1 – Introduction to Entrepreneurship Management

Introduction

Everyone is familiar with “entrepreneurship,” which refers to how people start and run their businesses and industries. Entrepreneurs take risks and invest money in companies and industrial endeavours.

The term “entrepreneur” conjures up ideas of business magnates such as L.N. Mittal and Bill Gates. While these wealthy, famous, and successful people may inspire some, most of us would find it impossible to relate their lives, personalities, or abilities to our own. But the truth is that almost everyone is an entrepreneur at some point. Entrepreneurial in terms of self-development (an athlete who is constantly practising to improve his or her performance and stamina), self-decision-making (a man who decides not to marry and devotes the rest of his life to the service of God), and creativity (a housewife who recycles waste materials for crafts).

As a result, anyone who demonstrates self-development, innovation, decision-making, and risk-taking can be classified as an entrepreneur. When a firm leader demonstrates these characteristics, he is correctly referred to as an entrepreneur. The opposite is true: a businessman who does not take chances or strive for self-improvement is not creative, and one who cannot make decisions independently is not an entrepreneur. In today’s competitive environment, market forces eventually drive the latter out of the company.

Despite its current popularity, entrepreneurship is still a somewhat hazy term. According to the dictionary, an entrepreneur is “one who reorganises and controls only one firm, especially one containing considerable risk.” This definition appears to be adequate if taken literally. However, it is far from complete. According to research, entrepreneurs are not always significant risk-takers. A wise entrepreneur, on the other hand, works to reduce risk and maximise the chances of success. The definition does not mention opportunities or resources allocated to achieve success. The sole point listed in the definition is a significant risk, which may or may not be required for success.

1.1 Meaning Of Entrepreneurship

The term “entrepreneur” conjures up ideas of business magnates such as L.N. Mittal and Bill Gates. While these wealthy, famous, and successful people may inspire some, most of us would find it impossible to relate their lives, personalities, or abilities to our own. But the truth is that almost everyone is an entrepreneur at some point. Entrepreneurial in terms of self-development (an athlete constantly practising to improve his or her performance and stamina), self-decision-making (a man deciding not to marry and devoting the rest of his life to the service of God), creativity (a housewife using waste material for making a piece of art), risk-taking (a teenage boy trying bungee jumping).

Entrepreneurship produces something new and valuable by committing time and effort, accepting the associated financial, psychological, and social risks, and reaping financial and personal satisfaction and independence.

Entrepreneurship is frequently regarded as a role that entails exploiting market opportunities. The direction or combination of productive inputs is usually connected with exploitation. Entrepreneurs are generally associated with taking risks to pursue opportunities, and they are also associated with creative and inventive behaviours. Entrepreneurs also play a management role in their businesses; however, ordinary running business management is not considered entrepreneurship. Entrepreneurial activity is transient in this sense. An individual may perform an entrepreneurial function when starting an organisation but is afterwards relegated to administering it without performing an entrepreneurial function. Many small-business owners would not be called entrepreneurs in this sense. Finally, because they pursue the exploitation of chances, persons within organisations (i.e., non-founders) might be classified as entrepreneurs.

Entrepreneurship is a person’s predisposition to profitably organise and run his or her firm, utilising leadership, decision-making, and management abilities. The terms “entrepreneur” and “entrepreneurship” are frequently used interchangeably. The job of the entrepreneur, or the work that the entrepreneur does, is referred to as entrepreneurship. The main goal of an entrepreneur is to take calculated risks and invest money to profit from a business opportunity. He’ll need far-sightedness for this, as he’ll need to spot an opportunity quickly to take advantage of it. Although an entrepreneur must accomplish various tasks, he must possess several attributes to be a successful businessperson.

1.2 Importance of Entrepreneurship

A country’s economic progress determines its prosperity. Every country is responsible for ensuring economic development to improve living conditions and eradicate poverty and backwardness. Economic growth entails an increase in Gross National Product and depends on human resources’ use of physical and natural resources to realise the nation’s productive potential. It necessitates a rise in both production and consumption.

