entrepreneur

For the computer game previously called Entrepreneur, see The Corporate Machine.

An entrepreneur (a loanword from French) is a person who undertakes and operates a new enterprise or venture and assumes some accountability for the inherent risks. In the context of the creation of for-profit enterprises, entrepeneur is often synonomous with founder.

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 outcome (see entredonneur).

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. Business entrepreneurs are often highly regarded in U.S. culture as critical components of its capitalistic society.

Famous American entrepreneurs include: John D. Rockefeller (Oil) , Henry Ford (automobiles), J. Pierpont Morgan (banking), Thomas Edison (electricity/light bulbs), George Eastman (cameras), Barron Collier (advertising), Milton S. Hershey (confections), J.R. Simplot (agriculture), Estee Lauder (cosmetics), Oprah Winfrey (television), Martha Stewart (media), Sam Walton (department stores), Larry Ellison (database systems), Bill Gates (computer operating systems and applications) and Steve Jobs (computer hardware, software).

Famous British entrepreneurs include: Richard Branson (travel and media), James Dyson (home appliances) and Alan Sugar (computers).

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

Defining entrepreneur

Dictionary Definition of Entrepreneur:

1. a person who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk.

2. an employer of productive labor; contractor. –verb (used with object)

3. to deal with or initiate as an entrepreneur. –verb (used without object)

4. to act as an entrepreneur.

An entrepreneur is someone who organizes a system to create a product or service in order to gain profit. However, there is a general sense that entrepreneurship involves the establishment of a new venture while adopting some of the risk and being ready for failure. There is no general definition for the word, as it has been used in a large variety of ways and has been commonly defined differently by different people. Some scholars of entrepreneurship, such as Prof. W. Long have tried to develop a specific definition by looking at the historical use of the word, as it evolved (Outcalt 2000). Perhaps the first person to create a theory about modern entrepreneurs would be Schumpeter, although instead of using the French word adopted by the American literature, he used the German word "unternehmer", and "unternehmergeist" (spirit of entrepreneurship).

Entrepreneur as a risk bearer

Richard Cantillon, an Irish man living in France, was the first to introduce the term entrepreneur and his unique risk bearing function in economics during the early 18th century. He defined an 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 to. Mark Casson has extended this notion to characterize entrepreneurs as decision makers who improvise solutions to problems which cannot be solved by routine alone.

Entrepreneur as an organiser

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.

Functional and indicative approach to entrepreneur definition

Mark Casson divides the approach of defining entrepreneur into two parts, the first being the functional approach which states that an entrepreneur is what entrepreneur does. Second, the indicative approach provides a description of the entrepreneur by which he may be recognized. The indicative approach maybe more concrete: it can describe entrepreneur in terms of legal status, relation with other parties, position in society, etc. An entrepreneur is an individual whose specialism and economic contribution refer to allocation of factors of production.

Entrepreneur as a person willing to engage uncertainty

Frank Knight, in his seminal contribution to economics Risk, Uncertainty and Profit (1921), defines uncertainty as a primary attribute of his entrepreneurship theory. If there were no uncertainty no losses would be made. Risk is calculable, uncertainty is not. Entrepreneur is a person who is willing to put his career and capital on an uncertain venture.

Entrepreneur as a leader

More recently, researchers such as R. B. Reich have argued that leadership, management ability, and team-building should be added to the definition of entrepeneur.

In western financial circles since the early 1990's, the term has often been applied to those who are simply opportunistic. While the first to take advantage of any opportunity could be considered a leader, that alone should be insufficient to qualify one as an Entrepreneur. Instead, a hallmark would be one who creates opportunity. A succinct example: Sell a man a fish, you have sold one fish. Teach a man to fish, and you can sell him bait for life.'

