An entrepreneur is someone who looks for change and reacts to it by launching a business. According to Adam Smith, an entrepreneur is a person who creates a company for commercial purposes after determining there may be a market for their goods and services. By doing this, the entrepreneur serves as an economic agent and changes the relationship between supply and demand. The process through which an entrepreneur creates an entity to make his business ideas a reality is known as entrepreneurship.
“Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity and through the communicative and management skills to mobilize human, financial and material resources necessary to bring a project to fruition,” claim John Kaso and Howard Stavenson.
This definition acknowledges that entrepreneurship entails the fusing of resources, including capital, technology, and human skill, in order to successfully accomplish a project while taking a manageable amount of risk. A person who launches a business is an entrepreneur. Entrepreneurship refers to the act of creating. Entrepreneurship is an act, and the entrepreneur is the performer.
What are the types of Entrepreneurs?
Types of entrepreneurs:
Innovating Entrepreneurs: An innovative businessperson is one who launches new products, implements novel manufacturing techniques, unearths untapped markets, and restructures the company. It is crucial to remember that these businesspeople can only succeed when society has already advanced to a certain point and people are open to change and advancement. They are typical of wealthy nations in general.
Imitative Entrepreneurs: These are characterized by a willingness to absorb technologies that are launched by prosperous innovatory entrepreneurs. They eat up inventions created by inventive businesspeople. Entrepreneurs who copy others’ innovations don’t create the improvements themselves; instead, they only use their methods and tools. Such businesspeople are especially suited to introducing a mushroom drive of imitation of novel combinations of production elements that are currently available in developed regions to underdeveloped areas.
Fabian Entrepreneurs: Fabian business owners are known for their extreme caution and skepticism when it comes to experimenting with and implementing change in their company. They only copy when it is very evident that not doing so will cost them their relative standing in the organization. They lack the motivation to adopt new production techniques because they are timid and sluggish.
Drone Entrepreneurs: Drone business owners are defined by a failure to take advantage of possibilities to change the production process, even at the expense of significantly lower returns compared to other similar producers. Such business owners might even incur losses, yet they are unwilling to alter their current production processes. They fight only to survive, not to advance. They continue to function in a traditional manner and fight change, making them laggards.
What is the need of Entrepreneurship?
The need of Entrepreneurship is:
Entrepreneurship as Career Option: An educated person has broadly two career option. One
is called wage or salary employment, wherein people are employed in government service,
public and private sectors and get fixed wage or salary. The other career option is
entrepreneurial employment under which people set up their new ventures.
is called wage or salary employment, wherein people are employed in government service,
public and private sectors and get fixed wage or salary. The other career option is
entrepreneurial employment under which people set up their new ventures.
Wage
employment does not generate resources and is organized which in the existing wealth. Wage
employment is self-saturating. Once availed, it blocks the employment opportunity to others
for another 10 years. On the other hand, the latter contributes towards national wealth and has
a unique characteristic of self-generation.
employment does not generate resources and is organized which in the existing wealth. Wage
employment is self-saturating. Once availed, it blocks the employment opportunity to others
for another 10 years. On the other hand, the latter contributes towards national wealth and has
a unique characteristic of self-generation.
This starts a chain of activities that create unending
employment opportunities. Entrepreneurship promotes small saving amongst middle class
individuals for investment into new ventures. It also provides an outlet that creates an urge
among individuals to attain excellence in product design and related innovation. Thus,
entrepreneurship provides a lasting solution to the acute problem of unemployment.
employment opportunities. Entrepreneurship promotes small saving amongst middle class
individuals for investment into new ventures. It also provides an outlet that creates an urge
among individuals to attain excellence in product design and related innovation. Thus,
entrepreneurship provides a lasting solution to the acute problem of unemployment.
National Income: National Income consists of goods and services produced in the country
and imported. The goods and services produced are for consumption within the country as well
as to meet the demand of exports.
and imported. The goods and services produced are for consumption within the country as well
as to meet the demand of exports.
The domestic demand increases with ever increasing
population and improving standard of living. The export demand also increases to meet the
needs of growing import due to various reasons. An increasing number of entrepreneurs are
required to meet this increasing demand for goods and services. Thus, entrepreneurship
increases the national income.
population and improving standard of living. The export demand also increases to meet the
needs of growing import due to various reasons. An increasing number of entrepreneurs are
required to meet this increasing demand for goods and services. Thus, entrepreneurship
increases the national income.