In a labour-rich but capital-poor economy like India, the government’s ability to directly raise productivity is limited due to severe budgetary constraints and the compelling need for increased investment in the frontiers of social development. As a result, people must step forward to engage in productive activities by establishing their industrial unit as a source of income. When more people step forward to start their businesses, no matter how small, and operate them efficiently and successfully, the nation’s productivity will immediately improve. The government runs several programmes to encourage people to work for themselves and grow their businesses in the country. As a result, developing entrepreneurship and entrepreneurs is a prerequisite for the nation’s economic progress. The following are some of the reasons why entrepreneurship is so important in the economy:

1. Generates wealth for the nation and individuals: Entrepreneurship is a common way for people looking for business opportunities to generate wealth. The wealth generated by entrepreneurship contributes significantly to the nation’s development. The firm and the entrepreneur contribute to the economy in some way, whether through products or services, increased GDP rates, or tax contributions. Their thoughts, ideas, and innovations also benefit the country.

2. Employs many individuals: While many believe that the unemployed turn to entrepreneurship, the reality is that 76 per cent of new business establishments in 2003 were motivated by a desire to pursue opportunities. This underscores the notion that entrepreneurship is not an economic stumbling block. Furthermore, from 1980 to the present, entrepreneurs have produced about 34 million new job opportunities. This data shows that entrepreneurship leads a country to better prospects and a substantial economic input.

3. Contributed to the research and development system: Entrepreneurs are responsible for approximately 2–3 percent of all innovations. The globe would have been a much drier place to live without the invention boom. Through better and standardised technology, inventions make it easier to get things done. It is simple to earn money and even simpler to spend it, but it is more challenging to spend money properly. It’s an excellent task to save your resources while increasing their potential. Unplanned spending also leads to mismanagement of loan conditions and sales cycles, resulting in the entrepreneur’s venture’s premature termination.

4. It is a challenging opportunity for people: Although entrepreneurship is a complex endeavour, the rewards it provides are usually far greater than one expects. Entrepreneurship rewards an entrepreneur financially and on an individual level, giving the entrepreneur a sense of accomplishment.

5. Entrepreneurship creates self-sufficiency: The entrepreneur not only becomes self-sufficient but also ensures that his or her employees have a high standard of living. It gives several people in the organisation the chance to grow. Liberty, monetary incentives, and the feeling of fulfilment from doing one’s job are some essential components that might lead to pleasure. As a result, the contribution of entrepreneurs improves the economy as a whole.

6. Sky-high levels of apparent prospect: When a person pursues entrepreneurship, he has the most significant potential for growth and opportunity. He not only earns money, but he also learns while doing so. This is a powerful motivator for any entrepreneur because the information and skills he acquires while running his business are his assets for life, something that most people lack when they are employed. When a person becomes an entrepreneur, he must undergo a grooming process. In this way, not only does he benefit, but the economy as well.

1.3 Concepts of Entrepreneur and Entrepreneurship

Although entrepreneurship has evolved, its popularity has not increased significantly in recent years. However, the concept of resurrection has risen in popularity to the point where, following its observation, a definite thought has come up concerning its unexpected finding. The four primary economic components are land, labour, capital, and entrepreneurship. In the 17th century, the word entrepreneur was taken from the French word entrepreneur, which meant a person who takes on the risk of starting a new business. The individuals would take on the contractor role, bearing the risk of profit or loss. The term “entrepreneur” was first used in the 14th century to refer to tax contractors who paid a set amount of money to a government in exchange for the right to collect taxes in their jurisdiction.

Following that, in the 18th and 19th centuries, entrepreneurship was a popular topic in economic essays. Early French, British, and Austrian economists stood out, writing eloquently about entrepreneurs as the driving force behind progressive economies. Richard Cantillon, a French economist, is credited with being the first to give the concept of entrepreneurship a key place in economics, as detailed in his article in 1755. Entrepreneurs, according to Cantillon, make resource allocation decisions knowingly. Entrepreneurs, he defined, are agents who purchase means of production to combine them to manufacture a product to sell at an undetermined price when they commit to his cost.

