ENTREPRENEURSHIP CONCEPTS

AND EVIDENCE
Lesson 1

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 Defining entrepreneurship
• There is no universally accepted definition of
entrepreneurship, though the study of
entrepreneurship has a long tradition
• The word entrepreneur is derived from the
French verb entreprende, which means to
take on.

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Who is the entrepreneur?

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 Definition by Richard Cantillon (1730)

• He defined entrepreneurship as self-

employment of any sort
• They take the risk of buying goods at a
particular price and reselling them at a higher
price in the future

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 Definition by Say 1816
• He defined the entrepreneur as the individual
who ‘unites all means of production and finds
in the value of the products, their
establishment of the entire capital he employs
of the wages, of the interest, of the rent which
he pays, of the profits belonging to himself’

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 Definition by Schumpeter (1934)
• He considers an entrepreneur as an individual
who initiates innovative change within
markets and these result in new or improved
goods, new methods of production, new
markets, new sources of supply, and/ or re-
engineering of business management
processes

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 Definition by Drucker (1985)
• He regards an entrepreneur as a person who
looks for change, adapts to it exploits the
opportunities emanating from the change

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 Descriptors of Entrepreneurs
 Bearing risk (Cantillon, (1730);
 Agents who unite factors of production (Say,
1816);
 Organizing innovation (Schumpeter, (1934);
 Exploiting change (Drucker, 1985)

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Qualities/ Characteristics of entrepreneurs
• Initiative
• Opportunity Seeking and Taking Action
• Persistence
• Knowledge
• Concern for High Quality of Work
• Systematic Planning
• Problem solving skills
• Self efficacy
• Persuasion
• Leadership skills
• Monitoring Skills
• Concern for employee welfare

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 Leadership Skills Examples

 Good communicator;
 courageous;
 responsible;
 integrity;
 creative;
 problem solving;
 emotional intelligence;
 accountable;
 decision-maker;
 active listener;
 honesty’ self-aware;
 motivator;
 problem-solver;
 empathy;
 humility,
 patience,
 and a continuous learner.
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 Activity
• Identify a successful entrepreneur you know
very well and analyze five key characteristics
that they possess.

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 Defining entrepreneurship
• Entrepreneurship can defined as the process by
which opportunities to create future goods or
services are discovered, evaluated and
exploited
• Entrepreneurship is the mindset and process to
create and develop economic activity
• It involves blending risk-taking, creativity and
innovation with sound management, within a
new or an existing organization’
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 Defining entrepreneurship cont’

• Entrepreneurship is NOT quick microwave

riches proposition; rather, it is one of building
long-term value and durable cash flow
streams
• At the core of entrepreneurship lies the
creation and exploitation of entrepreneurial
opportunities regardless of the context

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 Defining entrepreneurship cont’
Entrepreneurship plays an important role in
 the creation and growth of businesses,
 in the growth and prosperity of regions and
nations.
Entrepreneurial actions are as a result of
 a lucrative opportunity
 an enterprising individual (the entrepreneur).

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 Entrepreneurial opportunities
• Situations where new goods, services, raw
materials, and organizing methods can be
introduced and sold at greater prices than
their cost of production
– introducing an existing technological product to a
new market.
– creating a new technological product for an
existing market or creating both
– a new product/service and a new market.

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 Entrepreneurial Actions
• Action through which the creation of new
products/ processes and/ or the entry into
new markets, which may occur
– through a newly created organization or
– within an established organization.

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 Manifestations of entrepreneurial actions

• New or improved goods

• New services
• New methods of production
• New markets
• New sources of supply
• Re engineering of business management
processes

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 Entrepreneurial Activity
• Exploiting opportunities
• Resource mobilization
• Setting up production processes
• Setting up legal entities
• Attracting employees
• Providing goods and services of value

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SCHOOLS OF THOUGHT

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 Cantilon school of thought
• Equates entrepreneurship to any form of self employment
• Push factors are prominent
– Job dissatisfaction: Many people start their ventures because they
are not satisfied with their existing jobs, or work environment.
– Relocation: Repeated or unhappy relocation prompts some
individuals to start their own business.
– Joblessness: Poor prospects in formal employment push others to
start own business. Need for survival considered as a major push
factor to establishing own business.
– Lay-off or retirement: when your are physically fit to carry on.
– Boredom: Housewives

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 Schumpeter school of thought
• Equates entrepreneurship with innovation that brings change.
• It takes prominence in the development of high growth
ventures.
• Opportunity based (pull factors)
– Promise of financial rewards in form of profits to the owner
– Promise of a more satisfying life than in formal employment.
– Exploitation of opportunity spotted in the course of doing their
work.
– Motivation from biographies or success stories .i.e. Rich Dad Poor
Dad (Book by Robert Kiyosaki – a must read)
– Government policies that promote certain business activities

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 Importance of Entrepreneurship

• Entrepreneurship is “the primary catalyst for

innovation”. (Mc Fadzean et al, 2005,p.351),
• Entrepreneurship is seen crucial in delivering
innovation to the market.(Watkins-
MathysandFoster,2006).
• It drives innovation and technical change, and
therefore generates economic growth

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 Importance of entrepreneurship cont’
• Encouraging entrepreneurship is vital in
creating wealth, creating jobs, improving
competitiveness, boosting exports, fostering
economic growth, and reducing poverty
• Lack of entrepreneurship is frequently cited as
the main cause of the country’s relatively low
rate of economic development

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 Types of Entrepreneurship
• Business entrepreneurship
– Small business entrepreneurship
– Intrapreneurship
– Scalable startup entrepreneurship
• Social entrepreneurship

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 Group Assignment
1. Explain the meaning and focus of the types of
entrepreneurship
– Business entrepreneurship
• Small business entrepreneurship
• Intrapreneurship
• Scalable startup entrepreneurship
– Social entrepreneurship
2. Explain the primary difference between small business
entrepreneurship and scalable startup entrepreneurship
3. Explain the primary difference between business
entrepreneurship and social entrepreneurship

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Theories in Entrepreneurship

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 Jack of all Trades Theory (Lazear 2005)
• This theory implies that the Entrepreneur
must know about many different areas.
• Entrepreneurs main tasks:
– Find innovative ideas
– Mobilize and manage resources
– Achieve success
• Entrepreneurs need all abilities, the weakest
ability determines income.

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Jack of all Trades Theory (Lazear 2005)

• Requirements:
– Range of skills endowment
– Balanced skills profile
– Invest in several skills –become a generalist
– Assumption:
• The assumption is that all these skills must be
performed by one person

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 O-Ring Theory (Fabel, 2004)
• According to this theory, a range of abilities
are generated from various individuals with
different abilities, however;
• The quality in which tasks are fulfilled is
crucial, it is not just about fulfilling the tasks
• Negative actions of one member or failure in
fulfilling the task by one member may hinder
entire project

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 Implications of the O-Ring Theory
• Teams are homogeneous with relation to ability.
• Teams should not only be assessed in terms of size, but also
abilities.
• The more able a team is the more per capita capital is used.
• It is important to have knowledge from a variety of people.
• However each additional member of a team should also be
viewed as an additional source of risk.
• If the team mal-performs it will significantly affect the
market of value of the output.

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 Summary
• Who is an entrepreneur?
• Key characteristics of an entrepreneur?
• What is entrepreneurship?
• Importance of entrepreneurship?
• Entrepreneurship concepts
• Types of entrepreneurships
• Theories of entrepreneurships

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