Cha 1

Entrepreneurship
Chapter 1. Introduction
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The concept of Entrepreneur
 The concept of entrepreneur varies from country to country as well
as from period to period and the level of development thoughts and

perceptions.
 The word entrepreneur is derived from a French verb entreprendre.
 It means “to undertake”.
 The word entrepreneur is defined by different authors in different
periods.
 This implies that, there is no single definition to entrepreneur.
2
The Concept (Cont…)
 No ones’ profile can represent today’s entrepreneur,
 Research is providing an increasingly sharper focus on the subject.
 To see the progress on how entrepreneur is defined, some of the

definitions are given below;
 The French economist Richard Cantillon was the first to introduce
the concept ‘entrepreneur’ in the early 18th century.
 Accordingly, an entrepreneur is a person who pays a certain price
for a product to resell it at an uncertain price,
 thereby making decisions about obtaining and using the resources
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while consequently admitting the risk of enterprise.
 According to J.B. Say (1803), an entrepreneur is an economic agent
 Who unites all means of production
 Land ,labor ,capital and Mgt thus produces a product.
 By selling the product in the market he/she pays rent of land,
 wages to labor, and
 interest on capital and what remains is his/her profit.
 He/she shifts economic resources out of an area of lower and into an
area of higher productivity and greater yield.

4
 Adam smith described entrepreneur as a person who only provides
capital without taking active part in the leading role in enterprise.
 Peter F. Drucker defines an entrepreneur as one, who always
searches change,
 responds to it and exploits it as an opportunity.
 Innovation is the specific tool of entrepreneurs, the means by which
they exploit change as an opportunity for a different business or

service.
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 Joseph A. Schumpeter defines entrepreneur as an innovator who
brings economic development through new combinations of factors

of production.
 A person who introduces innovative changes is an entrepreneur and
he/she is an integral part of economic growth.
 According to David (1961), an entrepreneur is a person with a high
need for achievement.
 He/she is energetic and a moderate risk taker.
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 Entrepreneurship is a dynamic process of vision, change, and creation.
 It requires an application of energy and passion towards the creation and
implementation of new ideas and creative solutions.
 Essential ingredients include the willingness to take calculated risks- in
terms of time, equity, or career;
 The ability to formulate an effective venture team; the creative skill to
marshall needed resources;
 The fundamental skills of building a solid business plan; and,
 Finally, the vision to recognize opportunity where others see chaos,
contradiction, and confusion.

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 Entrepreneurship is a process of actions of an entrepreneur
 Who is a person always in search of something new and exploits
such ideas into gainful opportunities
 by accepting the risk and uncertainty with the enterprise.
 Entrepreneurship is a purposeful activity of an individual or a group
of associated individuals, undertaken to initiate, maintain or

generate profit by production or distribution of economic goods and
services.
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Definitions of entrepreneurship
 Entrepreneurship can be described as a process of action an entrepreneur
undertakes to establish his/her enterprise.
 Entrepreneurship is also a creative activity.
 It is the ability to create and build something from practically nothing.
 It is a knack of sensing opportunity where others see chaos, contradiction
and confusion.
 Alternatively, entrepreneurship is considered as the attitude of mind to
seek opportunities,
 take calculated risks and derive benefits by setting up a venture.
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Definitions of entrepreneurship (Cont…)
 Above concepts implies that, entrepreneurship comprises of numerous
activities involved in
 conception,
 creation and running an enterprise.
 According to Peter Drucker entrepreneurship is defined as ‘a systematic
innovation, which consists in the purposeful and organized search for

changes, and
 it is the systematic analysis of the opportunities such changes might offer
for economic and social innovation.’
 Entrepreneurship is a discipline with a knowledge base theory.

