MODULE 1: CONCEPT AND PRINCIPLES OF ENTREPRENEURSHIP
1.0
INTRODUCTION
We welcome you to the first module of this course. This module gives a detailed explanation of
the concept and principles of entrepreneur. We will take you through the origin of entrepreneurship
and show you some definitions of entrepreneurship. Understanding the core principles of
entrepreneurship is also very important in being a successful entrepreneur.
1.1
LEARNING OUTCOMES
At the end of this Module, you should be able to:
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Discuss the origin of entrepreneurship
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Discuss the various definitions of entrepreneurship
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Differentiate between entrepreneur and entrepreneurship
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State types of entrepreneurs
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List the characteristics of a successful entrepreneur
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Describe the Roles of Entrepreneurs
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Understand the core principles of entrepreneurship
1.2 EVOLUTION OF ENTREPRENEURSHIP
ENTREPRENEURSHIP - THE ORIGIN
The concept entrepreneur is derived from the French concept “entreprendre” which literarily is
equivalent to the English concept “to undertake” simply means to start a business.
Schumpeter (1951) opined that the French economist Richard Cantillon, was the first to introduce
the concept "entrepreneur" in his work in 1755. He viewed the entrepreneur as a risk taker (Burnett,
2000).
Some scholars contend that it was an economist, Jean-Baptiste Say, who analysed the concept in
an advanced way in his work in 1821 where he identified entrepreneur as new economic
phenomenon
Adam Smith, David Ricardo, and John Stuart Mill who have written extensively on it, albeit
referring to it as "business management”.
Alfred Marshall buttressed Mill’s view by formally recognizing entrepreneurship as an important
factor of production in 1890; he viewed entrepreneurship as organization creation and believed
that entrepreneurship is the driving element behind organization (Schumpeter, 1951; Burnett,
2000).
Schumpeter (1951) concludes that by combining the various disparate theories, a generalized set
of entrepreneurship qualities can be developed.
Schumpeter then listed the characteristics of entrepreneurs as: risk-bearers, coordinators and
organizers, gap-fillers, leaders, and innovators or creative imitators.
1.3 DEFINITIONS OF ENTREPRENEURSHIP
Cantillon (circa 1730) views entrepreneurship as: “self-employment of any sort”.
Joseph Schumpeter (1934) equated entrepreneurship with the concept of innovation and applied it
to a business context, while emphasizing the combination of resources.
Penrose (1963) views entrepreneurship as the activity that involves identifying opportunities
within the economic system.
Leibenstein (1968, 1979) perceives entrepreneurship as involving "activities necessary to create
or carry on an enterprise where not all markets are well established or clearly defined and/or in
which relevant parts of the production function are not completely known”.
Gartner (1988) conceives entrepreneurship as the creation of new organizations.
Okpara (2000) defines entrepreneurship as the willingness and ability of an individual to seek out
investment opportunities in an environment and be able to establish and run an enterprise
successfully based on the identifiable opportunities.
Nwachukwu (1990) regards entrepreneurship as a process of seeing and evaluating business
opportunities, gathering the necessary resources to take advantage of them and initiate appropriate
action to ensure success.
In summary, entrepreneurship is a function, which involves the exploitation of opportunities that
exist within a market.
1.3.1 Definitions of an Entrepreneur
Putari (2006) quoted Say (1816) who asserts that the entrepreneur is the agent “who unites all
means of production and who finds in the value of the products...the reestablishment of the entire
capital he employs, and the value of the wages, the interest, and rent which he pays, as well as
profits belonging to himself."
— Knight (1921) views entrepreneurs as individuals who attempt to predict and act upon change
within markets.
— Schumpeter (1934) conceives the entrepreneur as the innovator who implements change within
markets through the carrying out of new combinations such as introduction of new techniques of
production, re-organisation of an industry and innovation.
— Schumpeter (1934) further argues that the entrepreneur is an innovator, one that introduces new
technologies into the workplace or market, increasing efficiency, productivity or generating new
products or services (Deakins and Freel, 2009).
— Cantillon (circa 1730) conceptualized the entrepreneur as: the "agent who buys means of
production at certain prices in order to combine them" into a new product (Schumpeter, 1951).
— In Quick MBA (2010), the entrepreneur is defined as one who combines various input factors
in an innovative manner to generate value to the customer with the hope that this value will exceed
the cost of the input factors, thus generating superior returns that result in the creation of wealth.
