Difference between revisions of "Entrepreneur" - New World Encyclopedia
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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 [[United States|U.S.]] culture as critical components of its [[capitalism|capitalistic]] society. | 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 [[United States|U.S.]] culture as critical components of its [[capitalism|capitalistic]] society. | ||
| − | == | + | == Characteristics of an Entrepreneur == |
| − | + | An entrepreneur is a person who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk. They are an employer of productive labor. | |
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| − | + | === Risk Bearer === | |
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An entrepreneur is 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. | An entrepreneur is 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. | ||
| − | === | + | === Organizer=== |
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. | 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. | ||
| − | === | + | === Leader === |
| − | + | R. B. Reich 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) ''Treatise on Political Economy''. | |
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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 precise. 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. | 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 precise. 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. | ||
| − | = | + | ===Personality Characteristics=== |
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| − | ==Personality Characteristics== | ||
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John G. Burch[''Business Horizons'', September 1986] lists | John G. Burch[''Business Horizons'', September 1986] lists | ||
traits typical of entrepreneurs: | traits typical of entrepreneurs: | ||
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* '''Organization''': Are good at bringing together the components (including people) of a venture. | * '''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. | * '''Profit orientation''': Want to make a profit; but the profit serves primarily as a meter to gauge their success and achievement. | ||
| + | |||
| + | ==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. [[Behavioural sciences|Behaviorial scientists]] express this 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|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. | ||
| + | |||
| + | ==History of Entrepreneurship== | ||
| + | '''Entrepreneurship''' is the practice of starting new [[organization]]s, particularly new [[business]]es generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. | ||
| + | |||
| + | The understanding of entrepreneurship owes a lot to the work of economist [[Joseph Schumpeter]] and the [[Austrian School]] of [[economics]]. In Schumpeter (1950), an entrepreneur is a person who is willing and able to convert a new idea or [[invention]] into a successful [[innovation]]. Entrepreneurship forces "[[creative destruction]]" across markets and industries, simultaneously creating new products and [[business model]]s others. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. Despite Schumpeter's early 20th-century contributions, the traditional [[microeconomic]] theory of [[economics]] has had little room for entrepreneurs in their theoretical frameworks (instead assuming that resources would find each other through a price system). | ||
| + | |||
| + | Entrepreneurship received a boost in the formalized creation of so-called incubators and science parks (e.g., those listed at NBIA.org) where businesses can start at a small scale, share services and space while they grow, and eventually move into space of their own when they have achieved a large enough scale to be viable stand-alone businesses. Also, entrepreneurship is being employed to revitalize fading downtowns and inner cities, which may have excellent resources but suffer from a lack of spirited development. | ||
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| + | [[Image:Conceptual Timeline.png|right|thumb|250px|Conceptual and theoretic developments in entrepreneurship history. Adapted from [http://www.emeraldinsight.com/Insight/viewContentItem.do?contentType=Article&contentId=1537775 Murphy, Liao, & Welsch (2006)]]] | ||
| + | [[Image:entrepreneurship history.png|right|thumb|250px|Some notable persons and their works in entrepreneurship history.]] | ||
| + | |||
| + | For [[Frank H. Knight]] (1967) and [[Peter Drucker]] (1970) entrepreneurship is about taking [[risk]]. The behavior of the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as [[capital (economics)|capital]] on an uncertain venture. | ||
| + | |||
| + | Still another view of entrepreneurship is that it is the process of discovering, evaluating, and exploiting opportunities, which go on to reify themselves in the form of new business ventures. In this model an entrepreneur could be defined as "someone who acts with ambition beyond that supportable by the resources currently under his control, in relentless pursuit of opportunity" (a definition common to entrepreneurship professors Howard Stevenson and Jeffry Timmons). Pinchot (1985) coined the term [[Intrapreneurship]] to describe entrepreneurial-like activities inside organizations and government. The concept is commonly referred to as Corporate Entrepreneurship. | ||
| + | |||
| + | The place of the disharmony-creating and idiosyncratic entrepreneur in traditional economic theory (which describes many efficiency-based ratios assuming uniform outputs) presents theoretic quandaries. [[William Baumol]] has added greatly to this area of economic theory and was recently honored for it at the 2006 annual meeting of the [[American Economic Association]]. | ||
| + | |||
| + | Entrepreneurship is widely regarded as an integral player in the business culture of American life, and particularly as an engine for job creation and economic growth. [[Robert Sobel]] published ''The Entrepreneurs: Explorations Within the American Business Tradition'' in 1974. | ||
==Famous/Exemplary Entrepreneurs== | ==Famous/Exemplary Entrepreneurs== | ||
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Famous Asian entrepreneurs include [[Akio Morita]], [[Konosuke Matshushita]], [[Soichiro Honda]], [[Eiji Toyoda]] and many more contributed to consumer electronics and transportation industry. | Famous Asian entrepreneurs include [[Akio Morita]], [[Konosuke Matshushita]], [[Soichiro Honda]], [[Eiji Toyoda]] and many more contributed to consumer electronics and transportation industry. | ||
