Entrepreneur
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An entrepreneur (a loanword from French introduced and first defined by the Irish economist Richard Cantillon) is a person who undertakes and operates a new enterprise or venture and assumes some accountability for the inherent risks. Entrepreneurship is often difficult, as many new ventures fail. In the context of the creation of for-profit enterprises, entrepreneur is often synonymous with founder.
Most commonly, the term entrepreneur applies to someone who creates system to offer a product or service in order to obtain certain profit.
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 viewed as fundamentally important in the capitalistic society.
Some distinguish business entrepreneurs as either "political entrepreneurs" or "market entrepreneurs."
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[edit] Definition
- Someone who seeks to capitaize on new and profitable endeavors.
- Schumpeter’s (1934) entrepreneur uses available resources in novel ways.
- Cantillon's (1755) entrepreneur engaged in arbitrage of processes and ideas as well as good to establish equilibrium by assuming the risk and uncertainty inherent in an economic society (Spengler 1954, 286)
- Say's (1803) entrepreneur was a master manufacturer who assigned the value to goods in production (Koolman 1971, 271).
[edit] Entrepreneur as a risk bearer
An entrepreneur can be 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 the 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.
Definition
A decision-maker whose entire role arises out of his alertness to hitherto unnoticed opportunities
An entrepreneur is one who combines the land of one, labor of another and the capital of yet another, and, produces a product. By selling the product in the market, he pays interest on capital, rent on land and wages to laborers. What remains is his or her profit. Around 80 percent of entrepreneurs fail with their business enterprise. To be successful your product needs to be new to the consumer, and something you think will sell.
Entrepreneur is sometimes mistakenly equated with "opportunist". An entrepreneur may be considered one who creates an opportunity rather than merely exploits it, though that distinction is difficult to make precisely. Joseph Schumpeter (1934) and William Baumol (1980) consider more opportunistic behavior such as arbitrage one role of the entrepreneur as he helps to generate innovation or mobilize resources to address inefficiencies in the marketplace.
Academics have two classes of theories of how people become entrepreneurs, called supply and demand theories, after economics. In the demand theory, anyone could be recruited by circumstance or opportunity to become an entrepreneur. Most entrepreneurs get paid depending on their business' success.
[edit] Entrepreneur as a leader
Scholar R. B. Reich (citation) considers leadership, management ability, and team-building as essential qualities of an entrepreneur. This concept has its origins in the work of Richard Cantillon in his Essai sur la Nature du Commerce en Général (1755) and Jean-Baptiste Say (1803) in his Treatise on Political Economy.
[edit] Supply vs demand theories
Business academics have two classes of theories of how people become entrepreneurs, called supply and demand theories, after economics. In the demand theory, anyone could be recruited by circumstance or opportunity to become an entrepreneur.
Several research studies have shown that entrepreneurs are convinced that they can command their own destinies. Behaviorial scientists express this view by saying that entrepreneurs perceive the "locus of control" to be within themselves. It is this self-belief which stimulates the entrepreneur, according to supply-side theorists.
A more generally held theory is that entrepreneurs emerge from the population on demand, from the combination of opportunities and people well-positioned to take advantage of them. The entrepreneur may perceive that they are among the few to recognize or be able to solve a problem. In this view, one studies on one side the distribution of information available to would-be entrepreneurs (see Austrian School economics) and on the other, how environmental factors (access to capital, competition, etc.) change the rate of a society's production of entrepreneurs.
[edit] Personality characteristics
John G. Burch (Business Horizons, September 1986) lists traits typical of entrepreneurs:
- 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 the 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.
[edit] See also
- Entrepreneurship education
- Master of Enterprise
- Junior Enterprise
- Young Enterprise
- Independent contractor
- Consultant
- Famous Entrepreneurs
- Internet Entrepreneur
- They play pattle ball
[edit] References
- Baumol, W. (1980).
- Binks, M. and Vale, P. (1990). Entrepreneurship and Economic Change. Maidenhead: McGraw-Hill.
- Brouwer, M.T. (2002). 'Weber, Schumpeter and Knight on entrepreneurship and economic development'. Journal of Evolutionary Economics, vol. 12(1-2), p. 83.
- Cantillon, R. (1755). Essai sur la Nature du Commerce en Général
- 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.
- Kirzner, I. (1973). Competition and Entrepreneurship.
- Knight, F.H. (1921/61). Risk uncertainty and profit. Kelley, 2nd edition.
- Schumpeter, J.A. (1934). The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle
- Spengler, J.J. (1954).
[edit] 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)
[edit] Popular Literature
- Komisar, Randy, "The Monk and the Riddle", Harvard Business School Press, 2000. ISBN 1578511402
[edit] External links
- Inc.com: The Daily Resource for Entrepreneurs
- U.S. Small Business Administration
- Starting a Business - from U.S. Internal Revenue Service
- Ernst and Young - Entrepreneur of the Year Awards
- EO Network - Young Entrepreneurs Organisation -World Wide
- Entrepreneur company start-ups in Ireland
- German Information- and Newsportal for Entrepreneurs
