Ave Maria College

COLLEGE OF INFORMATION AND TECHNOLOGY

HEI Unique Institutional Identifier: 09077

GE 12- THE ENTREPRENEURIAL MIND

LESSON 1: ENTREPRENEUR AND ENTREPRENEURSHIP

The concept of entrepreneurship has been around for a very long time. Usually anyone who runs a business is called an
entrepreneur. The more precise meaning of entrepreneur is one who creates his own business i.e a person who organizes,
operates and assumes the risk of a business venture. An entrepreneur is a person who perceives a need and then brings
together manpower material and capital required to meet that needs. The concept of entrepreneurship is an age-old
phenomenon that relates to the vision of an entrepreneur as well as its implementation by him. Entrepreneurship is a
creative and innovative response to the environment. It is also the process of setting up a new venture by the entrepreneur.
Entrepreneurship is a composite skill that is a mixture of many qualities and traits such as imagination, risk-taking, ability
to harness factors of production i.e. land, labour, technology and various intangible factors. Entrepreneurship culture
implies a set of values, norms and traits that are conducive to the growth of entrepreneurship. It is the organizational
culture that focuses on new opportunities and creation of a set-up where these opportunities can be perused earnestly. An
entrepreneur seeks the opportunities, looks for ways and means to capitalize on the newer opportunities by organizing the
structure and the resources and gaining control on them.

A. DEFINING ENTREPRENEUR

The word “entrepreneur” is derived from French word ‘entrepreneur’ on the early part of 16 th century it was
applied to those who were engaged in military expedition on the 17 th century the word ‘entrepreneur’ was used for
civil engineering activities such as construction and fortification. It was applied to business for the first time in
18th century, to designate a dealer who buys and sells goods at uncertain prices. The French economist Cantillon,
the first to introduce the term entrepreneur, defined him as an agent who purchased the means of production for
combination into marketable products. Furthermore, at the moment of the factor purchases, the entrepreneur was
unaware of the eventual price which he would receive for his product.

Entrepreneurs perform a vital function in economic development. They have been referred to as the human agents
needed to “mobilize capital, to explore natural resources, to create markets and to carry on trade”. It might well be
said that the entrepreneurial input spells the difference between prosperity and poverty among nations. By nature,
an entrepreneur is neither a technician nor a financier, but he is considered an ‘innovator’. Entrepreneurship is
neither a profession nor a permanent occupation and, therefore, it cannot formulate a social class like capitalists or
wage earners. According to Harbison, an entrepreneur is not an ‘innovator’ but an ‘organization builder’ or one
who has the skill to build an organization and who must be able to harness the new ideas of different innovators to
the best of the organization.

Whatever be the definition, across the world entrepreneurs have been considered instrumental in initiating and
sustaining socioeconomic development. There are evidences to believe that countries which have proportionately
higher percentage of entrepreneurs in their population have developed much faster as compared to countries
which 8 have lesser percentage of them in the society. They discover new sources of supply of materials and
markets and establish new and more effective forms of organizations. Entrepreneurs perceive new opportunities
and seize them with super normal will power and energy, essential to overcome the resistance that social
environment offers.

By nature, an entrepreneur is neither a technician nor a financier, but he is considered an “innovator”.

Entrepreneurship is neither a profession nor a permanent occupation and, therefore, it cannot formulae a social
class like capitalist or wage earners. During the twentieth century, Dewing equated entrepreneur with business
promote and viewed the promoter as one who transformed ideas into a profitable business.

B. CHARACTERISTICS OF AN ENTREPRENEUR

An entrepreneur is a highly achievement oriented, enthusiastic and energetic individual, who has following characteristic:
1. Entrepreneurs are action oriented, highly motivated individuals who takes risks to achieve goals.
2. Entrepreneurs will have unwavering determination and commitment. They are creative and result-oriented. They
work hard in return for personal and financial rewards.
3. Entrepreneur accepts responsibilities with enthusiasm and endurance.
4. Entrepreneur have self-confidence, they are dedicated, setting self-determined goals and markets for their ideas
responding to existing market.
5. Entrepreneurs are thinkers and doers, planners and workers.
6. Entrepreneurs can for see the future, as a salesman’s persuasiveness, a financial talent for manipulating funds, as
auditor’s precision etc.
7. Entrepreneur depends on the intelligence, imagination and strength of purpose of the individual.
 C. TYPES OF ENTREPRENEUR

1. Empirical entrepreneur hardly introduces anything revolutionary and follows the principle of rule of thumb.
2. Rational entrepreneur is well informed about the general economic conditions and introduces changes that look
more revolutionary.
3. Cognitive entrepreneur is well informed, draws upon the advice and services of experts and introduces changes
that reflect complete break from the existing scheme of things.
4. Private Entrepreneur is motivated by profit and as such would not enter those sectors of the economy in which
prospects of monetary rewards are not bright. General infrastructure industries fall under this category.
5. Public Entrepreneur in the less developed countries the entrepreneurial functions of the government has greatly
widened due to the lack of sufficient private entrepreneurs.
6. Innovating Entrepreneur is one who assembles and synthesizes information and introduces noval combinations of
factors. He is an aggressive figure and an industrial leader.
7. Imitative entrepreneur also known as the adoptive entrepreneur that simply adopts successful innovations
introduced by other innovators.
8. Fabian entrepreneur is a timid and cautions, he will imitate other innovations only if he is certain that failure to
do may damage his business.

