Entrepreneurship
Understanding entrepreneurship, business creation, and the factors that influence entrepreneurial success
What is Entrepreneurship?
The term entrepreneurship is derived from the French word “entreprendre”, which means to undertake. It has no direct equivalent in English and is different things to different people. In the earliest times, it was defined as risk-taking and associated with people who traded: buying and selling goods. Because prices could change between the time of purchase and that of sale, the traders took risk, and this taking risk was seen as the defining feature of entrepreneurs. Entrepreneurship has also been described as innovation, defined to include:
- Introduction of new products
- Opening new markets
- New ways of production or technology
The process is further described as creative destruction — old products and ways replaced with improved new ones — and is said to be what drives economic development.
In economics, entrepreneurship is defined as the fourth factor of production, which organises the other three — land, labour, and capital — and without which these others cannot be productive.
More frequently, entrepreneurship is identified with profit and growth, and associated with a small group of exceptionally ambitious people, captains of industry, who create highly successful enterprises and who seem to have a Midas touch: Everything they touch turns to gold.
Entrepreneurship & Business Creation
- While there is no unanimous agreement, and people define it differently, the emergent consensus is that entrepreneurship is about business creation, that the difference between entrepreneurs and non-entrepreneurs is simply that entrepreneurs create businesses while non-entrepreneurs do not.
- Business creation itself starts as a business idea and involves turning the idea into an actual business. It involves: – Identifying an opportunity for the business idea – Evaluating the opportunity – Mobilising resources to carry out the business
- A business idea can be defined as an expression of goods or services you may want to offer, based on your interest and general understanding of the market. A business opportunity is a situation in the market where the goods or services of your business idea can be sold at a price above cost, in significant quantities, and over a reasonably long period. Any business is created to meet an identified need. Profit is made in the process.
- As many businesses die early while many do not grow to potential, to have practical benefit, entrepreneurship may need to be defined, not only as business creation but also to include business growth.
Factors Influencing Entrepreneurship
- Initially, entrepreneurship was associated with personality traits. These are personality characteristics that one is born with, and which influence behaviour. Traits associated with entrepreneurship include being risk-taking, innovative or creative, or having a desire for autonomy or independence, among others.
- An alternative view is that individuals become entrepreneurs because of their birth characteristics and upbringing. Males, firstborns, and those exposed to small business operators or parents are seen as more likely to start businesses.
- Much more currently, entrepreneurship is associated with attitude. Attitude is the way one thinks and feels about someone or something, which may be positive or negative and influences the person’s behaviour towards the object. The key attitudes considered to influence entrepreneurship include one’s view of self-employment as:
– Personally desirable
– Supported or appreciated by the community
– Feasible
- The view of self-employment as desirable is compared to one being employed. Its view as desired by the community, is the view of self-employment as valued or appreciated by others, and feasible is its view as something one can successfully undertake.
- An entrepreneur may therefore be viewed not as something that one is, but something one becomes.
Key Issues
Some issues attract debate in entrepreneurship. Among these are:
- Can entrepreneurship be learned?…. YES
- Can everybody be an entrepreneur? …NO
- Entrepreneurship and the informal sector
Based on the view that entrepreneurship is due to personality traits, it cannot be learned. Research and observation however strongly suggest that while children may be born with certain temperaments — curiosity, confidence, or boldness — entrepreneurial traits are largely developed through nurturing. A child becomes innovative, creative, and willing to take risks when their environment supports exploration, and entrepreneurship can be learned.
Based on the view that it is due to demographic and background factors, it similarly includes characteristics that can be learned and some that cannot be. From the view that it is linked to attitude, it is possible to mould attitude, and entrepreneurship can be learned.
The predominant view is that entrepreneurship can be learned. The learning can take place through training, mentorship and interacting with successful entrepreneurs.
While whether everybody can be an entrepreneur could be of interest, the more useful perspective is that a larger number could be helped to become entrepreneurs than presently realised.
Can Entrepreneurship Be Learned? YES
Based on the view that entrepreneurship is due to personality traits, it was believed it cannot be learned. However, research and observation strongly suggest otherwise.
While children may be born with certain temperaments — curiosity, confidence, or boldness — entrepreneurial traits are largely developed through nurturing. A child becomes innovative, creative, and willing to take risks when their environment supports exploration. The predominant view is that entrepreneurship can be learned through:
- Formal training and education
- Mentorship programs
- Interacting with successful entrepreneurs
- Practical business experience
- Learning from failures and successes
Can Everyone Become an Entrepreneur? NO
- While entrepreneurship can be learned, this doesn’t mean everyone can or should become an entrepreneur.
- Different people have different interests, strengths, and preferences. Some individuals thrive in structured employment, while others excel in the uncertainty and independence of entrepreneurship.
- However, the more useful perspective is that a larger number of people could be helped to become entrepreneurs than is presently realized. With proper training, support, and resources, many more individuals have the potential to successfully create and grow businesses.
Entrepreneurship and Self-Employment
Entrepreneurship and self-employment are closely related but not identical concepts.
Self-employment refers to working for oneself rather than for an employer. This includes freelancers, independent contractors, and small business owners. Entrepreneurship typically involves:
- Identifying business opportunities
- Taking calculated risks
- Creating value through innovation
- Building scalable businesses
- Managing growth and expansion
While all entrepreneurs are self-employed, not all self-employed individuals are entrepreneurs in the traditional sense. The distinction often lies in the level of innovation, growth orientation, and value creation involved.
Entrepreneurship and the Informal Sector
- The informal sector comprises two main categories:
– People self-employed in very small and micro enterprises and not registered
– Individuals employed in jobs without contract or security, such as domestic workers - Some claim that informal businesses perpetuate poverty, that they trap people in low-productivity subsistence-level activities and call for them to be abandoned. The history of many businesses, however, shows that even micro-enterprises can grow to become large companies. Some of the large-scale businesses started at the smallest level.
- The informal sector is also a major source of employment and income generation for the low-income population. It also provides critical links for the formal sector businesses, providing raw materials and distribution outlets.
- From their benefits and prospects, some consider informal businesses entrepreneurial and have labelled them “informal entrepreneurship.” The challenge then, is how to help the enterprises access the support necessary for growth.