MODULE 2  An entrepreneur is a person who
buys factor services at certain prices
Definition of Entrepreneurship
 Entrepreneurship is the process of
creating incremental wealth. The
wealth is created by those
individuals who assume the major
risk in terms of equity and time or
providing value for others
 Robert Hisrich (1985) defined
entrepreneurship in a relatively
comprehensive as: “A process of
creating something different with
value by devoting the necessary
time, and effort assuming the
accompanying financial,
psychological, and social risks, and
receiving the resulting rewards of
monetary and personal satisfaction.”
—Robert Hisrich (1985)
DEFINITIONS OF ENTREPRENEUR
 An entrepreneur as one, who always
searches for change, responds to it
and exploits it as an opportunity.
Innovation is the basic tool of
entrepreneurs, the means by which
they exploit change as an
opportunity for a different business
or service. —Peter F. Drucker
 Entrepreneurs as those people who
have the ability to see and evaluate
business opportunities, together with
the necessary resources to take
advantage of them and to initiate
appropriate action to ensure
success. — International Labour
Organization (ILO)
 A decision maker whose entire role
arises out of his alertness to hitherto
unnoticed opportunities. Kirzner –
1973
with a view to selling its product at
uncertain prices. —Richard Cantillon
 Who uses available resources in
novel ways —Schumpteter, 1934
 Entrepreneur is one who is endowed
with more than average capacities in
the task of organizing and
coordinating the factors of
production, i.e. land, labour capital
and enterprises. —F.A. Walker
 Entrepreneurship involves doing
things in a new and better way.
Entrepreneurial role calls for
decision making under uncertainty.
—McClelland
 An entrepreneur is an economic
man who tries to maximize his
profits by innovation, involve
problem solving and gets
satisfaction from using his
capabilities on attacking problems.
—E.E. Hagen
 Entrepreneurs are a product of
particular social condition in which
they are brought up and it is the
society which shapes individuals as
entrepreneurs. —Max Weber
 Entrepreneurs are people who have
the ability to see and evaluate
business opportunities, the ability to
gather resources to take advantage
of them; and the ability to initiate
action to ensure success.
 Frank Young defined entrepreneur
as a change agent.
 Akhouri describes entrepreneur as a
character who combines
innovativeness, readiness to take
risk, sensing opportunities,
 identifying and mobilizing potential
resources, concern for excellence,
and who is persistent in achieving
the goal.
PROCESS OF ENTREPRENEURSHIP
INTRODUCTION
 Entrepreneurship is a dynamic
activity which helps the entrepreneur
to bring changes in:
 The process of production
 Innovation in production
 New usage of materials
 Creator of market
ENTREPRENEURSHIP AND
PHILOSOPHY
 Fundamentally, Entrepreneurship is
a human creative act, involved in
building a team of people with
complementary skills and talents
 Entrepreneur Behavior:
 Initiative taking, organizing,
reorganizing of
social/economic resources
and acceptance of risk or
failure.
ENTREPRENEURSHIP &
ENTREPRENEURS
HISTORICAL PERSPECTIVES
 The term entrepreneur comes from
the French word and translated
means to ‘to undertake’ or ‘go-
between’. Meaning those, who
undertook the risk of new enterprise
 In the Earliest Period: An
entrepreneur was viewed As a ‘Go-
between’, who attempts to establish
trade Routes and signs contracts
with many persons (forerunners of
today’s venture capitalist) to Sell
goods; while the capitalist was a
passive risk bearer, the merchant
adventurer who took the active role
in trading, bearing all the physical
and emotional risks.
 In the Middle Ages: The term
‘entrepreneur’ was used to describe
a person managing large production
projects. In this case, the person
would not take any risks but would
merely manage the project using the
resource provided.
 17th Century: Richard Cantillon, a
noted economist of the 1700s,
developed theories of the
entrepreneur and is regarded as the
founder of the term. He viewed the
entrepreneur as a risktaker who
“buys at certain price and sells at an
uncertain price, therefore operating
at a risk.” Richard Cantillon used the
term entrepreneur in the business
context.
 18th Century: In the 18th century the
person with capital was
differentiated from the one who
needed capital. In other words,
Entrepreneur was distinguished from
the capital provider. Many of The
inventions developed during this
time as was the case with the
inventions of Eli Whitney and
Thomas Edison were unable to
Finance invention themselves. Both
 were capital users (entrepreneurs),
not capital providers (venture
capitalists.) Whitney used
expropriated crown property. Edison
raised capital from private sources.
 19th and 20th Centuries: In the late
19th and early 20th centuries,
entrepreneurs were viewed mostly
from an economic perspective. The
entrepreneur” contributes his own
initiative, skill and ingenuity in
planning, Organizing and
administering the enterprise,
assuming the chance of loss and
gain.”
 In the middle of the 20th century, the
notion of an Entrepreneur as an
innovator was established.
Innovation, the act of introducing
something new, is one of the most
difficult tasks for the entrepreneur.
 According to the Schumpeter “The
entrepreneur is someone, who
carries out New combination by such
things as:
 Introducing new products
and processes
 Identifying new export market
or source of supply
 Creating new type of
organization
IMPORTANCE OF
ENTREPRENEURSHIP
 Entrepreneurial endeavors have had
a large-scale impact on economic
conditions, business environment
and job generation in various
countries. In fact, they make a
significant contribution to the
country’s GDP and are often
referred to as a national asset. Gone
are the days when starting a
business of your own were
considered risky or only fit for brick
and mortar shops. Today,
entrepreneurial instincts are
encouraged and held in high regard.
However, achieving this feat was not
easy, especially since it was difficult
to find the right marketplace for the
right idea. With modernization and
the constantly changing pace of life,
entrepreneurial ventures with
promising potential are now
sponsored by government
organizations and even by other
established entrepreneurs.
 Popularity of innovative ideas:
Entrepreneurial endeavors are
witnessing a growth in popularity,
thanks to the innovative ideas that
start-up owners have brought to the
fore. People with an entrepreneurial
instinct are coming forward with
excellent business ideas and plans
that are capable of transforming the
landscape of the business world.
This not only contributes to the
changing dynamics of business but
also creates a platform for better,
more efficient ideas to be translated
into reality.
 Economic advancement: Setting the
wheels in motion for economic
development, entrepreneurial
ventures make a significant
contribution to national income. The
economy of a country is directly
proportional to the amount of
international business garnered by a
domestic organization and the
money earned by local employees.
 Employment generation: One of the
driving forces for a country’s
economic progress is the creation of
ample job opportunities for the
people of the country. Small-scale
enterprises are pivotal in training
locals with new skills to acquire
entry-level jobs and gaining
experience to become skilled
professionals. Start-ups are
responsible for generating a majority
 of the total job opportunities in the
marketplace.

