Entrepreneur

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Entrepreneur is a loanword from the French language that refers to a person who undertakes and operates a new venture, and assumes some accountability for the inherent risks.

Most commonly, the term entrepreneur applies to someone who establishes a new entity to offer a new or existing product or service into a new or existing market, whether for a profit or not-for-profit venture, a business entrepreneur. Business entrepreneurs often have strong beliefs about a market opportunity and are willing to accept a high level of personal, professional or financial risk to pursue that opportunity.

Research has demonstrated that there is such thing as an "entrepreneurial type," with certain characteristics (such as having a father or a mother who was an entrepreneur) linked to the probability of someone being an entrepreneur themselves. There is little good evidence, however, that entrepreneurial type is linked to ultimate success of an entrepeneurial venture.

Business entrepreneurs are often highly regarded in US culture as being a critical component of its capitalistic society. Famous entrepreneurs include: Henry Ford (automobiles), J. Pierpont Morgan (banking), Thomas Edison (electricity/light bulbs), Bill Gates (computer operating systems and applications), Steve Jobs (computer hardware, software), Richard Branson (travel and media) and others.

Some distinguish business entrepreneurs as either "political entrepreneurs" or "market entrepreneurs."

Contents

Are entrepreneurs born or made?

The answer to this question lies in what John G. Burch, writing in the September-October 1986 edition of Business Horizons calls "the galaxy of personality traits (which) characterise individuals who have a propensity to behave entrepreneurially". He lists nine as being more salient:

  • A desire to achieve: The push to conquer problems, and give birth to a successful venture.
  • Hard work: Are mostly workaholics.
  • Nurturing quality: Willing to take charge of, and watch over a venture until it can stand alone.
  • Acceptance of responsibility: Are morally, legally, and mentally accountable for their ventures.
  • Reward orientation: Desire to achieve, work hard and take responsibility, but also want to be rewarded handsomely for their efforts; rewards can be in forms other than money, such as recognition and respect.
  • Optimism: Live by the philosophy that this is the best of times, and that anything is possible.
  • Orientation to excellence: Often desire to achieve something outstanding that they can be proud of.
  • Organization: Are good at bringing together the components (including people) of a venture.
  • Profit orientation: Want to make a profit; but the profit serves primarily as a meter to gauge their success and achievement.


Image:Entrepreneur1.jpg

Of these nine traits, two stand out as being more likely to be 'inborn':

  • The desire to achieve;
  • Capacity for hardwork.

Several research studies have shown that entrepreneurs are convinced that they can command their own destinies, or in the jargon of behaviorial scientists, the "locus of control" of the entrepreneur lies within himself. It is this self-belief which stimulates him to act in a highly individualistic and often rebellious way. It creates an attitude which accepts large amounts of work, encourages persistence, and underpins a reputation for unswerving dedication to a concept, product or business initiative. The capacity to work exceptionally long and hard requires a combination of physical, emotional and intellectual energy which cannot be artificially stimulated. The extraordinary facility of the entrepreneur is to sustain that same commitment and capacity in the long term.

It therefore appears that unless a person has both inborn and acquired personality traits, he is highly unlikely to succeed as an entrepreneur.

Who is an entrepeneur?

  • Tinbergen’s Approach
According to Tinbergen, the best entrepreneur in any developing country is not necessarily the man who uses much capital, but rather the man who knows how to organize the employment and training of his employees.
  • Robert Hisrich’s Approach
According to Robert D. Hisrich, the person must be a visionary leader. A leader is like a gardener: when you want a tomato, you take a seed, put it in fertile soil, and carefully water under tender care. You don’t manufacture tomatoes, you grow them.
  • Martin Luther’s Approach
According to Martin Luther, an entrepreneur is one who distinguishes as a person who undertakes to organize, manage and assume the risk of running a business.

Views of entrepeneurship

The concept of the entrepreneur is intimately associated with three elements: Risk Bearing, Organizing and Innovating. Thus, an entrepreneur can be defined as a person who tries to create something new, organizes productions and undertakes risks and handles economic uncertainty involved in enterprise.

Entrepreneur as a risk bearer

Richard Cantillon, an Irish man living in France was the first who introduced the term entrepreneur and his unique risk bearing function in economics in the early 18th century. He defined entrepreneur as an agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. Uncertainty is defined as a risk, which cannot be insured against and is incalculable. There is a distinction between ordinary risk and uncertainty. A risk can be reduced through the insurance principle, where the distribution of the outcome in a group of instances is known. On the contrary, uncertainty is a risk, which cannot be calculated. The entrepreneur, according to Knight, is the economic functionary who undertakes such responsibility of uncertainty, which by its very nature cannot be insured, or capitalized or salaried too.

Entrepreneur as an organizer

Jean–Baptiste Say, an aristocratic industrialist, developed the concept of entrepreneur a little further. His definition associates entrepreneur with the functions of co-ordination, organization and supervision. According to him, an entrepreneur is one who combines the land of one, labor of another and the capital of yet another, and, thus, produces a product.

By selling the product in the market, he pays interest on capital, rent on land and wages to laborers and what remains is his or her profit.

Entrepreneur as an innovator

Joseph A. Schumpeter, for the first time in 1934, assigned a crucial role of innovation to the entrepreneur. Schumpeter considered economic development as a discrete dynamic change brought by entrepreneur by instituting new combinations of production, i.e. innovation. Schumpeter also made a distinction between an inventor and an innovator. An inventor is one who discovers new methods and new materials, and an innovator utilizes inventions and discoveries in order to make new combinations.

See also

External links

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