurs take and accepts risks.

2. Entrepreneurs own ventures.
3. Entrepreneurs are managers.
4. Entrepreneurs establish new ventures and develop existing ones.
5. Entrepreneurs identify opportunities in the market.
6. Entrepreneurs apply their expertise.
7. Entrepreneurs process market information.
8. Entrepreneurs bring innovation.

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 9. Entrepreneurs provide market efficiency.
10. Entrepreneurs maximize investment returns.
11. Entrepreneurs provides leadership.
Why is Motivation Required?

A person’s objectives, desires and needs are defined by their motives. They
guide human behavior in the direction of their objectives. The following points
provide an answers to this question as well as an understanding of why motivation is
such as important aspect for an entrepreneur.

1. Tough competition- To survive and thrive in this global economy, an

entrepreneur must face stiff competition. Motivation is essential at every step
of the company to deal with this competition.
2. Unfavorable conditions – No one can predict what the future may bring. The
current economy must be protected, and worst-case scenarios of worsening
economic situations must be anticipated. This will necessitate motivation and
hope.
3. To generate public demand- A market is governed by and for the people. To
run a profitable business, you must establish a market demand for your
product or service and attract as many clients as feasible. Motivation is
essential to do this task properly.
4. To boost creativity- The market is constantly on the lookout for anything new
and different. If every company offers the same product with no variety, there
is no point in choosing one brand over another. It is necessary to be inventive
to live. Add some new features to existing products and services to make
them more user-friendly on a tight budget. This, too, demands motivation.
5. To boost productivity- Both product quality and profit must be considered.
People will always prefer products that are both cost-effective and of great
quality. As a result, motivation plays a unique role in the formation of a
business by regularly motivating the entrepreneur to execute practical tasks
effectively.

What motivates an Entrepreneur?

1. Earn profit- The desire to make a substantial profit and to be able to improve
one’s income every year or so by a margin higher than one might obtain
working for another company is the most basic factor at play here.
2. Make one’s own choices- Another component at work here, one that is
more directly tied to human emotion is the desire to be free to make one’s
own decisions and not be constrained by the dictates of others. People are
apprehensive of becoming subordinate because of our history of human
tyranny and slavery, and our minds are instilled with a deep longing for
independence. Being one’s own boss also means being able to grasp and put
one’s ideas into action in a way that no one else can. As a result, rationality
appears to play a role in this desire.
3. Atain success- Another common motivation of starting a business is to reach
a better level of success and social prestige than one could accomplish as an
employee of another company.

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 4. Grab an Opportunity- A person’s ability to recognize a loop in the market, a
blank space where opportunity is ripe and completion is near minimum, is
another important aspect that motivates them to start their own firm.
5. Give back/ Pay it forward- A desire to give back to the community is another
reason for beginning a business. Welfare-related businesses are frequently
the result of this idea.

What Makes a Successful Entrepreneur?

1. Entrepreneurs are in good physical health.

2. Entrepreneurs have superior conceptual abilities.
3. Entrepreneurs have the broad thinking of the generalist.
4. Entrepreneurs have high self-confidence.
5. Entrepreneurs have a strong personal drive.
6. Entrepreneurs need to control and direct.
7. Entrepreneurs have moderate interpersonal skills.
8. Entrepreneurs are moderate risk-takers.
9. Entrepreneurs have a realistic outlook.
10. Entrepreneurs have a high degree of emotional stability.
11. Other characteristics of an entrepreneur:
a. Perseverance
b. Resourcefulness
c. Energy, diligence
d. Ability to calculate risk
e. Dynamis, leadership
f. Optimism
g. Need to achieve
h. Versatility
i. Initiative
j. Flexibility
k. Creativity
l. Intelligence
m. Profit- orientation
n. Cooperativeness
o. Commitment
p. Aggressiveness

The Myths, Fears and Excuses of People Who are not

Entrepreneurs

1. Entrepreneurs are born.

2. Entrepreneurs are superhuman.
3. Entrepreneurs are inventors.
4. Entrepreneurs inherit business trait.
5. Entrepreneurs possess a definite characteristic profile.
6. The gender-difference myth. (Men are better entrepreneurs.)
7. Entrepreneurs are academic and social misfits.
8. Entrepreneurs are gamblers and risk-takers.
9. Luck and money are the only things needed to become an entrepreneur.

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 10. Entrepreneurs experience many failures.