Nature or Nurture (origins of the entrepreneur)

There are two theories about how entrepreneurs develop, often called the "supply" and "demand" theories. In the supply theory, entrepreneurs are born, not made -- certain people have the personality traits that make a good entrepreneur. 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 the entreprenuer, according to supply-side theorists. John G. Burch, writing in the September-October 1986 edition of Business Horizons gave a list of in-born traits that make an entrepreneur:

• A desire to achieve: The push to conquer problems, and give birth to a successful venture.
• Hard work: It is often suggested that many entrepreneurs are workaholics.
• Desire to work for themselves: Entrepreneurs like to work for themselves rather than working for an organization or any other individual. They may work for someone to gain the knowledge of product or service that they may want to produce.
• 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. Some entrepreneurs may be driven more by altruism than by self-interest.
• Reward orientation: Desire to achieve, work hard, and take responsibility, but also with a commensurate desire 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.

In academic circles, however, the "demand" theory is now generally more prevalent. The demand theory holds that entrepreneurs emerge out of the combination of entrepreneurial opportunities and people who are well-positioned to take advantage of them. Thus, anyone who encounters the right conditions might become an entrepreneur, if they find themselves in a position where they find a valuable problem that they alone can solve. Scholars studying the demand theory try to understand the conditions under which entrepreneurs appear, particularly in understanding how differences in the information various people have (see Austrian School economics) creates entrepreneurial opportunities, and how environmental factors (access to capital, competition, etc.) change the rate of entrepreneurship. Entrepreneurs are an important part of the society.

See also

• Entrepreneurship
• Master of Enterprise
• Junior Enterprise
• Young Enterprise

External links

• NirmaLabs NirmaLabs, the most recent initiative of Nirma Education and Research Foundation – NERF, is an incubator to spawn High Tech Knowledge based Wealth Generation ventures. Located on Nirma University campus at Ahmedabad in India, it is a technology incubator primarily focussed on technology entrepreneurship and technology start ups.

• The Businessmakers Radio Show The BusinessMakers is a weekly podcast focused on championing entrepreneurship. The show features successful entrepreneurs sharing their very personal stories about building and growing successful businesses
• TeachAManToFish - Entrepreneurial Education for Poverty Reduction
• Entrepreneur's Web in the Philippines Pinoy-Entrepreneur was put-up to to guide beginners, and established business owners as well, find sources that can guide them to the right questions and the best answers.
• [1] The IEEE-USA Entrepreneurs Village has been established to support those people who create entrepreneurial businesses based on technology.
• U.S. Small Business Administration
• Starting a Business - from U.S. Internal Revenue Service

References

• Binks, M. and Vale, P. (1990). Entrepreneurship and Economic Change. Maidenhead: McGraw-Hill.

• Casson, M. (2005). 'Entrepreneurship and the theory of the firm'. Journal of Economic Behavior & Organization, 58 (2) , 327-348

• Hebert, R.F. and Link, A.N. (1988). The Entrepreneur: Mainstream Views and Radical Critiques. New York: Praeger, 2nd edition.

• Knight FH (1921/61). Risk uncertainty and profit. Kelley, 2nd edition.

• Maria T. Brouwer (2002). 'Weber, Schumpeter and Knight on entrepreneurship and economic development'. Journal of Evolutionary Economics, vol. 12(1-2), p. 83. Heidelberg.

Resources

• ACashFlow.com - Comprehensive source offers legitimate money making ideas for online entrepreneurs. Honest reviews of proven cash flow internet home business opportunities. Internet marketing tools and resources to start and run a home based business successfully.
• Many entrepreneurs congregate on the startup community website goBIGnetwork.com*[2] The website is a resource to help entrepreneurs find funding for their businesses, find startup talent, and connect with people who can help them grow their businesses faster and bigger.
• The Entrepreneur's Dictionary - The Guide for Startup Business Terms
• The Entrepreneur's Home Business Guide
• Entrepreneur Manufacturing Network

Theories of the Firm

• Long, W. (1983). The meaning of entrepreneurship. American Journal of Small Business, 8(2), 47-59. (c971086)
• Outcalt, Charles, (2000). 'The Notion of Entrepreneurship: Historical and Emerging Issues'. Cellcee digest. Kauffman Center for Entrepreneurial Leadership.
• Reich, R. B. (1987, May/June). Entrepreneurship reconsidered: The team as hero. Harvard Business Review. (c96187)