 Promotes social change: The

introduction of new products and
services decreases the dependency
of the country’s population on
obsolete organizations or
technologies, giving way to better  The market for factors of production
quality of living. Bridging the gap is the place where households offer
between the scarcity of a product their labor, capital and other factors
and its demand can help create a such as land, receiving an income
positive impact on people and bear for their use. Firms use these factors
fruitful results from a business
in their production.
viewpoint.
 In this case, money flows from firms
 Promotes research and to households (green arrow in the
development: While it is important to diagram below) in the form of wages
produce new business ideas, it is in exchange for labor, interests for
also essential to cultivate the ideas capital and rent for the use of land.
for the development of a successful Factors of production flow form
business structure. With the rise in households (red arrow) to firms, so
entrepreneurial endeavors and
they can produce more goods and
minds, the need to see an idea
through execution is crucial. services.
Entrepreneurship promotes the
importance of research and
development in testing the longevity
of an idea and its subsequent
commercial success.

ROLE OF ENTREPRENEURSHIP IN
ECONOMIC DEVELOPMENT
 The market for goods and services  When we combine both diagrams,
is the place where households we get the circular-flow diagram, as
spend their money buying goods shown below. The exchanges made
and services produced by firms. In in the economy imply a redistribution
other words, is the place where firms of rent according to the diagram, and
sell the goods and services they the creation of value makes the
have produced, receiving revenue
economy grow.
paid by households
 This market represents the place
where money and goods are
exchanged. In this case, the flow of
money (green arrow in the diagram
below) goes from households to
firms, in exchange for finished
products, which flow from firms to
households (red arrow).