In his classic book, Wealth of Nations, published in 1776, Adam Smith defined the term “enterpriser” as someone who forms a company for commercial objectives. In his opinion, entrepreneurs reacted to economic change by becoming economic actors who converted demand into supply. Cantillon’s definition of entrepreneurship gained clarity a few decades later. Another French economist, J.B. Say, defined an entrepreneur in his book A Treatise on Political Economy, first published in 1803, as a person who possessed specific arts and skills for establishing new economic enterprises, as well as an exceptional understanding of society’s needs and the ability to meet them. John Stuart Mill, a British economist, examined the importance of entrepreneurship in the private sector in 1848.

In the nineteenth century, entrepreneurs were referred to as captains of industry. They were risk-takers, decision-makers, and people who wanted to make money. They created new businesses through resource collection and administration.

A significant movement was noted in Austria two decades after J.S. Mill’s announcement. This trend inspired the concept of entrepreneurship in the twentieth century. Carl Menger founded the subjectivist perspective of economics in his book Principles of Economics, published in 1871, in which he argued that economic change is caused by an individual’s consciousness and understanding of particular circumstances rather than by the circumstances themselves. In his opinion, an entrepreneur is a change agent who converts resources into valuable goods and services, establishing the conditions for industrial growth.

In the nineteenth century, entrepreneurs were seen as the captains of industry, risk-takers, and decision-makers. They were the people who wanted to make money and gathered and managed resources to start new businesses. An entrepreneur’s connotation has shifted from captain of industry to an elusive man who profited at the expense of others. For decades, the term “entrepreneur” was relegated to obscurity in economic literature, with management authors and thinkers focusing on manufacturing efficiency and administration.

Joseph Schumpeter, another Austrian economist, rewrote the definition of entrepreneurship. He was the first to understand the relevance of an entrepreneur in economic development as a human agent. Between 1911 and 1950, Schumpeter wrote a series of financial papers and treatises describing entrepreneurship as a force of creative destruction, in which established ways of doing things are destroyed by the emergence of new ones. Entrepreneurship, he believes, is a process that is primarily a creative endeavour. Entrepreneurs are the innovators who bring something new to the economy by combining fresh resources and introducing new business methods. Such innovators, he believes, are uncommon in society and only arrive on the scene of progress periodically.

Max Weber (1864–1920), a German sociologist, emphasised his belief that exogenous beliefs generate creative and entrepreneurial initiatives, which, in turn, produce three intense efforts toward occupational goals and the accumulation of productive assets that lead to the manufacture of goods and services. According to him, society influences the personalities of entrepreneurs and the social environment in which they live.

In recent years, several well-known psychologists, like McClelland, Hagen, and Kunkel, have created a few psychological theories on entrepreneurship and sociological theories developed by Thomas Cochran and Frank Young. McClelland emphasised the relevance of the accomplishment drive in exposing entrepreneurs’ personalities and resulting in economic and social growth. Hagen observed a group of creative individuals forming due to losing social position. As a result, it aided the emergence of entrepreneurs and accelerated economic development. According to Kunkel, individual behavioural patterns are the most critical growth factor. An external trigger can direct such a behavioural pattern. Cochran and Young did not place a high value on society in shaping the personality of entrepreneurs in their theories, instead suggesting that certain factors in society, such as agricultural values, social sanctions, role expectations, and inter-group relations, are responsible for the emergence of entrepreneurs.

Various notions of entrepreneurship had arisen up until the eighteenth century. Since then, the work of management has been acknowledged as critical in terms of business management. The responsibility of entrepreneurs has been outsourced to managers in terms of management. The phrase entrepreneurship isn’t easily defined, and entrepreneurs aren’t easily recognised as individuals. According to modern management experts, entrepreneurship is a behaviour that encompasses an individual’s pursuit of opportunity regardless of the resources held.

Given the above debate, it is reasonable to assume that many researchers have voiced differing viewpoints on the emergence of entrepreneurship. Following are some observations based on an examination of many studies and their findings regarding the evolution of entrepreneurship:

Entrepreneurship has been honoured in numerous places worldwide under various names at various times. Some of the different terms are risk-taking, decision-making, free-thinking, change agency, an act of invention, and so on.

Entrepreneurs have attempted to speed up economic progress by creating their businesses. They tried to accelerate development by appropriately allocating resources, that is, by utilising diverse, productive variables.