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 It is an outcome of complex
 socio-economic,
 psychological,
 technological,
 legal and other factors.
 It is a dynamic and risky process.
 It involves a fusion of capital, technology and human talent.
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 Entrepreneurship is equally applicable to big and small
businesses, to
 economic and
 non-economic activities.
 Different entrepreneurs might have some common traits
but all of them will have some different and unique

features.
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 If we just concentrate on the entrepreneurs then there will be as
many models as there are ventures and we will not be able to

predict or plan, how and where, and when these entrepreneurs will
start their ventures.
 Entrepreneurship is a process.
 It is not a combination of some stray incidents.
 It is the purposeful and organized search for change,
 conducted after systematic analysis of opportunities in the
environment.
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 Entrepreneurship is a philosophy-
 it is the way one thinks,
 one acts and therefore it can exist in any situation be it
business or government or
 in the field of education, science and technology or
 poverty alleviation or any others.
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 Let’s consider some definitions given for entrepreneurship based on
the chronological order.

 This is helpful to understand improvements, if any, through time
about the concept of entrepreneurship by different scholars.

 Cantillon (1730) viewed entrepreneurship as ‘self-employment of
any sort.’
 Schumpeter (1934) equated entrepreneurship with the concept of
innovation applied to a business context while

 emphasizing the combination of resources.
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 Penrose (1963) viewed entrepreneurship as the activity that
involves identifying opportunities within the economic system.
 Leibenstein (1979) defined entrepreneurship as activities necessary

to create or carry on an enterprise where not all markets are well
established or clearly defined and/or in which relevant parts of the
production function are not completely known.
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 Gartner (1988) conceived entrepreneurship as the creation of new
organizations.
 Whereas, Putari (2006), defined entrepreneurship as a function
which involves the exploitation of opportunities which exist within

a market.
17
 Thus, from the definitions above we can see that various scholars,
over the years, while defining the concept, entrepreneurship, laid

emphases on a wide spectrum of activities such as:
 Self-employment of any sort.
 Creation of organizations.
 Innovation applied to a business context.
 The combination of resources.
 Identification and exploitation of opportunities within the economic
system or market.
18 The bringing together of factors of production under uncertainty.

 Hence, any action that involves one or all of the above activities can be
regarded as entrepreneurship.
 Before going to see the role of Entrepreneurs, it is important to see the
difference between entrepreneur and entrepreneurship.
 Accordingly,
 The term entrepreneur is used to describe men and women who establish
and manage their own business.
 The process involved is called entrepreneurship.
 Entrepreneurship is an abstract
 whereas entrepreneurs are tangible people.

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 Entrepreneurship is a process and an entrepreneur is a person.
 Entrepreneurship is the outcome of complex socio-economic,
psychological and other factors.
 Entrepreneur is the key individual central to entrepreneurship who
makes things happen.
 Entrepreneur is the actor, entrepreneurship is the act.
 Entrepreneurship is the most effective way of bridging the gap
between science and the market place by creating new enterprises.
 An entrepreneur is the catalyst who brings about this change.

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Definition of Enterprise
 Entrepreneur is a person who starts an enterprise.
 The process of creation is called entrepreneurship.
 The entrepreneur is the actor and entrepreneurship is the act.
 The outcome of the actor and the act is called the enterprise.
 An enterprise is the business organization that is formed and which
provides goods and services,
 creates jobs, contributes to national income, exports and overall
economic development.

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Definition of Enterprise (Cont…)
 The relationship among the three above discussed

concepts (entrepreneur, entrepreneurship and
enterprise) can possibly be depicted in Figure 1.
 Entrepreneur Entrepreneurship Enterprise
 Person Process of action Object
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Definition, concepts and characteristics of Agricultural
entrepreneurship
 Agricultural entrepreneurship can be defined as being primarily
related to the marketing and production of various agricultural

products.
 Agricultural entrepreneurship is also related to the use of
agricultural inputs to produce an agricultural outputs.
 Examples of areas where agricultural entrepreneurs associate
themselves include dairy, forestry, and horticulture. etc
 Production and marketing of an agricultural inputs and outputs
involved in the agriculture sector.

