What Is Entrepreneurship? Definitions, History, Types, Process: Entrepreneurship can be called a technique for developing a new company by tackling all the possible risks for making profits. In simple language, it is referred to as a procedure for finding investment and production chances so that profit or social needs can be fulfilled. This process has turned out to be a very important process for boosting economic development in a certain market.
What Is Entrepreneurship? Definitions, History, Types, Process
In this post, you will get complete information about this perspective and understand “what is entrepreneurship”?
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Who is an Entrepreneur?
The person who is responsible for completing the entrepreneurship process is known as an entrepreneur. He/she can be the individual who set up an organization to enjoy a healthy profit from it. The exact definition might be a vague task for some people, but the reason can be useful. The entrepreneur can be a person who has started a manufacturing company or even a first e-commerce store with an aim to earn money.
There are only possibilities and solutions explored by entrepreneurs where the average individuals only look for problems while setting up the business. Understanding the real meaning of entrepreneurship is beneficial for people who want to give their contribution to the economic world.
Why is entrepreneurship important?
As we already told, the entrepreneur is a problem-solving person who stays focused on developing a solution. They are talented leaders who work for improving society and giving jobs to others. Let’s have a look at the reasons that prove entrepreneurship is important below:
- Lowers unemployment
The jobs are created by entrepreneurship that helps others earn well. The entrepreneurs take risks for giving employment to the society. They continuously focused on growing their business that directly creates jobs. It helps in lowering the unemployment rate.
- Make Change
There are natural dreams in the ideas of entrepreneurs that can change the concept globally. It can range from the development of a new product for solving the transport problem or a system that purifies the air. While checking history, one can see how tremendous sort of things delivered by entrepreneurs for the world.
- Boost the nation’s economy
As we all know, entrepreneurship can lead to the generation of money that can enhance the economy of the country. The growth of new markets occurs due to the new ideas or improved services provided by entrepreneurs.
Read More: Role And Importance of Entrepreneurship
What are the main Characteristics of Entrepreneurship?
- Economic Activity
A business is developed and run by the entrepreneurship so there will be involvement of economic activity in it.
There are new ideas implemented discovered by entrepreneurship. Moreover, the trending modes of operating a business are evaluated by an entrepreneur consistently.
- Risk Bearing
The main quality of entrepreneurship is the will power to deal with the risks. It takes place due to the development and implementation of new ideas.
The main motive of an entrepreneur is to make a profit with the idea he/she implements. It can be called the reward of efforts performed by them.
History of Entrepreneurship
Do you believe that the entrepreneurs started from around 20, 000 years back? Believe it or not but the first trading took place in Guinea in 17, 000 BCE to exchange Obsidians for required goods.
Agricultural Revolution: About a millennium ago, trade was done by hunters and gatherers to provide benefits to their tribes. Moreover, during the Agricultural revolution, the entrepreneurship took a first big shift as the people started doing farming about 12, 000 years ago and they produce food more than they required to sell the remaining in the market.
However, there are some other areas of specialization such as Fishing, Cooking, Tool-making, Shelter-making and Clothes-making. The expertise increased at a high pace and tricks of the trade was becoming better and better. It was observed that the town and cities grew and there was an establishment of religious centres, marketplaces and courts. It gave an opportunity of entrepreneurship to experts in growing their business.
In the early times of entrepreneurship, people would work in the field of Pottery, Carpentry, Wool-making and Masonry and the innovation increased in all areas.
The trade expansion: Apart from the Agricultural revolution, the cities started existence nearby rivers such as the Nile, the Tigris and Euphrates, the Indus, and the Yellow and Yangtze in 2000BCE. Another important turn took place in Entrepreneurship here as they started trade between cities and cultures such as the trade of salt, Chinese paper-making, rice, coffee, lemon, oranges, gunpowder, etc. The trading of weapons became popular at that time and it was the most successful trade of 2000BCE in the field of entrepreneurship.
Introduction of money in the world of Entrepreneurship: During that time, trading took place based on the barter system and the invention of money is another key element of Entrepreneurship. With the development of currency in the form of paper money and coinage, it facilitated entrepreneurs to do long-distance trade, fair exchange and store value.
As the marketplaces grew, people started purchasing food, clothes and other things. So, there a huge development happened because of Entrepreneurship as the small business owners need financial help and then, there was the establishment of banks and guild system too.