D. CONCEPTS OF ENTREPRENEUR

The term “entrepreneurship” is often used synonymously with the “entrepreneur”. Though they are two sides of the
same coin, conceptually they are different. The entrepreneur is essentially a business leader and the functions
performed by him are entrepreneurship. Arthur H. Cole has stated that entrepreneurship is the purposeful activity of
an individual or a group of associated individuals undertaken to initiate, maintain or organize a profitoriented business
unit for the production or distribution of economic goods and services. The following table can be given to distinguish
the entrepreneur from entrepreneurship.

Entrepreneur Entrepreneurship

Refers to a person Refers to a process

Visualizer Vision

Creatore Creation

Organizer Organization

Innovator Innovation

Technician Technology

Initiator Initiative

Decision-maker Decision

Planner Planning

Leader Leadership

Motivator Motivation

Programmer Action

Risktaker Risk-taking

Communicator Communication

Administrator Administration

Entrepreneurship refers to a process of action an entrepreneur undertakes to establish his enterprise. It a creative and
innovative response to the environment. It is thus a cycle of actions to further the interests of the entrepreneur.
Entrepreneurship can be defined as an ability to discover, create or invent opportunities and exploit them to the benefit
of the society, which, in turn, brings prosperity to the innovator and his organization. From the social and macro-
economic perspective, it is held that the economic development of any nation is a direct function of the number of high-
quality innovators and entrepreneur it supplies.
Entrepreneurship means the function of creating something new, organizing and coordinating and undertaking risk and
handling economic uncertainty. D.C. McClelland has identified two characteristics of entrepreneurship. Firstly, doing
things in a new and better way. Secondly, it is decision-making in conditions of uncertainty; Benjamin Higgins has
defined entrepreneurship as, “entrepreneurship means the function of foreseeing investment and production opportunity,
organizing an enterprise to undertake a new production process, raising capital, hiring labour, arranging for the supply of
raw materials and selecting top managers for the day-to-day operation of the enterprise”.
According to Peter F. Drucker; “Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base.
Knowledge in entrepreneurship is a means to an end. Indeed, what contributes knowledge in practice is largely defined by
the ends, that is, by the practice”. In Drucker’s view, entrepreneurship is considerably less risky, if the entrepreneur is
methodical and does not violate elementary and well-known rules. There is no doubt that entrepreneurship is a complex
phenomenon. But a systematic and disciplined approach can help entrepreneurship to grow and develop. Modern writers
have identified the following three phases in entrepreneurship development:
a. Initial Phase- creation of awareness about the entrepreneurial opportunities based on survey.
b. Development Phase- implementation training programs to develop motivation and managerial skill.
c. Support Phase- infrastructural support of counselling-assisting to establish a new enterprise and to
develop existing units.

E. CHARACTERISTICS OF ENTREPRENEURSHIP

Above study of entrepreneurship has shown that the process of entrepreneurship is indeed complex and also when we say
entrepreneur is what an entrepreneur does. Experts have enlisted the characteristics of entrepreneurship as follows:
1. Ability to create enterprise: Entrepreneurship is primarily an economic activity because it involves creation and
operation of an enterprise. It is basically concerned with satisfying the needs of customer with the help of production and
distribution of goods and services.
2. Organizing function: An entrepreneur brings together various factors of production for an economic use. He co-
ordinates and controls the factors of production, efforts of the persons engaged in his enterprise.
3. Innovation: Entrepreneurship is an automatic, spontaneous and creative response to changes in the environment. It
involves innovation of something new to cause dynamic change and spectacular success in the economy, and create
conditions for growth of the economy.
4. Risk bearing capacity: Risk is an inherent and inseparable element of entrepreneurship. He assumes the uncertainty of
future. An entrepreneur guarantees rent to the landlord, wages to employees and interest to the investors in the hope of
earning more than the expenses.
5. Managerial and leadership functions: An industrial entrepreneur must have additional personality traits such as
managerial and leadership skills. Managerial and leadership qualities predominant orientation in the direction of
productivity, working relation and creative integration along with desire to make profit. Entrepreneurship demands tactful
handling of risk and uncertainties because new commodity and its acceptability are uncertain.
6. Gap filling: The gap filling between human needs and the available products and services leads to entrepreneurship. An
entrepreneur identifies the gap and takes necessary corrective measures to fin the gap, to achieve his action-oriented
motive in the enterprise as an entrepreneur with the help of entrepreneurship process.