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 The differences between General Entrepreneurship and
Agricultural Entrepreneurship
 General Entrepreneurship means engaging any entrepreneurial
activities in all business sectors while
 agricultural entrepreneurship mean staring any business activities
in agriculture sector.
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Characteristics of Entrepreneurship
 Creating New Venture
 Strong networking abilities
 Self-Motivation
 Hard Work and Commitment
 Profit potential
 Risk Assumption
 Reaping of Rewards
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Characteristics of Entrepreneurship (Cont…)
 Passion
 Economic and dynamic activity:
 Related to innovation:
 Profit potential:
 Risk bearing:
 Entrepreneurial Process
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Characteristics of Entrepreneurs
 There are some qualities that distinguish entrepreneur from other
population even from professional managers.
 Some of these qualities/characteristics are explained in detail as
follows:
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High need for achievement
 Psychologists’ study recognizes that there is a positive correlation
between the need for achievement and entrepreneur activity.
 That is, a person who becomes entrepreneur has a high desire to
success than other population.
 The drive or movement for achievement is reflected in the
ambitious individuals who start new firms and then guide them in
their growth.
 Simply put, entrepreneurs have a desire to meet some standards of
excellence.
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Self-confidence
 Entrepreneurs’ success of their need and preference to assume
moderate risk reflects their confidence.
 Individuals who possess self-confidence feel that they can meet the
challenges that confront them.
 Entrepreneurs are self-confident individuals, who see the problems
in launching a new venture but believe in their own ability to

overcome these problems.
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Innovation
 The entrepreneur is constantly looking for innovations, not by waiting for a flash
of inspirations, but through an organized and continuous search for new ideas.
 Entrepreneurship is not so much an art that we either have, or we do not, but
rather a practice, which we constantly follow or we choose to ignore.
 It, thus, can be developed and learned; its core activity is innovation and a
continuous and purposeful search for new ideas, and their practical applications.
 Doing things differently is part of entrepreneurs’ nature.
 It is how they create a market opportunity and differentiate themselves from the
competition.
 Innovation can be based upon many factors from marketing to technology.
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Willingness to take risks
 Risk-taking characteristic of an entrepreneur is somewhat related
with their need for achievement.
 That is, entrepreneurs prefer risky situations in which they can
exert some control in the outcomes in striving to achieve their
need.
 The risks that face entrepreneurs in starting and/or operating their
own business are classified as follows;
 Financial risk: A risk associated with the failure of the business or a loss
incurred to the business.
 Investment of entrepreneurs’ savings involves this financial risk.
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Willingness to take risks (cont…)
 Career risk: It is difficult for unsuccessful entrepreneurs to find
suitable employment elsewhere.
 Family risk: Since entrepreneurs spend most of their time in
operating their business, their spouse and children suffer from

inattention and also suffer from emotional stress while coping with
a business failure.
 Psychic risk: Since the entrepreneur is identified so closely with
the business venture that he takes business failure as a personal

failure.
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Need to seek refuge
 Although most people go into the business to obtain the benefits of
entrepreneurship,
 There are some, who become entrepreneurs to escape from
environmental factors.
 Professor Russell M. Knight of the University of Western Ontario
has identified a number of environmental factors that encourage or

‘push’ people to found new firms and he has labeled such
entrepreneurs as ‘refugees’ and classified them as follows:
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Foreign refugee
 Foreign refugee is a person who leaves his native country and later
becomes an entrepreneur.
 There are many individuals who escape the political, religious, or
economic constraints of their homelands by crossing national

boundaries.
 Frequently such individuals face discrimination or handicaps in
seeking salaried employment in the new country.
 As a result, many of them go into business for themselves.
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Corporate refugee
 Individuals who flee the bureaucratic environment of big business
(or even medium-size business) by going into business for

themselves.
 Paternal refugee: A person who leaves a family business to show
the parent that “I can do it alone”.
 Feminist refugee: An individual who experiences discrimination
and elects to start a firm in which she can operate independent of

male chauvinists.
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Housewife refugee
 An individual who starts her own business after her family is grown or at
some other point when she can free herself from household
responsibilities.
 Society refugee: Individuals who sense some alienation from the
prevailing culture and express it by indulging in entrepreneurial activity.
 Selling women’s cars or selling modern paintings which are against the
culture of his society are the examples of such entrepreneurial activity.
 Educational refugee: Individuals who are tired of academic programs
and decided to go into business.
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The Difference Between Entrepreneur and Manager
 The main difference between Entrepreneur and Manager is their
role in the organization.
 An entrepreneur is the owner of the company whereas a Manager is
the employee of the company.
 Entrepreneur is a risk taker, they take financial risk for their
enterprise.
 The entrepreneur has a vision and focuses on achievements and
profit.
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 The key difference between an entrepreneur and a manager is their
standing in the company.
 An entrepreneur is a visionary that converts an idea into a business enterp.
 He is the owner of the business, so he bears all the financial and other
risks.
 A manager, on the other hand, is an employee, he works for a salary.
 So he does not have to bear any risks.
 The focus of an entrepreneur lies in starting the business and later