The beginning of Capitalism: Now, there was a revolution of innovation in Entrepreneurship as the period gave rise to the paper mill, windmill, mechanical clock, the printing press and the map. Then, the entrepreneurs started using innovate technologies for the innovation of their business. But here the theory of mercantilisms introduced and the Entrepreneurs were known as merchants as well as explorers in 1492. These entrepreneurs of that time were similar to today’s as they raise capital, took risks and stabilize the economic growth.
Here, capitalism has begun and the gold and silver were introduced. Moreover, the accounting advancement of accounting advances by Luca Pacioli which created a standard track record for the firm’s account.
Machines and Markets in the 1800s: These years were fueled by “Machines and markets”. It paved the way to Capitalism and the theory of Mercantilism destroyed in the field of entrepreneurship.
The Industrial Revolution: There was another astounding shift in the history of entrepreneurship as the people started migrating from the small cities to the big cities for large-scale production in the 18th century. The fundamental changes in Entrepreneurship were the availability of energy and labour.
Entrepreneurship after World War 2: As the economies changed over the globe, so it paved the way for the entrepreneurs to sell their products and services worldwide through the shipping across the world. During this period, few companies prospered such as general Electric and aircraft like Lockheed, Holiday Inns and IBM. Japan became the largest economies in the world.
Today’s Entrepreneurship: In these days, Entrepreneurship is of paramount importance around the world and has a great contribution to any nation. The modern infrastructure and communication have made a new competition in the world of Entrepreneurship.
Relationship between Entrepreneurship and Innovation
Innovation is an element which means to do something new or doing things in new ways. It also comprises of new methods of production, introduces new products, new market creations a discovery of new industrial organizations. It has a close relationship with the Entrepreneurship. A business firm always wants to do something unique to form some changes in the customer’s need and use innovations in all realms of life. The innovation in any field of business created a vast competition in the market place.
These two phenomenons are very closely related to each other as some sort of entrepreneurial behaviour is required for innovation. However, the terms are not very similar. Various functions from idea to innovation and growth are performed by different actors. At the initial stage, ideas are formed by the researchers and investors but can be only identified by the entrepreneur of any size of the firm.
Moreover, the entrepreneur converts the ideas into innovations and it helps to lower the cost. A crystal clear relationship between Entrepreneurship and innovation means that the idea of innovation is implemented by an entrepreneur.
Definitions of Entrepreneurship
Numerous definitions of the concept of Entrepreneurship are there. Here are some of them as given below:
- According to Cunningham and Lischeron (1991), “Entrepreneurship is a series of learning activities which focus on the central functions of managing a firm”.
- Stevenson defined Entrepreneurship as, “… the pursuit of opportunity without regard to resources currently controlled.”
- As per Peterson (1985), the Entrepreneurship is defined as, ”… the opportunity-seeking style of management that sparks innovation.”
- “Entrepreneurship is the act of forming a new organization of value.” (Bateman & Snell, 1996)
- According to Stoner, Freeman and Gilbert (1995), “Entrepreneurship is the seemingly discontinuous process of combining resources to produce goods or services.”
- Entrepreneurship is, “…the creation of a new enterprise. (Bateman and Snell, 1996)
- According to Dollinger, 1995, “Entrepreneurship is the creation of an innovative economic organization or network of an organization for gain under conditions of risk and uncertainty.”
Types of Entrepreneur
Different types of Entrepreneurs emerge based on interaction with the business environment. To the same token, there are four types of Entrepreneurs such as Innovative, Imitating, Fabian and Drone which will be discussed below:
- Innovative Entrepreneur: The entrepreneur who is flooded with something new and wants to use the same for business purposes. This type of entrepreneur is interested in inventive things and always takes the first step to invest in a different type of research and development.
- Imitating Entrepreneur: Such type of Entrepreneurs always tries to mimic others and known as “copy cats”. They observe the system deeply and replication the same in a better manner. Through the implementation of various existing technologies, they make improvements in the products, procedures and create something similar but much better as compared to others. It can be like the students will become better than the master.
- Fabian: These entrepreneurs adopt any type of technology and changes with utmost care and caution. But they are shy and show laziness while adopting the technologies.
- Drone: Such entrepreneurs are opposed to change, so they are considered as “old school”. Moreover, they always stick to the orthodox methods of production and systems.