Employment Generation: Growing unemployment, particularly educated unemployment is
an acute problem of the nation. The available employment opportunities can cater to only 5 to
10 per cent of the unemployed.
an acute problem of the nation. The available employment opportunities can cater to only 5 to
10 per cent of the unemployed.
If a hundred persons become entrepreneurs they not only
create a hundred jobs for themselves but also provide employment to many more. As the time
passes these enterprises growth providing direct and indirect employment to many more. Thus,
entrepreneurship is the best way to fight the evil of unemployment.
create a hundred jobs for themselves but also provide employment to many more. As the time
passes these enterprises growth providing direct and indirect employment to many more. Thus,
entrepreneurship is the best way to fight the evil of unemployment.
Balanced Regional Development: The growth of industry and business leads to a large
number of public benefits like road transport, health, education, entertainment etc.
number of public benefits like road transport, health, education, entertainment etc.
When the
industries are concentrated in selected cities, the development gets limited to these cities. Till
late sixties, 50 per cent of industrial enterprises were located in only six cities of India. A rapid
development of entrepreneurship ensures a balanced regional development.
industries are concentrated in selected cities, the development gets limited to these cities. Till
late sixties, 50 per cent of industrial enterprises were located in only six cities of India. A rapid
development of entrepreneurship ensures a balanced regional development.
When the new
entrepreneurs grow at a faster pace, in view of the increasing competition in and around the
cities, they are forced to set up their enterprises in the smaller towns away from big cities. This
helps in the development of the backward regions.
entrepreneurs grow at a faster pace, in view of the increasing competition in and around the
cities, they are forced to set up their enterprises in the smaller towns away from big cities. This
helps in the development of the backward regions.
Dispersal of Economic Power: The world affairs have been dominated by power. There have
always been two types of power, i.e., muscle power and economic power. In the modern age,
the muscle power has lost its relevance and the world is ruled by the economic power.
always been two types of power, i.e., muscle power and economic power. In the modern age,
the muscle power has lost its relevance and the world is ruled by the economic power.
Economic power is the natural outcome of industrial and business activity. Industrial
development normally can lead to concentration of economic power in few hands. This
concentration of power in few hands has its own evils in the form of monopolies.
development normally can lead to concentration of economic power in few hands. This
concentration of power in few hands has its own evils in the form of monopolies.
Developing a
large number of entrepreneurs helps in dispersing the economic power amongst the
population. This in turn causes hindrance to the growth of monopolies, which exist partly
because of lack of sufficient number of entrepreneurs. Setting up of a large number of
enterprises for the goods helps in weakening the harmful effects of monopoly.
large number of entrepreneurs helps in dispersing the economic power amongst the
population. This in turn causes hindrance to the growth of monopolies, which exist partly
because of lack of sufficient number of entrepreneurs. Setting up of a large number of
enterprises for the goods helps in weakening the harmful effects of monopoly.
What is the role of Entrepreneurship in Economic Development?
Role of entrepreneurship in economic development:
Capital formation: Entrepreneurs mobilize the idle savings of the public through the issues of
industrial securities. Investment of public savings in industry results in productive utilization of
national resources. Rate of capital formation increases which is essential for rapid economic
growth. Thus, an entrepreneur is the creater of wealth.
industrial securities. Investment of public savings in industry results in productive utilization of
national resources. Rate of capital formation increases which is essential for rapid economic
growth. Thus, an entrepreneur is the creater of wealth.
Improvement in per capita income: Entrepreneurs locate and exploit opportunities. They
convert the latest and idle resources like land, labour and capital into national income and
wealth in the form of goods and services. They help to increase. Net National Product and per
capita income in the country, which are important yardsticks for measuring economic growth.
convert the latest and idle resources like land, labour and capital into national income and
wealth in the form of goods and services. They help to increase. Net National Product and per
capita income in the country, which are important yardsticks for measuring economic growth.
Generation of employment: Entrepreneurs generate employment both directly and
indirectly. Directly, self-employment as an entrepreneur offers the best way for independent
and honourable life. Indirect, by setting up large and small scale business units they offer jobs
to millions. Thus, entrepreneurship helps to reduce the unemployment problem in the country.
indirectly. Directly, self-employment as an entrepreneur offers the best way for independent
and honourable life. Indirect, by setting up large and small scale business units they offer jobs
to millions. Thus, entrepreneurship helps to reduce the unemployment problem in the country.