expanding the business.
 A manager will focus on the daily smooth functioning of the business.
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 For an entrepreneur the key motivation is achievements.
 But for the managers, the motivation comes from the
power that comes with their position.
 The reward for all the efforts of an entrepreneur is the
profit he earns from the enterprise.
 The manager is an employee, so his remuneration is the
salary he draws from the company.
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The difference Between Entrepreneur and Manager
 The entrepreneur can be informal and casual in his role.
However, a manager’s approach to every problem is very

formal.
 The entrepreneur by nature is a risk taker.
 His has to take calculated risks to drive the company further.
 A manager, on the other hand, is risk-averse.
 His job is to maintain the status quo of the company. So he
cannot afford risks.

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To sum up
Difference Entrepreneur Manager
Innovation Does not live within the
status quo
keeps running a business on
established lines
Risk bearing Takes calculated risks Does not share in business

risk.
Reward Positive negative or break

even profit
Fixed salary
Skill needs intuition, creative

thinking, and innovative
depends more on human
relations and conceptual
ability among other skills abilities
Status self-employed and he is his

own boss
a salaried person and he is a
dependent of his employer
Response to Authority Do not submit report submit report to
authority
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Types of Entrepreneurs
 Entrepreneurs can take three different forms.They are:
1. The individual entrepreneur: An individual entrepreneur is someone
who started; acquired or franchised his/her own independent organization.
 The major portion of this module is also devoted to describe the basic features
and activities of the individual entrepreneur.
2. Intrapreneur: An Intrapreneur is a person who does entrepreneurial work

within large organization.
 The process by which an intrapreneur affects change is called Intrapreneurship.
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Types of Entrepreneurs
Facts
a. The Intrapreneur’s context is often large and bureaucratic organization whereas
the individual entrepreneur operates in the broader, more flexible economic
market place.
b. Intrapreneurs are individuals who often engage in the entrepreneurial actions
in large organizations without the blessing of their organizations.
3. The Entrepreneurial Organization: The entrepreneurial function need

not be embodied in a physical person.
 Every social environment has its own way of filling the entrepreneurial
function.
 An organization can create an environment in which all of its members can
contribute in some function to the entrepreneurial function.
 An organization that creates such an internal environment is defined as
entrepreneurial organization.
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Function of Entrepreneurs
 Broadly speaking, there are three most important general functions
performed by entrepreneurs. These are:
1) Innovation: Introduces something new in any branch of economic

activity. Invention: Something invented or the capacity to invent.
2) Risk taking: Assumes the responsibility for loss that may occur due to
unforeseen contingencies of the future.
3) Organizing-Building
 Organizes the factors of production and manages various functions of an
enterprise.
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1. Innovation
 The basic function of an entrepreneur is to innovate.
 An entrepreneur introduces something new in any branch of
economic activity.
 He introduces new combinations of means of production.
 A new combination can be carried out by employing both unused
and used means of production.
 As an innovator, the entrepreneur foresees the potentially profitable
opportunity and tries to exploit it.
 He is a problem-solver and gets satisfaction by attacking problems.

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1. Innovation (cont…)
 Innovation implies doing new things or doing of things that are
already being done in a new way.
 It includes introduction of new products, creation of new markets,
application of new processes of production, discovery of new and

better sources of raw materials and developing new and better forms
of industrial organizations.
 Innovation may be based on the application of knowledge produced
by research but it may also be completely independent of research.
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Innovation (cont…)
 They are based on different skills.
 Innovation requires relevant information about market, patents and
management which have little to do with research.
 Innovations are not necessarily based on research but on creative
combination of existing materials and components.
 Innovation is also different from invention.
 Invention implies discovery of a new idea, new article and a new
method.
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Innovation (cont…)
 On the other hand, innovation refers to the application of an
invention and a discovery to make a new combination and thereby