Also See: Types of Entrepreneurship with Examples
Functions of an Entrepreneur
Various actions were taken by the Entrepreneur to establish a new firm and what an entrepreneur does it is called as Entrepreneurship. Here, we will discuss the functions performed by the entrepreneurship:
- Entrepreneurial Functions: As an entrepreneur of an organization, the person has to perform some of the basic functions related to his positions. First and the foremost function is to take initiative in every activity that has to be done in the business and he is always ready to incur any sort of risk related to any investment. Moreover, He has to build an organization with all their efforts and also bring innovation in the business according to the changing demand to meet the requirements of the customers. An entrepreneur is the only person who can take such decisions on behalf of the business.
- Managerial Functions: The entrepreneur is doing multi-tasking and starts to plan for the different projects of the business. Moving further, he is also an integral part of organizing the business, staffing, give direction to all the employees, controlling all the attached business work, leading the subordinates, supervise every co-worker in their working and maintains coordination among the employees.
- Promotional functions: After the completion of production processes, an entrepreneur has to find out the different ways to discover some ideas about the promotion of the goods and services they provide to the customers. Moreover, he has to assemble all the requirements related to the products and services.
- Commercial Functions: Entrepreneur should also take care of all the activities related to the commercial area of the business. The entrepreneur needs to keep an eye over the functions associated with the production, marketing, personnel as well as accounting of the business.
- Financial functions: Entrepreneur is the only person who makes investments in the business whether it is big or small in amount. He needs to plan all the finances of the business and raise funds according to the requirement of the business as well as expenses in various areas. However, the utilization of funds is also an essential part of the business which is also done by the entrepreneur.
Fig: Functions of an Entrepreneur
Why people do become Entrepreneurs?
There are ample numbers of the reason behind the desire to become an entrepreneur rather than an employee. Becoming an employee is a traditional approach nowadays and as an entrepreneur, you can decide what you want to do. But with the uncertainty and risk factor, it comes with the tremendous approach of freedom as well as accountability.
Here are some of the genuine engenders to become an owner of a business rather than a co-worker of someone else.
- They like to take risks: It is irrefutable the entrepreneurs love risks! Although there are a lot of unexpected risks, still they have a passion to deal with all the related risks of the business. Their whole life is almost based on adventures as well as excitement. Moreover, they get goosebumps when they succeed in their goal and brainstorm new ideas. Moreover, they are always looking for high stake projects because they have enough confidence to handle and execute it well. It does not matter to them whether these projects will make millions of bucks or it may be a big failure in their life.
- Have enough guts and experience: After getting years of experience and aware of the market conditions, they decided not to continue with working for others and it’s time to grasp something high on life by establishing own business. A strong desire in their heart tells them that they have guts as well as big purpose in the globe that surpasses the idea of being an employee. They want to succeed high in their life and strongly want to control their destiny.
- Admire other Entrepreneurs: A successful person of any industry can also inspire others to do something blockbuster in their life. They want to get interact with people who have already established their business in a very good way and now, they are one of the unbeaten businessmen. They have a feeling that the next million-dollar idea can come from their mind and change the lives of millions of people.
- They get frustrated from bounds: A flexible lifestyle has a lot of hype but the reality is that Entrepreneurship is not a shortcut that you can start a business and can touch the great heights of success in the very first run. However, it needs a lot of efforts to get victory in the field of business and hard work too. Moreover, there is a lot of flexibility in the area of Entrepreneurship as compared to the monotonous job routine of nine to five job.
- They have inventive ideas: A level of imagination and a dash of insanity is a must for working as an Entrepreneur. They are out of those people who can change the world by their creative and imaginative ideas as they distinctively see the world as not as it is. They do have genius ideas like Wright Brothers, Steve Jobs, Bill Gates and others. All these personalities have a knack in their mind to change the world with a new advancement and make some unique developments.
- Wants freedom at all: The level of freedom everyone wants is a normal fact but the freedom that the Entrepreneur is seeking for is full freedom to do anything. Moreover, if you want freedom from work, then Entrepreneurship is not your cup of tea. The person who wants creative freedom can go for this field as it means to do something on your own professional and not being free all the time for fun.
- Financial Success: Everyone needs a better life flooded with luxurious things and this can easily be achieved by becoming an entrepreneur. However, it is hard to get to that level of financial success in a couple of days but it is a motivational factor that can easily push up anyone to indulge in business. They can achieve their success and financial security too.
The Entrepreneurial Process
The stages of entrepreneurial development are not easy to understand and happen to begin a business firm. There is a difference between the person who just says things that are needed to happen for starting a business and others who did the same. So, a huge distinction between the action of a person and what a person thinks about. One step at a time can be developed in the entrepreneurial stages while some continue with the existing lifestyle.
