Entrepreneur
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.
Definition of entrepreneur
- An entrepreneur is a person who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk.
- An employer of productive labor; contractor.
- Is the one to deal with or initiate as an entrepreneur.
- a decision-maker whose entire role arises out of his alertness to hitherto unnoticed opportunities (Kirzner 1973).
- 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).
Entrepreneur as a 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.
Entrepreneur as an 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.
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) 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.
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.
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.
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.
Some distinguish business entrepreneurs as either "political entrepreneurs" or "market entrepreneurs."
See also
- Entrepreneurship
- Entrepreneurship Education
- Master of Enterprise
- Junior Enterprise
- Young Enterprise
- Independent contractor
- Consultant
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
ReferencesISBN links support NWE through referral fees
- 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.
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)
Notes
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