Entrepreneurship: Definition, Origin, Concept

Definition of Entrepreneurship

The concept of entrepreneurship is understood in different manners by different scholars and authors. There is no one consensual definition of the term among the experts.

Different dimensions have been used to explain the term. The definitions also vary with the passing of time.

Therefore, a chronological description of the movement path of the definitional changes of entrepreneurship would make the understanding clear to the readers.

So, look at and read the following description carefully.

“Entrepreneurship entails bearing the risk of buying at a certain price and selling at uncertain prices.”- Ricardo Cantillon.

The concept focuses on the trading of goods and bearing its associated risk as to the act of entrepreneurship.

“Entrepreneurship is any kind of innovative function that could have a bearing on the welfare of an entrepreneur.”-Joseph A. Schumpeter (1934).

Schumpeter recognizes entrepreneurship as a rewarding activity that involves any form of innovation. Innovation is doing things in a new and better way. It adds utility to existing operations or products.

Entrepreneurship is that form of social decision-making performed by economic innovators.” -Robert K. Lamb (1952).

Lamb describes entrepreneurship as an act of economic activity engaged in innovation. He also points out the social orientation of entrepreneurship as it is involved with social good and welfare.

“Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or aggrandize profit by production or distribution of economic goods and services.” – A.H. Cole (1959).

The definition recognizes entrepreneurship as a deliberate human activity for earning profit through economic activities of production and distribution of goods and services.

It may be an individual or a group activity. But the central focus is profit-making. That is. to initiate, maintain, or increase profit, entrepreneurship is undertaken.

“Entrepreneurship is the dynamic process of creating incremental wealth.” – Robert C. Ronstadt (1984)

Ronstadt explains that wealth is created by individuals who assume the major risks in terms of equity, time, and/or career commitment or provide value for some product or service.

The product or service may or may not be new or unique, but the entrepreneur must somehow infuse value by receiving and locating the necessary skills and resources.

Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.

The writers conceive entrepreneurship as the devoted efforts of individuals to create something of value for the people of society. They also believe that entrepreneurship is a rewarding activity.

It gives not only financial rewards but also freedom and personal satisfaction that are of immense reinforcement for the furtherance of entrepreneurial action. Entrepreneurship, in their view, is also a risk-hearing activity.

Three types of risks are involved with it financial, psychic, and social risks. Entrepreneurship takes these risks and devotes efforts to having rewards by giving mankind something of value.

Therefore, entrepreneurship entails missionary efforts that involve risks to innovate something of value from which the entrepreneur will get financial and psychic rewards.

Why Entrepreneurship Is Part Of The Economy And Society?

Entrepreneurship is the immense strength and human spirit that made the great geographical discoveries of the world possible. Entrepreneurship is vital to bring about changes in the economy and society, not only in a country but also in the world.

It causes the initiation of all types of human activities in the society.

Entrepreneurship is the immense strength and spirit of humanity which made possible the great geographical discoveries of the world.

The astounding forces of man indebted our civilization with various products, technologies, and breakthrough thoughts.

It affects all aspects of life and society’s political-legal, sociocultural, technological, economic, and demographical environment. Entrepreneurship is the pioneering force that connects world societies with its exchange activity from the early period of our human history.

It is a basic strength of business organizations too. The provocation of change toward future business prosperity is the result of the entrepreneurial zeal of the people. Therefore entrepreneurship is a basic discipline to learn for the student of business.

Origin of Entrepreneurship

Entrepreneurship is derived from the French word ‘Entreprendre,’ which means ‘to undertake,’ ‘to pursue opportunities’, or ‘to fulfill needs and wants through innovation and starring businesses.’ The word first appeared in the French dictionary in 1723.

It is believed that the Irish Banker operating in France, Ricardo Cantillon (Kent, 1984), was the first person who used the word ‘entreprendre’ in economics as “an agent who assembles material/inputs for producing goods at a specific price and through coordination of those inputs produces goods whose sales price is uncertain in comparison with production cost.”

It is also believed that the Frenchman J.B. Say (1824) first used the term ‘entrepreneur’ as an economic agent who brought together the factors of production in such a way that new wealth could be created.

Oxford English dictionary adopted the word ‘entreprendre’ as “entrepreneur” in 1897, and it meant; “director or manager of a public musical institution; one who gets up entertainments, especially musical performance.”

