School of Business and Technology

Department of Business

TOPIC 1: INTRODUCTION AND SCOPE OF ENTREPRENEURSHIP

 Define the Term Entrepreneurship

 Features of Entrepreneurship

 Explain the Contribution of Entrepreneurship in Economic Development

The concept of entrepreneurship has a wide range of meanings.

On one extreme:

An entrepreneur is a person of very high aptitude who pioneers change, possesses characteristics

found in only a fraction of the population

On the other extreme of definition,

Anyone who wants to work for him or herself is considered an entrepreneur.

The term Entrepreneurship is used synonymously with entrepreneur. Though they are two sides

of the same coin, conceptually, they are different. The entrepreneur is the person, the business

leader While Entrepreneurship is the function performed by him or her.

Entrepreneur Entrepreneurship Enterprise

Person Process or Philosophy Object

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DEFINITION

Entrepreneurship is a multidisciplinary concept.

Meaning that its meaning and use varies.

Merriam-Webster gives a definition that’s closer to what most of us would probably offer the

English learner: an entrepreneur is “a person who starts a business and is willing to risk loss in

order to make money.”

Oxford English Dictionary’s definition is similar, though it doesn’t mention the starting of the

business: an entrepreneur is “a person who organizes and operates a business or businesses,

taking on greater than normal financial risks in order to do so.”

Macmillan English Dictionary offers the most general of them all—“Someone who uses money

to start businesses and make business deals

Definition by scholars

Richard Cantillon, a well-known English economist at the beginning of the 17th century

He viewed the entrepreneur as a risk taker, observing that merchants, farmers, craftsmen, and

others sole proprietors “buy at certainty and sell at an uncertainty, therefore operating at a risk.

Peter F Drucker

Defines an entrepreneur as one who always searches for change, responds To it and exploits it

as an opportunity.

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Joseph Schumpeter

He was an Austrian economist and is referred to as the father of entrepreneurship. He defined an

entrepreneur “as a person who is willing and able to convert a new idea or invention into a

successful innovation.

Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace

in whole or in part inferior innovations across markets and industries, simultaneously creating new

products including new business models.

In this way, creative destruction is largely responsible for the dynamism of industries and long-

run economic growth.

Example, we had the floppy disks, cds which were destructively replaced with the flash disks.

We had the old camera where we had to wait for pictures after the film was full and entrepreneurs

creatively destructed them to the digital cameras where we can even edit our photos before

printing.

From this,

We get;

 New products, from floppy disks to flash disks

 New methods of production

 New markets and

 New forms of business organization.

When such innovations results in new demand, wealth is now created.

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FEATURES OF ENTREPRENEURSHIP

i. Innovation is an important function of entrepreneurship. Innovation means doing

something new or doing old things in new or different way. It is the introduction of new

methods and ways of doing the work. An entrepreneur should be innovative.

ii. Risk bearing. Risk bearing is also an important function of entrepreneurship.

There are two types of risk;

Foreseeable risk – is the risk which can be insured and capable of being calculated.

E.g. earthquakes, theft, floods

Unforeseeable risk - is the risk which can’t be insured and it is tough to calculate

it. E.g business risk, government policy risk, competitive risk

iii. Organizing function - entrepreneurship can also be defined as an organizing function.

Organization means organizing all the factors of production and directing them towards

the attainment of the goals of the organization.

iv. Management skills - Entrepreneur must possess managerial skills like motivation and

leadership. Motivation is inner urge that emerges the behaviour towards achievement of

goals. It can be positive and negative, financial and non-financial and leadership is to direct

the people to do what you want your men to do.

v. Economic activity - Entrepreneurship is an economic activity as it is concerned with

earning more and more profits.

vi. Goal oriented – Entrepreneurship is a goal oriented activity. It is undertaken to achieve

the predetermined goals of the entrepreneur.

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vii. Decision Making: Entrepreneur takes decisions regarding activities of enterprise. He

decides about the type of business to be done and the ways of doing it. An entrepreneur has

to make decisions to take actions with unknown and unpredictable results.

viii. Function of High Achievement: People for high need for achievement are more likely to

succeed as entrepreneur.

ix. Resource Mobilization: Gap filling is the most significant feature of entrepreneurship.

The job of entrepreneur is to fill the gap or make up the deficiencies which always exist in

the production function. He has to perform the functions of input completing and gap

filling.

Intrapreneurship is a system which allows an employee to act like an entrepreneur within an

organization.

Intrapreneurs are self-motivated, proactive, and action-oriented people who have leadership skills

and think outside the box.

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 IMPORTANCE OF ENTREPRENEURSHIP TO ECONOMIC DEVELOPMENT

i. Create Jobs: Entrepreneurs are by nature and definition job creators, as opposed to job

seekers. The simple translation is that when you become an entrepreneur, there is one less

job seeker in the economy, and then you provide employment for multiple other job

seekers.

This kind of job creation by new and existing businesses is again is one of the basic goals

of economic development. This is the reason the government is supporting entrepreneurial

ventures.

ii. Wealth Creation and Sharing: By establishing the business entity, entrepreneurs invest

their own resources and attract capital (in the form of debt, equity, etc.) from investors,

lenders and the public.

This mobilizes public wealth and allows people to benefit from the success of entrepreneurs

and growing businesses. This kind of pooled capital that results in wealth creation and

distribution is one of the basic imperatives and goals of economic development.

iii. Balanced Regional Development: Entrepreneurs setting up new businesses and industrial

units help with regional development by locating in less developed and backward areas.

The growth of industries and business in these areas leads to infrastructure improvements

like better roads and rail links, airports, stable electricity and water supply, schools,

hospitals, shopping malls and other public and private services that would not otherwise

be available.

iv. Standard of Living: Entrepreneurs again play a key role in increasing the standard of

living in a community. They do this not just by creating jobs, but also by developing and

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 adopting innovations that lead to improvements in the quality of life of their employees,

customers, and other stakeholders in the community.

For example, automation that reduces production costs and enables faster production will

make a business unit more productive, while also providing its customers with the same

goods at lower prices.

v. Exports: Any growing business will eventually want to get started with exports to expand

their business to foreign markets. This is an important ingredient of economic development

since it provides access to bigger markets, and leads to currency inflows and access to the

latest cutting-edge technologies and processes being used in more developed foreign

markets. Another key benefit is that this expansion that leads to more stable business

revenue during economic downturns in the local economy.

vi. Promotes research and development - Entrepreneurship is innovation and hence the

innovated ideas of goods and services 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.

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