F. ENTREPRENEURIAL TRAITS

The true entrepreneur is one who is endowed with more than average capacities in the task of organizing and coordinating
the various other factors of production. He should be a pioneer, a captain of industry. The supply of such entrepreneurship
is, however, quite limited and all are not endowed with such talent. The modern entrepreneur is one who detects and
evaluates a new situation in his environment and directs the making of such adjustments in the economic system as he
deems necessary. He conceives a new industrial enterprise, displays considerable initiative, grit and determination in
bringing his project to fruition. Thus, a successful entrepreneur must possess the following traits:
1. Mental Ability - consists of intelligence and creative thinking. An entrepreneur should be intelligent and must
have an analytical mind. He should have the capacity to engage in the analysis of various problems and situations
in order to deal with them. The entrepreneur should anticipate changes and must be able to study the various
situations under which decisions have to be made.
2. Clear Objectives- an entrepreneur should have a clear objective as to the exact nature of the business, nature of
the goods to be produced and ancillary activities to be undertaken. A successful entrepreneur must have the
objective to establish his product in the market, make profit and also render social service.
3. Business Secrecy- an entrepreneur must be able to guard business secrets. Leakage of business secrets to trade
competitors is a serious matter which should be carefully guarded against by an entrepreneur. Here the
entrepreneur should be able to make a proper selection of his subordinates.
4. Human Relations Ability - the most important entrepreneurial traits contributing to his success are emotional
stability, personal relations, consideration and tactfulness. In other words, maintenance of public relations or
human relations most often makes the difference between success and failure of an entrepreneur. An entrepreneur
must have good relations with his customers in order to gain their continued patronage and win their confidence
in his product. He must also maintain good relations with his employees, if he is to motivate them to higher levels
of efficiency. An entrepreneur who maintains good human relations with customers, employees, suppliers,
creditors and the community in general is much more likely to succeed in his endeavors than the individual who
does not practice good human relations.
5. Effective Communication- the “gift of the gab” is a must for a successful entrepreneur. Good communication also
means that the entrepreneur has the ability to put his point across effectively and with clarity. Communication
 must be to the point, crisp and convincing. Communication ability is the secret of the success of most
entrepreneurs.
6. Technical Knowledge- the entrepreneurs are dealing with situations where sophisticated technology is involved.
The entrepreneur must have a reasonable level of technical knowledge. This is one trait which entrepreneurs can
acquire if they try hard enough.
7. Decision making -running a business requires taking a number of decisions. Hence, an entrepreneur should have
the capacity to analyses the various aspects of the business for arriving at a decision.
8. Energy- as constant attention is required for the successful running of the business, an entrepreneur must have
sufficient energy to work hard for long periods.
9. Risk-bearing - ‘No-risk, no business’ or ‘no-risk, no gains. There is an element of risk in every business, hence an
entrepreneur should be prepared to accept failure in its proper perspective and view failure as a challenge and
opportunity.

Apart from these basic traits, Robert D. Hisrich has identified a few more entrepreneurial traits. In his opinion the
entrepreneur must have adequate commitment, motivation and skill to start and build a business. It is his responsibility to
determine if the management team has the complementary skills necessary to succeed. Hisrich feels that the entrepreneur
must possess the following traits in addition to those mentioned in the preceding paragraphs:
a. Motivation: An entrepreneur must build an efficient team, keep it motivated and provide an environment for
individual growth and career development.
b. Self-confidence: Entrepreneurs must have the mental capacity to face any situation. They should also have the
ability to inspire others. They must have the confidence in themselves and the determination to achieve their
goals.
c. Long-term involvement: Entrepreneurs must be committed to long-term projects which require continuous and
consistent involvement.
d. High energy level: Success of an entrepreneur demands the ability to work long hours for sustained periods of
time.
e. Trouble-shooter: The entrepreneur must possess the trait of the proverbial “trouble-shooter”. He must have the
ability to identify where a problem is and suggest on the spot solutions.
f. Initiative: The entrepreneur must have initiative, accepting personal responsibility for actions and above all make
good use of resources. It is this trait which gives the entrepreneur the courage to risk and learn from failures.
g. Goal-setter: An entrepreneur must be able to set challenging, but realistic goals. This personal trait can go a long
way in the all-round progress of a nation.

These personal traits make an entrepreneur a successful person. However, it must be stated that no entrepreneur possesses
all these strengths. No entrepreneur is born with all these traits. It is possible for him to acquire these traits if the
environment is suitable for this purpose.