CHAPTER 1

Understanding the Entrepreneur and

Entrepreneurship
 Evolution of the Concept of Entrepreneur
The word “Entrepreneur” comes from French origin which refers “to
designating an organizer of musical or other entertainments”.

1897 – Oxford English Dictionary defined it in a similar way.

Early 16th century – Applied to those engaged in military expeditions.

17th century – Extended to cover civil engineering activities.

Beginning of the 18th century – Used to refer to economic aspects.

Thus, the evolution of the concept is considered over more than 4

centuries.
 Viewing Entrepreneurs

Over the period of last four centuries (1600s-1900s), the term is used in
various ways:

Entrepreneurs are viewed as i. Risk-Bearers

ii. Organizers
iii. Innovators

Entrepreneur as a Risk-Bearer:

Richard Cantillon, an Irish man living in France, 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.
 Viewing Entrepreneurs
Entrepreneur as an Organizer:

An Entrepreneur is one who combines the land of one, the 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 wage to labourers and what remains is his/her profit.
- Jean-Baptiste Say

Entrepreneur as an Innovator:

Joseph A. Schumpeter considered economic development as a discrete

dynamic change brought by entrepreneur by instituting new
combinations of production, i.e. innovations.
 Who is an Entrepreneur?

An entrepreneur can be defined as a person who tries to create something

new, organizes production and undertakes risks and handles economic
uncertainty involved in enterprise.

In general, the responsibility of doing something is called initiation. And

the person shouldering it is called the initiator. In that case, any
initiation taken to establish or promote a business can be called
entrepreneurship and the man behind taking the whole responsibility
is thus the entrepreneur.
 What is Entrepreneurship?

Entrepreneurship can be referred to as

• a process, not a person

• creating or developing something of value
• innovating or identifying an opportunity
• combining resources to pursue an opportunity
• developing and implementing a business plan,
• involving uncertainty and
• accepting risk
 Role of Entrepreneurship in Economy
1. To promote capital formation by mobilizing the idle saving of public

2. To reduce the unemployment problem

3. To promote balanced regional development

4. To help reduce the concentration of economic power

5. To stimulate the equitable redistribution of wealth, income, and even

political power in the interest of the country

6. To organize and utilize skills into productive use

7. To introduce backward and forward linkages so as to stimulate the

process of economic development, and

8. To promote a country’s export trade

 The Myths of Entrepreneurship
• “Entrepreneurs are doers, not thinkers”
• “Entrepreneurs are born, not made”
• “All Entrepreneurs need is luck”
• “Entrepreneurs are extreme risk
takers(Gamblers)”
• “Entrepreneurs are proud and unsociable”
 “ENTREPRENEUR”

• E = Extra effort
• N = New ways of doing business
• T = Tactics
• R = Revolutionary Outlook
• E = Empowerment
• P = People-orientation
• R = Rational
• E = E-solutions for Customers
• N = Next best Alternative / Next Opportunities (NO)
• E = Equity
• U = You-first Approach
• R = Reassessment of Decisions
 Characteristics of an Entrepreneur
Psychological characteristics:
• Intense drive to succeed
• Attitude toward taking risk that can be measured
• Innovative power/ creativity; and power to visualize
• Recognition to and dignity of labor
• Interest to learn; and flexibility to accept any sort of outcome
• Face challenges in changed/ changing situation

Social characteristics:
 Caring for the society
 Promise to give something worthwhile to the society
 Respect for social custom, culture, and practices
 Complying with legal structure, judiciary decisions and legislative
actions of the society
 Honest response to behave ethically
 Characteristics of an Entrepreneur
Economic characteristics:
• Professional experience
• Ability to properly utilize capital
• Technical ability and knowledge

Personal characteristics:
• Age and education
• Honesty and sincerity
• Loyalty and truthfulness
• Perseverance and integrity
 Entrepreneur (Winner) Vs Non-
Entrepreneur (Loser)
• The Winner is always part of the answer;
• The Loser is always part of the problem.

• The Winner always has a program;

• The Loser always has an excuse.

• The Winner says, "Let me do it for you";

• The Loser says, "That is not my job".
 Entrepreneur (Winner) Vs Non-
Entrepreneur (Loser)
• The Winner sees an answer for every problem;
• The Loser sees a problem for every answer.

• The Winner says, "It may be difficult but it is possible";

• The Loser says, "It may be possible but it is too difficult".