Webster’s Third New International Dictionary (1961) takes it as;

‘an organizer of an economic venture, especially one who organizes, owns, manages, and assumes the risk of a business’.

The Oxford English Dictionary revised the meaning of entrepreneur in / 1933 and meant ‘a contractor acting as an intermediary between capital and labor”.

Today, entrepreneurship is used with different meanings, such as innovating, risk-bearing, adventurism, wealth creation, thrill-seeking, etc.

Concept of Entrepreneurship

Like other economic concepts, entrepreneurship has been a subject of much debate and discussion. It is an elusive concept.

Hence, it is defined differently by different authors. While some call entrepreneurship ‘risk-bearing,’ others view its innovation, and yet others consider it ‘thrill-seeking.’ Let us consider some important definitions of entrepreneurship to understand what entrepreneurship is all about.

In a Conference on Entrepreneurship held in the United States, the term ‘entrepreneurship’ was defined as follows:

“Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilize human, financial, and material resources necessary to bring a project to fruition.”

In the opinion ‘of A.H. Cole, “Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or aggrandize profit by production or distribution of economic goods and services.”

According to Schumpeter, “Entrepreneurship is based on purposeful and systematic innovation. It included not only the independent businessman but also company directors and managers who carry out innovative functions.

In all the above definitions, entrepreneurship refers to the functions performed by an entrepreneur in establishing an enterprise. Just as management is regarded as What managers do, entrepreneurship may be regarded as what entrepreneurs do. In other words, entrepreneurship is the act of being an entrepreneur.

Entrepreneurship involves various actions to be undertaken to establish an enterprise. It is, thus, the process of giving birth to a new enterprise.

Innovation and risk-bearing are regarded as the two basic elements involved in entrepreneurship. Let us understand what these two terms mean.

Entrepreneurship Strategy

The following questions guide the entrepreneurship process:

• Why, when, and how do opportunities for the creation of goods and services come into existence?
• Why, when, and how do some people, and not others, discover and exploit these opportunities?
• Why, when, and how are different modes of strategic action used to exploit entrepreneurial opportunities?

The important question is what is the relationship between entrepreneurship and strategy?

Both entrepreneurship and strategic management focus on the ways in which businesses create change by exploiting opportunities they discover within the uncertain environments in which they operate.

Entrepreneurs are able to create wealth by identifying opportunities and then developing competitive advantages to exploit them.

Thus, strategic entrepreneurship is the integration of entrepreneurship and strategic management knowledge.

Entrepreneurship strategy emphasizes the key strategic roles of creativity, opportunity identification, opportunity evaluation and implementation, and continual innovation in the emergence and growth of entrepreneurial businesses.

Innovation and Entrepreneurship

Innovation, i.e., doing something new or something different, is a necessary condition to be called a person as an entrepreneur.

Entrepreneurs are constantly on the lookout to do something different and unique to meet the customers’ changing requirements.

They may or may not be inventors of new products or new methods of production, but they possess the ability to foresee the possibility of making use of the inventions for their enterprises. Let some facts speak.

To satisfy customers’ changing preferences, fruit juice is sold in small cartons (Mango Fruity) instead of bottles so that customers can carry it and throw away the container after drinking the juice. Let us take another example.

Lipton offers its tea in small packs known as ‘PUDIYAS’ to meet the requirements of its rural customers.

You may have heard of Henry Ford, the founder of the Ford Motor Company in the United States.

Remember, Henry Ford himself did not invent the automobile. Foreseeing the people’s desire to have passenger cars at somewhat lower rates, he applied new mass production methods to offer customers an affordable price.

Since customers’ tastes and preferences always keep changing, the entrepreneur needs to apply invention after invention continuously to meet the customers’ changing demands for products.

Risk-Bearing and Entrepreneurship

Starting a new enterprise always involves risk, and trying to do something new and different is also risky.

The reason is not difficult to seek. The enterprise may earn profits or incur losses because of various factors like increasing competition, changes in customer preferences, shortage of raw materials, etc.

An entrepreneur, therefore, needs to be bold enough to assume the risk involved in the enterprise.

He needs to be a risk-taker, not a risk-avoider. His risk-bearing ability enables him, even if he fails in one time or one venture, to persist on and on, which ultimately helps him succeed.

The Japanese proverb applies to him; “Fall seven times, stand up eight.”