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.
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 US culture as being a critical component
of its capitalistic society.
Famed entrepreneurs in America include: Henry Ford (automobiles),
J. Pierpont Morgan (banking), Thomas Edison (electricity/light bulbs),
Barron Collier (advertising), Milton S. Hershey (confections), Bill
Gates (computer operating systems and applications), and Steve Jobs
(computer hardware, software).
Defining 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. 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 .
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. Entrepeneurs are an important
part of the society