• When a Winner makes a mistake, he says, "I was wrong";

• When a Loser makes a mistake, he says, "It wasn't my
fault".
 Entrepreneur (Winner) Vs Non-
Entrepreneur (Loser)
• A Winner makes commitments;
• A Loser makes promises.

• Winners have dreams;

• Losers have schemes.

• Winners say, "I must do something";

• Losers say, "Something must be done".
 Entrepreneur (Winner) Vs Non-
Entrepreneur (Loser)
• Winners are a part of the team;
• Losers are apart from the team.

• Winners see the gain;

• Losers see the pain.

• Winners see possibilities;

• Losers see problems.
 Entrepreneur (Winner) Vs Non-
Entrepreneur (Loser)
• Winners believe in win/win;
• Losers believe for them to win someone has to lose.

• Winners see the potential;

• Losers see the past.

• Winners are like a thermostat;

• Losers are like thermometers.
 Entrepreneur (Winner) Vs Non-
Entrepreneur (Loser)
• Winners choose what they say;
• Losers say what they choose.

• Winners use hard arguments but soft words;

• Losers use soft arguments but hard words.

• Winners stand firm on values but compromise on petty

things.
• Losers stand firm on petty things but compromise on
values.
 Entrepreneur (Winner) Vs Non-
Entrepreneur (Loser)
• Winners follow the philosophy of empathy:
"Don't do to others what you would not
want them to do to you";
• Losers follow the philosophy, "Do it to
others before they do it to you".
 Classifications of Entrepreneurs
Clarence Danhof (1949) classified entrepreneurs into the
following 4 types:

• Innovative entrepreneurs: These entrepreneurs introduce

new goods, develop new methods of production, discover
new markets, and reorganize the enterprise. Such
entrepreneurs can work only when a certain level of
development is already achieved.
• Imitative entrepreneurs: They do not innovate, but imitate
the innovations of others. Such entrepreneurs are suitable
for the under developed regions for bringing a mushroom
drive of imitation of new combination of factors of
production already available in developed regions.
• Fabian entrepreneurs: They are characterized by very
great caution and skepticism in experimenting any
change in their enterprises. They love to remain in the
business with the age old techniques of production. They
only adopt the new technologies when they realize that
failure to adopt will lead to loss or collapse of the
business.
• Drone entrepreneurs: They are characterized by a refusal
to adopt opportunities to make changes in production
even at the cost of severely reduced returns as compared
to other entrepreneurs.
 Other Classifications of Entrepreneurs
 Opportunity seekers: They are characterized by the power to detect
opportunities at the very first time and making the full use of them
to make fortune.
 Incubative entrepreneurs: These types of entrepreneurs nurture new
or old businesses that need special care.
 Acquisitive entrepreneurs: They are characterized by the ability to
acquire competitors’ technical capabilities. They make accelerated
growth and diversification through horizontal or vertical integration
by gaining access to others’ technological properties.
 Solo operators: They work alone and employ a few employees, if
needed. In the beginning, most of the entrepreneurs start like them.
 Active partners: They start an enterprise as a joint venture by
actively taking part in business operations. Entrepreneurs who only
contribute funds to the enterprise, but do not actively participate in
business activity are called simply ‘partners’.
 Functions of Entrepreneurs
From a broader perspective, following are the functions an entrepreneur
is likely to perform:

 To find out new opportunities and prospect (innovating)

 To perform administrative functions (organizing)

 To handle risk (risk bearing)

 To create or transform (innovating)

 To make decision (organizing & risk bearing)

 Who is an Intrapreneur?
An intrapreneur is such a person who does not do job for himself. He
puts his endeavor and talent for some one else.

Intrapreneurship is such a process whereby big companies set out to

encourage entrepreneurial characteristics in their own managers. In
other words, if people come to work with good ideas, stop them
going home with them.

So, the difference between an entrepreneur and an intrapreneur is that an

entrepreneur does everything for his own business and an
intrapreneur does so for his employer.
 Entrepreneurs Vs Intrapreneurs

Entrepreneurs are different from intrapreneurs in the following

ways:

 Dependency

 Raising of funds

 Risk bearing

 Operation
 Entrepreneurs Vs Managers
Entrepreneurs are different from managers in a number of ways:

 Motive

 Status

 Risk bearing

 Rewards

 Innovation

 Qualification
 The Entrepreneurial Process

The process of entrepreneurship can be viewed as follows:

• Step 1: Deciding to become an entrepreneur

• Step 2: Developing successful business ideas

• Step 3: Moving from an idea to an entrepreneurial firm

• Step 4: Managing and growing the entrepreneurial firm.

Thank You