produce satisfaction and profit.
 Invention may facilitate innovations but an invention in itself is of
little benefit to mankind unless it is marketable.
 Therefore, the innovator provides this missing link.
 An invention becomes an innovation only when it is embodied in a
product or service that can be successfully sold in the market.
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2. Risk-taking
 Risk-taking or uncertainty-bearing implies assuming the
responsibility for loss that may occur due to unforeseen
contingencies of the future.
 An entrepreneur is an especially talented and motivated person who
undertakes the risks of a business.
 An entrepreneur reduces uncertainty in his plan of investment,
diversification of production and expansion of the enterprise.
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Risk-taking (cont…)
 He visualizes opportunities for introducing new ideas and handles
economic uncertainty.
 Generally an entrepreneur is an enterprising individual willing to
assume the risks involved in innovations.
 New ventures, and
 Expansions of an existing venture.
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3. Organization-building
 Alfred Marshall recognized the organization and management of
the enterprise as the main function of an entrepreneur.
 It implies bringing together the various factors of production.
 The purpose is to allocate the productive resources in order to
minimize losses and reduce costs in production.
 An entrepreneur takes business decisions.
 In the initial stage of the establishment of an enterprise, the
entrepreneur may take all decisions by himself.
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Organization-building (cont…)
 But as the enterprise grows and the work of the decision-making
becomes more complex, the entrepreneur delegates authority to
subordinate executives.
 However, the central function of the entrepreneur remains the same.
 He alone determines what line of business to expand into and how

much capital to employ.
 He determines the expansion and contraction of the size of the total
business and its various branches.
 Being at the helm of affairs, the entrepreneur is the final judge in
the conduct of his business.
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Entrepreneurial Roles
 Entrepreneurial roles may be classified into three types: founders, general managers,
and franchisees.
1.Founding entrepreneurs:
 Founders may be inventors who initiate businesses on the basis of new or improved products or services.
 They may also be craftsmen, who develop a skill and then start their own firms.
 Or they may be enterprising individuals, often with marketing backgrounds, who draw upon the ideas of
others in starting new firms.
 These people bring firms into existence by surveying the market, raising funds, and arranging for the
necessary facilities.
 After the firm is launched, the founding entrepreneur may preside over the subsequent growth of the
business.
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2.General Managers
 As new firms become well-established, founders become less innovators
and more administrators.
 Thus, we recognize another class of entrepreneurs called general
managers.
 General managers preside over the operation of successful ongoing
business firms.
 They manage the week-to-week and month-to-month production,

marketing, and financial functions of small firms.
 The distinction between founders and general managers is often not clear.
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3.Franchisees
 Franchising is a marketing system whereby one party (called
‘Franchiser’) grants the privilege to another party (called
‘Franchisee’) to conduct business as an individual owner but is
required to operate according to certain methods and terms
specified by the franchiser.
 Franchisees differ from general managers in the degree of
independence.
 Because of constraints and guidance provided by contractual
relationships with franchising organizations, franchisees function as
limited entrepreneurs.
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Role of Entrepreneurship in Economic Development
 There are various roles of agricultural entrepreneur in economic
development some of them are;
 Wealth Creation and Sharing
 Create Jobs
 Balanced Regional Development
 GDP and Per Capita Income
 Standard of Living
 Exports
 Community Development
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Role of Entrepreneurship in Economic Development
(Cont…)
 The entrepreneur, among others, can also undertake any or all of
the following categories of innovation:
 Introduction of a new good or a new quality of good
 Introduction of a new method of production
 The opening of a new market
 The conquest of a new source of supply of raw materials
 Carrying out of a new organization of any industry
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Theories of Entrepreneurship
Sociological Theories of Entrepreneurship
 These theories suggest that entrepreneurial behavior is a
function of the individual’s interaction with the society.
 Sociological models that have received significant empirical

support are the inter-generation inheritance of enterprise
culture,
social marginality and
By Mengistu N.
ethnicity.
58 4/22/2024
 The supporter of sociological theory says that the
entrepreneurial activity is affected from social status hierarchy
and values: Individuals’ position, tradition, cultural values,
mobility and social status etc.
 are thoroughly effected to entrepreneurship development.
 The sociological theories depend on this concept.
 Entrepreneurship is likely to get a boost in a particular social