The person who has an entrepreneurial culture, as well as spirit, can think to take a step ahead to get closer to the goal. Although it is a long-term procedure the results are though fruitful. Here are some of the stages for the entrepreneurial process.
- Idea Generation: The entrepreneur tries to find out why the particular service is not available and how to make improvements in certain things by generating income to pay for the expenses. Thousands of ideas arise and it will create a lot of opportunities to fulfill the needs of the market. It is required to search for information and market analysis to look for the chances of success. A number of people generate ideas to start a business but when it comes to implementing all the ideas, they take their step back. It is not easy to commence business by just getting ideas as it takes a lot of potentials.
- Decision Making and Business Planning: The decision to start a project is a crucial point in the process of entrepreneurial. The two factors to land all the ideas for an entrepreneur are activeness and motivation. Ask what material is needed and where to take all these as it is vital to get the information about the project. The development of a proper plan can be done to have a guide with you all the time.
- Project Creation: When the entrepreneur decided to obtain resources, then the project is conducted. Finance is one of the major problems that creates hurdle in the commencement of the business. The initial step of investment and operating all the ideas is a stress buster for the entrepreneur as it is the beginning of the company.
- Management and Control: Within the first few months, the company can see whether they increase, decrease or maintain stability in sales. The main motive of an entrepreneur is to maximize the revenue instead of concentrating on the infrastructure of the office. It is troublesome to manage the entire business but as time goes on, it becomes easy for the owner to manage the business as well as resources.
Well, the entrepreneurial process ends here but it is no longer an entrepreneur and now, he or she becomes a full businessman or businesswoman.
Examples of Entrepreneur
It is illogical that people looking for some of the magical shortcuts that paved the way to become a successful entrepreneur. But the fact is that you need to engage in real businesses with real products and services too. I know it is difficult and has a lot of work to do.
To exemplify, the founder of Microsoft Bill Gates is in the hit list of the most influential entrepreneurs. There are probably not many people that have not been touched by one of his products such as Microsoft Windows, Microsoft Office and Internet Explorer. Moreover, here is another name appears in the category of great entrepreneurs such as the Co-founder of Apple computers, Steve Jobs. It produces Macs, iPods as well as iPhones and Apple TV also.
Drawbacks of being an Entrepreneur
Every concept of business has two-fold effects as similar to Entrepreneurship. It has many plus points related to the life of a person however, it also has some drawbacks that a person can face sometimes. The choice of entrepreneurship is not all about your working schedules, freedom to fun anytime and anywhere makes fun at work and creating your destiny. However, it has also some minus points that can somehow de-motivate anyone to enter into this field in the future.
Also See: Advantages of Entrepreneurship
- Sense of Responsibility: It is not only the responsibility of the entire business is in your hands but also the paycheck too. When it comes to match and find differences between the expenses and revenues, then everything is the responsibility of the owner only. You never pay salary to the employees with low or unstable income and it makes you frustrated. Even, you can pay easily, still, there is a kind of headache on mind every time.
- Risk: The well-known fact is that business is nothing without risk. Whenever you make an investment in any project or products or services, then there is always some risk attached to it whether it is low or high but it is. Moreover, all your savings, time as well as efforts are on the risk for the business only.
- Loads of work: As we all know, an entrepreneur is an innovator, and a hustler too. It takes too much effort to start with a new business and achieve great heights of success. At the beginning of the business, you have to do all the work as you can trust yourself or you don’t have that much budget to appoint a special person. It is a tough task for a single person to handle all the grunt work and sometimes it seems like exhausting.
- Competition: In the business sector, the sharks are everywhere, especially the huge and well-known firms. It becomes sometimes difficult to differentiate your business from other industries. Moreover, it is required to plan something innovative and unique in the business, so that it can grasp the attention of the customers at the first look.
- Working Schedule: The firm is yours and you are the only owner who is responsible for the failure as well as the achievement of the business. So, the working schedule of an entrepreneur is always not predictable. It is necessary to work for longer hours and late nights at the beginning of the company.
- Maximize Stress: An entrepreneur preoccupied with a lot of worries all the time. The stress is about the uniqueness and how to succeed in their business with greater profitability.
- Other limitations: Being an Entrepreneur is a daunting task as it requires a number of sleepless late nights and lonely weekends to get success in this field. It becomes a challenge for a person and is very opposite to reality.
Overall, Entrepreneurship is a double-edged weapon, with pros and cons at the same time. But it is up to a person how it takes the concept. Be passionate about what you want to do and not a single list of cons will stop you from doing so.