The Concept of Entrepreneurship
Length: 1433 words (4.1 double-spaced pages)
Need writing help? Check your paper »
The entrepreneur is our visionary, the creator in each of us. We're born with that quality and it defines our lives as we respond to what we see, hear, feel, and experience. It is developed, nurtured, and given space to flourish or is squelched, thwarted, without air or stimulation, and dies.
The term 'entrepreneur' has been around since the seventeenth-century, it originates from France, where the phrase “entreprendre” was first used when a Frenchmen ‘entered and took charge’ of royal contracts. It was used widely to describe a person who lead a project which would deliver valuable benefits and bring it to completion, a person who can manage uncertainty and bring success in the face of challenges that would destroy a less well managed venture.
In this early 19th century this description was altered by the French economist J. B. Say who instead focused on the business process rather than the practitioner. He said that an entrepreneur shifts economic resources out of an area of lower productivity and into one of higher productivity and greater yield. 200 years later confusion still remains over the definitions of ‘entrepreneur’ and ‘entrepreneurship' with no single definition existing.
Further examples back up this point. In 'Advanced Entrepreneurship' by H. Rwigema and R. Venter the term is described as “... a process of conceptualising, organising, launching and – through innovation – nurturing a business opportunity into a potentially high growth venture in a complex, unstable environment”.
Meanwhile Scott Shane in 'General Theory of Entrepreneurship' believes "Entrepreneurship is an activity that involves the discovery, evaluation and exploitation of opportunities to introduce new goods and services, ways of organising, markets, processes, and raw materials through organising efforts that previously not existed." (Shane, S. 2003)
In fact, the variations are almost endless: "Entrepreneurship is the act of forming a new organisation of value" (Bateman& Snell 1996), "... the creation of new enterprise" (Bartol & Martin 1998) or "...the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, and receiving the resulting rewards of monetary and personal satisfaction and independence." (Hisrich & Peters 1998)
Consequently, we can say with certainty that entrepreneurship is at best ambiguous and at worst a wildly theoretical concept but we believe the best definition comes from Peter Kilby – as noted by Wickham (1998). He says the entrepreneur has a lot in common with the 'Heffalump', a fictional animal in A.
A. Milne’s Winnie the Pooh.
"[The Heffalump] is a rather large and important animal. He has been hunted by many individuals using various trapping devices, but no one so far has succeeded in capturing him. All who claim to have caught sight of him report that he is enormous but disagree on his particulars." (Wickham 1998)
Unlike the others, Kilby accepts the mystic of the entrepreneur as primary to its definition and that its value is actually found in this ambiguity because it enables each individual to find meaning and inspiration to match their expectations.
Definitions aside, to better understand the nature of entrepreneurship itself however we must now look at some of developmental theory and examine the different schools of entrepreneurial thought.
THE MACRO VIEW OF ENTREPRENEURSHIP – is a view which presents a broad selection of factors relating to success or failure in existing entrepreneurial businesses in the external locus of control. It also includes external processes that are beyond the control of the individual entrepreneur and can be broken down into three subcategories:
The Environmental School of Thought – This school deals with external factors that affect the lifestyle of a potential entrepreneur. These could be positive or negative forces in the modelling of entrepreneurial desires. The school focuses on institutions, values and influence of the society that put together, form a socio-political environmental framework that affects the development of an entrepreneur. For example strong support from family and friends may influence the desire to become an entrepreneur. In the case of Richard Branson this would refer to the major influence of his mother.
The Financial/ Capital School of Thought – The foundations of this school are based on the capital-seeking process. The search for start-up and growth capital is the complete focus because securing venture capital is vital to an entrepreneur’s development. In this case, the entire entrepreneurial venture is viewed from a financial management viewpoint and decisions involving finance occur at every major point.
The Displacement School of Thought – This thought process concentrates on the negative side of the existence of group, where someone can feel out of place or be displaced from the group. It argues that a group can slow a person’s development, either bringing it to a halt or removing specific factors vital to the individual for them to advance. As a result the frustrated individual is motivated to succeed which can be projected into an entrepreneurial pursuit. There are three major types of displacement that demonstrate this school of thought:
-Political displacement. Government regulations and policies that can limit/ redirect certain industries or reject free enterprise.
-Cultural displacement. Social groups excluded from professional fields e.g. Ethnic background, sex race, religion.
-Economic Displacement. Job loss, capital shrinkage and anything affected by economic variations of recession and depression.
THE MICRO VIEW OF ENTREPRENEURSHIP – examines the factors that are specific to entrepreneurship and are part of internal locus of control. The potential entrepreneur has the ability to direct or adjust the outcome of each major influence.
The Entrepreneurial Trait School of Thought – This approach focuses on researches about successful entrepreneurs and recognising similar traits and characteristic that if copied could increase success opportunities for the emulators. They believe that certain attributes are usually exhibited by entrepreneurs (creativity, determination etc.). They influences of family and education are also examined. Some researchers argue that educational involvement challenges entrepreneurial nature and kills creativity. The family development is considered very important in the creation of entrepreneur; certain traits established and supported early in life will lead eventually to entrepreneurial success.
The Venture Opportunity School of Thought – Opportunity aspect of venture development is the main focus in this school of thought and the interest areas are the search for idea sources, the development of concepts, and the importance of venture opportunities. Developing the right idea at the right time for the right market niche is extremely important for the entrepreneurial success and creativity and market awareness are viewed as essential.
The Strategic Formulation School of Thought – This approach emphasizes the planning process in successful venture development. The effective venture formations are constructed by unique markets, unique people, unique products, or unique resources. Each of these unique aspects has it’s own strategy.
Those Schools of Thought are foundations to entrepreneurial theory. And we need those theories to understand the field of entrepreneurship in its growth and development.
In recent years another aspect to entrepreneurship has been developed: an intrapreneurship. The definition of an intrapreneur is very similar to the one of entrepreneur with a difference that takes place within an organisation. The main idea is to create the entrepreneurial spirit within corporate limitations therefore allowing the atmosphere of innovation to flourish.
In conclusion an entrepreneurship is a process of innovation and new venture creation through four major dimensions- individual, organisational, environmental, processes- that is aided bycolaborative networks in government, education and institutions.(Kuratko &Hodgetts, 2007)
But there is a difference between entrepreneurial business and a small new business (Drucker, 2007). The little Indian restaurant/take away opened by a family for sure is taking a risk but is it entrepreneurial? All it gambles on is the increasing popularity of eating curry or eating out in the area but it creates neither new consumer demand nor new satisfaction. So even though it is a new venture it is not an entrepreneurial.
On the other hand we’ve got a chain fast food restaurant McDonald’s which for sure we can call an entrepreneurship. It did not invent anything, and products it is selling are what many fast food restaurants have produced years ago. The difference is in applying management concepts and management techniques, researching what is value to the customers, bringing their final product to a higher standard, designing the look , processes and tools by which they drastically upgraded the yield from resources, and created a new market therefore creating a new customer.
As Drucker says “(…) all new small businesses have many factors in common. But to be entrepreneurial, an enterprise has to have special characteristics over and above being new and small. Indeed, entrepreneurs are a minority among new businesses. They create something new something different; they change or transmute values.”