culture.
 Society’s values, religious beliefs, customs, taboos etc.,
influence the behavior of individual’s in a society.
59 By Mengistu N. 4/22/2024
 The entrepreneur is a role performer according to the role
expectations by the society.
 Entrepreneurship is inhibited by the social system, which denies

opportunities for creative facilities:
 The forces of custom, values, the rigidity of status and the district of
new ideas and of the exercise of intellectual curiosity, combine to
create an atmosphere inimical to experiment and innovation.
Sociologists argue that entrepreneurship is most likely to emerge
under a specific social culture.
 Social marginality model:
 This theory suggests that individuals who perceive a
strong level of incongruence between their personal

attributes and the role they hold in society will be
motivated to change or reconstruct their social reality.
 While some people may reconstruct their reality by
changing careers or employers, others may choose self-

employment.
 Marginal men” are referred as individuals who are less
integrated in their society.
 Since marginal men are not completely part of the society of
their adoption, they are free of the restrictions imposed by its
value system.
 At the same time, having left their own society, they are no
longer constrained by its dominant values.
 This situation gives way to the development of
unconventional patterns of behavior, which increases their
propensity to become entrepreneurs.
Economic theories of Entrepreneurship
 Entrepreneurial economics is the study of the entrepreneur and
entrepreneurship within the economy.
 Human creativity and productive entrepreneurship are needed to
combine the inputs in profitable ways, and
 An institutional environment that encourages productive entr/ship
becomes the ultimate determinant of economic growth.
 Thus, the entrepreneur and entrepreneurship should take center
stage in any effort to explain long-term economic development.
 This theory emphasizes the importance of good judgment in
economic success.
 Entrepreneurs are people who specialize in the application of
judgment to economic decisions.
 Good judgment leads to timely innovation and profitable arbitrage
 It eliminates waste caused by the misallocation of resources, and
reduces the risks associated with major projects or ventures.
 Entrepreneurs establish firms through which they can exploit their
superior judgment, although they may take over the control of

existing firms instead.
 Entrepreneurship and economic development are interdependent.
 Economic development takes place when a country real national income

increase overall period of time wherein
 Economic incentives are the main motivations for entrepreneur activities.
 Economic incentives includes
 Taxation policy
 Industrial policy
 Sources of finance and raw materials
 Infrastructure availability
 Investment and marketing opportunities
 Access to information about market conditions, technology etc.

Cultural Theories of Entrepreneurship
 Cultural theories pointed out that entrepreneurship is the product of the
culture.
 Entrepreneurial talents come from cultural values and cultural systems
embedded into the cultural environment.
 Entrepreneurs are the persons who are responsible for organizing and
managing the business by the careful utilization of the theories of

entrepreneurship.
 The different theories of entrepreneurship are relevant for the development
of the business which helps the beneficiaries to perform better.
 There does not exist one universal theory that can be utilized and applied by
the entrepreneurs.
 Every individual is responsible for making cultural choices.
 Entrepreneurs are one of the important products of culture.
 It is important for entrepreneurs to apply their cultural values within the

cultural environment.
 Cultural theory of entrepreneurship helps to influence the stakeholders of
their enterprise by instilling in their minds the importance of culture with
respect to the business.
 The cultural theories of entrepreneurship provide a massive knowledge of
someBytraditional
Mengistu N.
and effective theories on entrepreneurship.
67 4/22/2024
 Cultural values influence the entrepreneurial behaviors in a society,
such as the propensity take risks, or to pursue innovations that deviate

from norms.
 Some cultures may value conformity, which discourages innovation.
 Societies that value autonomy have a higher level of need for
achievement and greater self-efficacy tend to have higher rates of new

venture founding.
 Low uncertainty avoidance may also play a role in new venture
creation.
Psychological theories of Entrepreneurship
 Psychological trait theories of entrepreneurship state that certain
attitudinal and psychological attributes differentiate entrepreneurs

from non-entrepreneurs, and Successful entrepreneurs from
unsuccessful ones.
 These theories include:
 Need for achievement
 Locus of control
 Psychodynamic model
 Risk taking propensity