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==References== | ==References== | ||
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* Schumpeter, J. (1950) ''Capitalism, Socialism, and Democracy'', 3rd edition, Harper and Row, New York, 1950. | * Schumpeter, J. (1950) ''Capitalism, Socialism, and Democracy'', 3rd edition, Harper and Row, New York, 1950. | ||
* Shane S., (2003) ''A general theory of entrepreneurship : the individual-opportunity nexus '' in New Horizons in Entrepreneurship series, Edward Elgar Publishing. | * Shane S., (2003) ''A general theory of entrepreneurship : the individual-opportunity nexus '' in New Horizons in Entrepreneurship series, Edward Elgar Publishing. | ||
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== External links == | == External links == | ||
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*[http://kellerblog.com/?p=45 Basic framework for developing a business concept into a business] | *[http://kellerblog.com/?p=45 Basic framework for developing a business concept into a business] | ||
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{{Credit2|Entrepreneur|101232159|Entrepreneurship|106509093|}} | {{Credit2|Entrepreneur|101232159|Entrepreneurship|106509093|}} | ||
Revision as of 01:59, 26 February 2007
An entrepreneur (a loanword from French introduced and first defined by an Irish economist named Richard Cantillon) 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, entrepreneur is often synonymous 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.
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.
Characteristics of an Entrepreneur
An entrepreneur is a person who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk. They are an employer of productive labor.
Risk Bearer
An entrepreneur is 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.
Organizer
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.
Leader
R. B. Reich 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) Treatise on Political Economy.
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 precise. 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.
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 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.
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 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.
History of Entrepreneurship
Entrepreneurship is the practice of starting new organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities.
The understanding of entrepreneurship owes a lot to the work of economist Joseph Schumpeter and the Austrian School of economics. In Schumpeter (1950), an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship forces "creative destruction" across markets and industries, simultaneously creating new products and business models others. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. Despite Schumpeter's early 20th-century contributions, the traditional microeconomic theory of economics has had little room for entrepreneurs in their theoretical frameworks (instead assuming that resources would find each other through a price system).
Entrepreneurship received a boost in the formalized creation of so-called incubators and science parks (e.g., those listed at NBIA.org) where businesses can start at a small scale, share services and space while they grow, and eventually move into space of their own when they have achieved a large enough scale to be viable stand-alone businesses. Also, entrepreneurship is being employed to revitalize fading downtowns and inner cities, which may have excellent resources but suffer from a lack of spirited development.
For Frank H. Knight (1967) and Peter Drucker (1970) entrepreneurship is about taking risk. The behavior of the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as capital on an uncertain venture.
Still another view of entrepreneurship is that it is the process of discovering, evaluating, and exploiting opportunities, which go on to reify themselves in the form of new business ventures. In this model an entrepreneur could be defined as "someone who acts with ambition beyond that supportable by the resources currently under his control, in relentless pursuit of opportunity" (a definition common to entrepreneurship professors Howard Stevenson and Jeffry Timmons). Pinchot (1985) coined the term Intrapreneurship to describe entrepreneurial-like activities inside organizations and government. The concept is commonly referred to as Corporate Entrepreneurship.
The place of the disharmony-creating and idiosyncratic entrepreneur in traditional economic theory (which describes many efficiency-based ratios assuming uniform outputs) presents theoretic quandaries. William Baumol has added greatly to this area of economic theory and was recently honored for it at the 2006 annual meeting of the American Economic Association.
Entrepreneurship is widely regarded as an integral player in the business culture of American life, and particularly as an engine for job creation and economic growth. Robert Sobel published The Entrepreneurs: Explorations Within the American Business Tradition in 1974.
Famous/Exemplary Entrepreneurs
Famous American entrepreneurs include:
- Christopher Gardner (stock brokerage)
- Sean Combs (music industry/media/fashion/movie production/restaurants/television/entertainer)
- Madame C J Walker (hair care products)
- Ben Cohen (Ben & Jerry's Ice Cream)
- Jerry Greenfield (Ben & Jerry's Ice Cream)
- Michael Dell (computer retail)
- Dave chalk (electronic superstores)
- Andrew Carnegie (steel)
- Jeff Bezos (retail)
- Bill Gates (software)
- Sergey Brin (search engines)
- Tom Carvel (founded Carvel Brand Ice Cream and was the first person to use franchising as a business model)
- Barron Collier (advertising)
- Larry Ellison (database systems)
- George Eastman (photography)
- Thomas Edison (electro-mechanics)
- Henry Ford (automobiles)
- Sylvan Goldman (shopping carts)
- Milton S. Hershey (confections)
- Ray Kroc (fast food restaurants)
- Steve Jobs (computer hardware, software)
- Scott A. Jones (voicemail, ChaCha search engine)
- Estee Lauder (cosmetics)
- J. Pierpont Morgan (banking)
- Elisha Otis (elevators)
- Larry Page (search engines)
- Elmer Sperry (avionics)
- John D. Rockefeller (oil)
- J.R. Simplot (agriculture)
- Donald Trump (Real estate)
- Ted Turner (media)
- Sam Walton (department stores)
- Thomas J. Watson Sr. (computers)
- Richard DeVos & Jay Van Andel (marketing)
- Li Ka Shing (manufacturing and telecommunications turned conglomerate)
- Howard Schultz (coffee franchise)
- Reed Hastings (online DVD rentals)
- Russell Simmons (media)
- Mark Cuban (e-commerce, HDTV, sports)
Famous Australian entrepreneurs include
- Dick Smith (electronics).