Entrepreneurs have played an essential role in society as economic agents and inventors. Up to the 19th century, their importance was limited to Cantillon’s, Adam Smith’s, J.B. Say’s, and J.S. Mill’s theories of risk-taking, decision-making, and economic agency. However, Joseph Schumpeter was the first to recognise the importance of the entrepreneur as an innovator.

1.4 Characteristics of an Entrepreneur

The following are essential attributes of entrepreneurs:

1. A person of exceptional ability: The entrepreneur is seen as someone of extraordinary ability who also serves as a source of motivation for others. He could be a solitary person or a member of a group of people. Whatever he is, he possesses a unique skill that is uncommon among ordinary people.

2. An innovator: He is well-known because he devotes himself to developing new product types, exploring new market vistas, and introducing new manufacturing techniques and methods of industry reconstruction. According to Schumpeter, an entrepreneur’s essential trait is the ability to innovate. The implementation and efficient use of a creative idea are secured through such innovation. Its success leads to commercial success, and a new economic vista opens up. Sasken Communication Technologies, for example, has implemented an innovative personnel policy to attract and retain talent at its Bangalore headquarters. Hibernation is one of the company’s policies, in which employees who have worked for the company for four years are given six weeks of paid leave. They have two weeks of paternity leave, no time in and time out, and a liberal leave policy aside from hibernation. These rules contribute to creating a work-life balance and aid in recruiting and retaining employees.

3. Providing completeness to the components of production: An entrepreneur obtains essential resources from various sources for production, ensuring that the factors of production are complete. He also tries to connect with a variety of markets for his products. He’s a risk taker who also serves as a coordinator.

4. Decision-maker: An entrepreneur is a person who can make sound decisions about establishing a firm, managing it, procuring various factors and distribution techniques, and coordinating various precious resources. He can draw quick conclusions on numerous issues since he has great decision-making power. His capacity for making decisions is a significant factor in his success.

5. A person with a creative personality is recognised as an employer who makes the best use of economic resources and engages in productive activities. He has an innovative personality since he can create something new. As a result, he is renowned as a creative inventor. He develops fresh ideas and nourishes them using his experience, expertise, and intellect. His innovative nature and mentality are shown through all of these endeavours.

6. A basic plan-maker: An entrepreneur is a business owner, employer, producer, market creator, decision-maker, risk-taker, market information coordinator, and user, as well as a creative individual and inventor. As a result, he is considered an economic development pioneer.

7. An entrepreneur is a business owner, employer, producer, market creator, decision-maker, risk-taker, coordinator, consumer of market data, and creative individual and innovator.

8. Dynamic leader: He uses leadership to motivate employees to work in the organization’s best interests.

9. Wealth creator: The entrepreneur employs various resources to produce goods or services. As a result, the entrepreneur develops personal wealth while contributing to the growth of social wealth because new wealth is created due to increased demand for products or services. One of the most essential characteristics of an entrepreneur is the ability to build wealth.

10. Self-assured and ambitious: According to John Hornaday, one of an entrepreneur’s most crucial characteristics is being self-assured and ambitious. One of his distinguishing characteristics for success is his self-assurance. This self-assurance allows him to take on any problem head-on. The harmony between words and work is related to self-confidence. Similarly, he should always have solid ambitions for himself.

11. Risk-taker: An entrepreneur is responsible for all company risks. His business activities cannot be carried out if he is unwilling to take risks. An entrepreneur’s fundamental feature is his ability to take risks. In the case of the production of any new product or service, he must always shoulder the risks. He will have to deal with a variety of dangers. These are dangers related to acquiring raw materials and capital and marketing commodities, and risk-taking is a requirement for his success. This is an integral element of his everyday routine.

12. Entrepreneur: After considering many issues, an entrepreneur begins his venture and, after weighing the benefits and drawbacks of each option, chooses the best one. He must have been a bit of an adventurer when making his decision. This trait is an attitude that leads him to accept the challenge in a variety of challenging conditions.