Need for achievement model
 This theory states that people desire to achieve something for their inner
feeling of accomplishment.
 Locus of Control:
 This theory states that there is a degree to which one believes that he/she is
in control of one’s fate.
 This can either be internal or external.
 Internals: The internals believe that what happens to them is a result of
their internal efforts whether it is good or bad.
Cont…
 Externals:
 These believe that whatever happens to them is a result of
external factors whether good or bad.
 Therefore the theory contends that internals are more successful
in business than the externals.
Psychodynamic model
 This says that people tend to be self-employed and become
successful because of “troubled childhood”.
 In troubled childhood, children tend to be lacking, security or
abused, low self-esteem, lack of confidence.
 Therefore growing in such an environment some people do have
repressed wishes towards those in control.
Risk taking propensity
 This theory contends about one’s willingness to accept risk.
 People who are more likely to accept risk and taking chances are
more likely of being self-employed than those who do not take

risk.
 Psychological theories of entrepreneurship focus on the individual and
the mental or emotional elements that drive entrepreneurial
individuals.
 Offers that entrepreneurs possess a need for achievement that drives
their activity.
 A locus of control theory; people with a strong internal locus of
control believe their actions can influence the external world.
 The entrepreneurship is termed as psychological concept and process.
 According to this theory, psychological factors are the primary source

of entrepreneurship development.

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Entrepreneurship

as from period to period and the level of development thoughts and

 The word entrepreneur is derived from a French verb entreprendre.

 It means “to undertake”.

 The word entrepreneur is defined by different authors in different

 This implies that, there is no single definition to entrepreneur.

 Research is providing an increasingly sharper focus on the subject.

 To see the progress on how entrepreneur is defined, some of the

 Who unites all means of production

 Land ,labor ,capital and Mgt thus produces a product.

 By selling the product in the market he/she pays rent of land,

 wages to labor, and

 interest on capital and what remains is his/her profit.

 He/she shifts economic resources out of an area of lower and into an

area of higher productivity and greater yield.

capital without taking active part in the leading role in enterprise.

 Peter F. Drucker defines an entrepreneur as one, who always

 responds to it and exploits it as an opportunity.

 Innovation is the specific tool of entrepreneurs, the means by which

they exploit change as an opportunity for a different business or

brings economic development through new combinations of factors

 A person who introduces innovative changes is an entrepreneur and

he/she is an integral part of economic growth.

 According to David (1961), an entrepreneur is a person with a high

need for achievement.

 He/she is energetic and a moderate risk taker.

 It requires an application of energy and passion towards the creation and

implementation of new ideas and creative solutions.

 Essential ingredients include the willingness to take calculated risks- in

terms of time, equity, or career;

 The ability to formulate an effective venture team; the creative skill to

marshall needed resources;

 The fundamental skills of building a solid business plan; and,

 Finally, the vision to recognize opportunity where others see chaos,

contradiction, and confusion.

 Who is a person always in search of something new and exploits

such ideas into gainful opportunities

 by accepting the risk and uncertainty with the enterprise.

 Entrepreneurship is a purposeful activity of an individual or a group

of associated individuals, undertaken to initiate, maintain or

undertakes to establish his/her enterprise.

 Entrepreneurship is also a creative activity.

 It is the ability to create and build something from practically nothing.

 It is a knack of sensing opportunity where others see chaos, contradiction

 Alternatively, entrepreneurship is considered as the attitude of mind to

 take calculated risks and derive benefits by setting up a venture.

 creation and running an enterprise.

 According to Peter Drucker entrepreneurship is defined as ‘a systematic

innovation, which consists in the purposeful and organized search for

 it is the systematic analysis of the opportunities such changes might offer

for economic and social innovation.’

 Entrepreneurship is a discipline with a knowledge base theory.

 legal and other factors.

 It is a dynamic and risky process.

 It involves a fusion of capital, technology and human talent.

 Entrepreneurship is equally applicable to big and small

 Different entrepreneurs might have some common traits

but all of them will have some different and unique

many models as there are ventures and we will not be able to

 It is not a combination of some stray incidents.

 It is the purposeful and organized search for change,

 conducted after systematic analysis of opportunities in the

 it is the way one thinks,

 one acts and therefore it can exist in any situation be it