- Gerry Harvey (auction house turned to homewares and electronics retailer)
- Frank Lowy (shopping centre real estate)
Famous British entrepreneurs include:
- Richard Branson (travel and media)
- James Dyson (home appliances)
- Alan Sugar (computers).
Famous French entrepreneurs include Francis Bouygues and Bernard Arnault.
Famous German entrepreneurs include Werner von Siemens and Ferdinand von Zeppelin.
Famous Greek entrepreneurs include Stelios Haji-Ioannou.
Famous Swedish entrepreneurs include Ingvar Kamprad (home furnishing).
Famous Indian entrepreneurs include Rajat Gupta,Vinod Khosla,Kanwal Rekhi and many more who contributed to silicon valley's entrepreneur revolution. Also include Dhirubhai Ambani,Narayana Murthy,Azim Premji and many more who contributed to Indian entrepreneur revolution.
Famous Asian entrepreneurs include Akio Morita, Konosuke Matshushita, Soichiro Honda, Eiji Toyoda and many more contributed to consumer electronics and transportation industry.
ReferencesISBN links support NWE through referral fees
- Bird, B. (1992)"The Roman God Mercury: An Entrepreneurial Archetype", Journal of Management Enquiry, vol 1, no 3, September, 1992.
- Busenitz, L. and Barney, J. (1997) "Differences between entrepreneurs and managers in large organizations", Journal of Business Venturing, vol 12, 1997.
- Cantillon, R. Essai sur la Nature du Commerce in Général. 1759 [1]
- Casson, M. (1982) The Entrepreneur: An Economic Theory Reprint. 1991.
- Casson, M. (2003) The Entrepreneur: An Economic Theory, second edition", Edward Elgar Publishing 2003.
- Cole, A. (1959) Business Enterprise in its Social Setting, Harvard University Press, Boston, 1959.
- Collins, J. and Moore, D. (1970) The Organization Makers, Appleton-Century-Crofts, New York, 1970.
- Corrigan, S (2005) "The Entrepreneur's Guide to the Business cycle" [2]
- Drucker, P. (1970) "Entrepreneurship in Business Enterprise", Journal of Business Policy, vol 1, 1970.
- Florida, R. (2002) The Rise of the Creative Class: And How It's Transforming Work, Leisure, Community and Everyday Life. Perseus Books Group.
- Folsom Jr., Burton W. (1987) The Myth of the Robber Barons, Young America.
- Hebert, R.F. and Link, A.N. (1988) The Entrepreneur: Mainstream Views and Radical Critiques. New York: Praeger, 2nd edition.
- Knight, K. (1967) "A descriptive model of the intra-firm innovation process", Journal of Business of the University of Chicago, vol 40, 1967.
- McClelland, D. The Achieving Society, Van Nostrand, Princeton NJ, 1961.
- Murphy, P. J. (2004). A logic for entrepreneurial discovery. UMI/ProQuest Learning and Information Company.
- Murphy, P. J., Liao, J., & Welsch, H. P. (2006). A conceptual history of entrepreneurial thought. Journal of Management History, 12(1), 12-35.
- Pinchot, G. (1985) Intrapreneuring, Harper and Row, New York, 1985.
- Price, J. (2006) The Entrepreneur's Dictionary CompanyCrafters LLC
- Sarasvathy,S. (2001). What makes entrepreneurs entrepreneurial? Working paper, University of Washington. [retrieved from http://www.effectuation.org/ftp/effectua.pdf]
- Schumpeter, J. (1950) Capitalism, Socialism, and Democracy, 3rd edition, Harper and Row, New York, 1950.
- Shane S., (2003) A general theory of entrepreneurship : the individual-opportunity nexus in New Horizons in Entrepreneurship series, Edward Elgar Publishing.
External links
- U.S. Small Business Administration
- Starting a Business - from U.S. Internal Revenue Service
- Basic framework for developing a business concept into a business
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