1.5 Factors Influencing Entrepreneurship

The following are some of the factors that have an impact on entrepreneurship:

1. Educational: Significant modifications in educational patterns are required to make them more relevant to the current requirements and the economic, social, and political environments. More young minds should be trained to develop self-employment opportunities. Designing an appropriate entrepreneurial education curriculum and introducing entrepreneurship as a subject of study, even at the elementary school level, to make young minds recognise the relevance of entrepreneurship is a pressing requirement.

2. Legal: The law must protect the vulnerable until they require assistance. Small-business owners have limited resources and cannot compete with large-scale manufacturers. One legal measure to protect the interests of small-scale entrepreneurs is the reservation of particular products for exclusive production in the small sector.

3. Infrastructure: The government should provide land and factory sheds at reduced rates, appropriate power, water, coal, and other energy sources, transportation infrastructure, waggon availability, raw material supply, and other physical amenities to make it easier to start a new business.

4. Institutional: Entrepreneurs require guidance on appropriate manufacturing lines, raw material sources, financing, and other resources such as technical know-how, tools, and equipment. They must also know business possibilities and dangers, government regulations, international economic developments, technical advancements, etc. Institutions must be built to inform entrepreneurs about these issues that concern them and enable them to convey their difficulties to government officials.

5. Financial: If new businesses are to flourish, they will require sufficient fixed and operating capital. Potential entrepreneurs are discouraged from starting new companies due to a lack of financial resources. The issues are exacerbated in capital-short emerging countries, where companies and industries must cope with an underdeveloped capital market. These countries’ governments should ensure that the capital markets are developed with newer and more innovative capital market tools and strong financial institutions.

6. Procedural: The bureaucratic procedures of government offices, industry departments, and financial institutions are a significant impediment to the development of new businesses. Entrepreneurs must rush to various employment opportunities, fill several government offices for multiple jobs, and complete several formalities mandated by different laws, rules, and regulations. It would be preferable for future and existing entrepreneurs if the number of procedural and legal barriers to entry were minimized and an administrative mechanism was built to address their demands and requirements.

7. Communicational: Many entrepreneurial endeavours face extinction due to a lack of information. Entrepreneurs are unlikely to succeed unless they know market potential, market competition, and technical and other advances. In this regard, government departments, entrepreneurial organisations, financial institutions, and business consultants all have a role to play. An entrepreneur must be successful.

8. Communication and information technology: Modern technology, such as information technology, has permeated every aspect of human life. Faster modes of communication via email, networking, and online technologies have transformed the industrial landscape by providing quick and up-to-date information at various management levels and significantly changing decision-making and implementation procedures.

9. Rapid Changes: The information and communication revolution has dramatically increased networking within and outside the sector. The availability of resources and the exchange of knowledge are causing changes in the sector faster than in the past.

10. Growth: In industries, there has been significant growth in automation and the introduction of computerised production and process controls. The demand for goods and the geographic reach bring in large-scale enterprises and services. In manufacturing marketing, the company’s size benefits from economies of scale.

11. R&D Technology: Companies spend a lot of money on R&D to develop new goods and processes to compete in the global market.

12. Stakeholders: Today’s stakeholders are more informed and receive up-to-date information on industry trends and the advancement of specific industries in which they are interested. As a result, the stakeholder is aware, allowing him to be more involved.

13. Globalization: Because no geographical limits exist, business now occurs in an open atmosphere. As a result, the competition has gotten quite fierce. In today’s market, a company must be very competitive in quality, price, and delivery to thrive.

REVIEW QUESTIONS:

How does an entrepreneur differ from a businessman, and what distinguishes their roles?
Explain the concept of entrepreneurship in your terms.
Create a table illustrating the evolving definitions of entrepreneur and entrepreneurship.
Highlight the distinctions between entrepreneur and entrepreneurship.
Explore the perspectives of notable social scientists on entrepreneurship and entrepreneurship concerning credible online sources.
Examine the key characteristics exhibited by entrepreneurs.
What role does entrepreneurship play in the economic landscape, and why is it significant?
Classify entrepreneurship based on relevant criteria.
Analyze the factors that exert influence on entrepreneurship.
How can information gaps pose challenges for entrepreneurial ventures, and what implications do they have?

Curriculum

Entrepreneurship Management