The Advantages of Becoming an Entrepreneur

1. Have the opportunity to create your destiny

2. Have the opportunity to be financially well-off
3. Have the opportunity of knowing yourself better
4. Have the opportunity to excel, be recognized and contribute to society

The Truths about Entrepreneurship

There are really no shortcuts when it comes to entrepreneurship. Entrepreneurs

must understand that it is a hard commitment and there is no quick formula for
success.

1. Entrepreneurship is not solely for startups.- A startup is a new company

that is just starting to progress and looking for a business model. Startups are
typically small and primarily funded and operated by a few founders or one
person. Traditionally, when a person starts a business, he is called an
entrepreneur. An entrepreneur forms a business from research on the
feasibility of a business idea or business model.

A business does not remain to be a startup, because it can always

develop and progress into something bigger. Being a startup is not the only
track for entrepreneurs. Entrepreneurs can be all over, from companies to
franchise, to profit and non-profit organizations, to family-owned business.

2. Entrepreneurs do not have exceptional personal qualities.- In reality,

there is really no evidence to prove that entrepreneurs possess special
personality qualities above others. Although without specific proof, traditionally
there are four recognized qualities of an entrepreneur which are being an
achiever, an influencer, a risk-taker and open-minded for uncertainty.

3. Entrepreneurship can be taught yet entails practice.- Nowadays,

entrepreneurship is already taught in colleges and universities worldwide.
However, most schools teach entrepreneurship as a linear process just like in
the manufacturing process. Linear process consists of identification of
opportunity, knowing resources needed, obtaining resources, planning,
implementing and harvesting once the business has been in place. Simply,
the linear process teach entrepreneurship as something predictable.

In reality, however, this is not the case, since entrepreneurship is

unpredictable. Instead, entrepreneurship requires a person to posses a set of
skills. These skills should be improved continuously through practice so that
they can be used for entrepreneurial action, not just for today but also for the
future.

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 4. Entrepreneurs are not so much risk-takers.- There has been an existing
stereotype about entrepreneurs that they are “gamblers”. Although there is
really no valid proof on this typecast about them, this suggests that
entrepreneurs take more risks compared to anyone. Gambling in its context is
really risky, because everything is left to chance. In reality, anything in life is
risky because no one holds the future. Entrepreneurs are really risk-takers but
they normally would make calculations first prior to taking the next step. They
usually measure every loss they are willing to take on each step of what they
do. They take every single step as lesson to learn and make use of said
lesson in the next level.
5. Entrepreneurs work in partnership more than they compete.- The
community is vital partner of most entrepreneurs. Most entrepreneurs learn
their lessons from the shared experiences other had faced. The support of a
community of entrepreneurs with similar mindset and willing to support each
other is important. This is because no one would know about
entrepreneurship unless it has been experienced.

Working in partnership not only works with the rest of the

entrepreneurs but also with target customers, with prospective investors and
with family and friends. Customer relationship is essential, investment
requires trust and friends and relatives are necessary as support groups.
Partnership usually brings about more efficiency, additional fresh ideas and
produces ingenuity and innovation.

6. Entrepreneurs are more on doing than planning.- Most people believe that
any business to succeed requires a business plan. Based on research, not all
successful companies had wrote a formal business plan. Perhaps people
would wonder how this came about. Simply, these successful entrepreneurs
had acted. They went out of the streets, talked to people, relate with
customers, buzz about their offerings whether product or service and most
importantly they form a solid networking. These successful people had really
practiced being real entrepreneurs. Gathering timely data as guide for the
next level decision is part of their action.

Investors are interested with the action of every entrepreneur such as

the relationship he has with his customers and how he has arouse the interest
of these customers. While facts and numbers are important, investors are
more fascinated with the ability of an entrepreneur to deal with a series of
difficult situations, able to solve problems and take positive feedback as he is
mentored.

7. Entrepreneurship is truly a life skill.- Before entrepreneurship was only

popular during creation of new businesses. Today, entrepreneurship has gone
far beyond the ability to start a business venture. A lot of people as well as
organizations these days consider entrepreneurship as a skill that is useful in
every human’s life. As a life skill entrepreneurship can offer the
methodological way of thinking, opportunity identification, specific way of
problem-solving, adapting to new situations and governing ones’ goals and

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 ambitions. Said life skills is not only for entrepreneurs but also for other
professions.

Chapter 1 References

Camilar- Serrano, A. (2021Entrepreneurial Mindset

Marcelo, J.S. (2022). Entrepreneurship

Pineda, A.D. (2019). Entrepreneurship Fundamentals

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