Balanced regional development: Entrepreneurs in the public and private sectors help to
remove regional disparities in economic development. They set up industries in backward areas
to avail of the various concessions and subsidies offered by the Central and State Governments.
remove regional disparities in economic development. They set up industries in backward areas
to avail of the various concessions and subsidies offered by the Central and State Governments.
Public sector steel plants, and private sector industries by Modis, Tatas, Birlas and other have
put the hitherto unknown places on the international map.
put the hitherto unknown places on the international map.
Improvement in living standards: Entrepreneurs set up industries which remove scarcity of
essential commodities and introduce new products. Production of good on mass scale and
manufacture of handicrafts, etc., in the small scale sector help to improve the standard of life of
a common man. These offer goods at lower costs and increase variety in consumption.
essential commodities and introduce new products. Production of good on mass scale and
manufacture of handicrafts, etc., in the small scale sector help to improve the standard of life of
a common man. These offer goods at lower costs and increase variety in consumption.
Economic independence: Entrepreneurship is essential for national self-reliance.
Industrialists help to manufacture indigenous substitutes of hitherto imported products thereby
reducing dependence on foreign countries.
Industrialists help to manufacture indigenous substitutes of hitherto imported products thereby
reducing dependence on foreign countries.
Businessmen also export goods and services on a
large scale and thereby earn the scarce foreign exchange for the country. Such import sub-
situation and export promotion help to ensure the economic independence of the country
without which political independence has little meaning.
large scale and thereby earn the scarce foreign exchange for the country. Such import sub-
situation and export promotion help to ensure the economic independence of the country
without which political independence has little meaning.
Backward and forward linkages: An entrepreneur initiates change which has a chain
reaction. Setting up of an enterprise has several backward and forward linkages. For example,
the establishment of a steel plant generates several ancillary units and expands the demand for
iron ore, coal, etc. these are backward linkages.
reaction. Setting up of an enterprise has several backward and forward linkages. For example,
the establishment of a steel plant generates several ancillary units and expands the demand for
iron ore, coal, etc. these are backward linkages.
By increasing the supply of steel, the plant
facilitates the growth of machine building, tube making, untensil manufacturing and such other
units.
facilitates the growth of machine building, tube making, untensil manufacturing and such other
units.
How Entrepreneurship and Innovation related to each other?
According to Schumpeter, an entrepreneur is basically an innovator who introduces new
combinations of means of production. Entrepreneurship is a creative activity and the entrepreneur
introduces something new in any branch of economic activity.
combinations of means of production. Entrepreneurship is a creative activity and the entrepreneur
introduces something new in any branch of economic activity.
The carrying out of a new combination
implies employment of productive means in a changed form. It is not necessary that new combination is
carried out by people who control the product or commercial process. A new combination can be
carried out by employing both unused and used means of production.
implies employment of productive means in a changed form. It is not necessary that new combination is
carried out by people who control the product or commercial process. A new combination can be
carried out by employing both unused and used means of production.
As an innovator, entrepreneur
forsees the potentially profitable opportunity and tries to exploit it. He is a problem solver and gets
satisfaction by attacking problems.
Some people believe that innovations are carried out by big firms.
forsees the potentially profitable opportunity and tries to exploit it. He is a problem solver and gets
satisfaction by attacking problems.
Some people believe that innovations are carried out by big firms.
The truth is that most of the
innovations are the handiwork of small firms. Large firms may have strong organisation
structures and management skills but they lack flexibility. Due to their intrinsic flexibility small
firms can react rapidly to new demands and easily exploit new ideas.
innovations are the handiwork of small firms. Large firms may have strong organisation
structures and management skills but they lack flexibility. Due to their intrinsic flexibility small
firms can react rapidly to new demands and easily exploit new ideas.
A large firm working
under the constraints of size and competition tends to perfect existing lines of production in
order to increase profits. On the other hand, a small firm tries to exploit the gaps in the
production system. Unlike the giant, it is not obliged to engage in expensive conversion and can
launch itself on new, narrow or risky markets.
under the constraints of size and competition tends to perfect existing lines of production in
order to increase profits. On the other hand, a small firm tries to exploit the gaps in the
production system. Unlike the giant, it is not obliged to engage in expensive conversion and can
launch itself on new, narrow or risky markets.