1.3.2 Definition of Intrapreneur
—When an entrepreneur is not able to establish his or her own business and as such has to work in
an organization is referred to as “Intrepreneurs” i.e. entrepreneurs within an organization.
— These individuals are entrepreneurs in their own right because they pursue the exploitation of
business opportunities as they emerge and are visionaries within a given organization.
1.3.3 Definition of Technopreneur
—An individual whose business is in the realm of high technology, who at the same time has the
spirit of an entrepreneur.
— A technopreneur’s business involves high technology or to put it more clearly a technopreneur
is a technological innovator and a business man all combined in one individual (Ogundele, 2007).
1.4. TYPES OF ENTREPRENEUR
1.4.1 Innovative Entrepreneur
An entrepreneur is preoccupied with introducing something new into the market, organization or
nation. They are interested in innovations and invest substantially in research and development.
1.4.2 Imitating Entrepreneur
—These are also referred to as ‘copy cats’.
— They observe an existing system and replicate it in a better manner.
— They could improve on an existing product, production process, technology and through their
vision create something similar but better.
— This is the case of the student becoming better than the master!
1.4.3 Fabian Entrepreneur
—These are entrepreneurs that are very careful and cautious in adopting any changes.
— They are lazy and shy away from innovations.
1.4.4 Drone Entrepreneur
—These are entrepreneurs that are resistant to change.
— They are considered as ‘old school’.
— They prefer to stick to their traditional or orthodox methods of production and systems.
1.5. CHARACTERISTICS OF ENTREPRENEURSHIP
1.5.1 Creative Activity
Entrepreneurship entails innovations. It deals with product innovation, production techniques
innovation while bearing in mind the market;
1.5.2
Dynamic Process
Entrepreneurship is a dynamic process that has to bear in mind the dynamic business environment.
1.5.3
Purposeful Activity
Entrepreneurship is an activity embarked upon for a specific purpose. This could be for profit
making purposes, for humanitarian purposes or to bring a difference to the market.
1.5.4 Involves Risk
—Entrepreneurship is a very risky venture; entrepreneurial decisions can have far-reaching impact
on the organization, people in the organization and even the economy.
— These decisions are critical, enormous and cannot be easily reverted.
1.6. CHARACTERISTICS OF AN ENTREPRENEUR
An entrepreneur must possess the following characteristics
— Risk bearing ability
— Technical Knowledge
— Ability to gather financial and motivational resources
— Self-confidence and multi-skilled
— Confidence in the face of difficulties and discouraging circumstances
— Innovative skills
— Results-oriented
— Risk-taker
— Total commitment
— Calm
— Focused
— Tolerance
— Balance
— Versatility
— Seriousness
— Planning ability
— Prudence
— Customer-centric
— Team player
1.7. ROLES OF AN ENTREPRENEUR
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— Figure Head Role
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— Leader Role
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— Liaison Role
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— Monitor Role
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— Information Disseminator Role
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— Spokesman Role
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— Entrepreneurial Role
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— Disturbance Handler
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— Resource Allocator
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— Negotiator role
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— Social Roles of Entrepreneur
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Economic Roles of Entrepreneur
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Transformation of traditional indigenous industry into a modern enterprise
Stimulation of indigenous entrepreneurship.
Job or employment creation in the community.
Provision of social welfare service of redistributing wealth and income.
Bearing the ultimate risk of uncertainty
Mobilising savings necessary for the enterprise
Providing channel for the disposal of economic activities
Utilising local raw materials and human resources
Technological Roles of Entrepreneur
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Stimulation of indigenous technology in the production process.
Adapting traditional technology to modern system
Adapting imported technology to local environment
Developing technological competence in self and the workforce through innovation
(Ogundele, 2007)
1.8. PRINCIPLES OF ENTREPRENEURSHIP
1.8.1
Principle Number 1: Know Who You Are
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Explore your strengths and weaknesses
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Look out for what you are good at, search for new ideas that will give you an edge over
your competitors
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Embrace knowledge, seek necessary information and learn new skills that are relevant to
your potential business.
1.7.2 Principle Number 2: Go for the right Business/Opportunity
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Do a lot of findings, consult existing entrepreneurs in your line of business
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Prepare a viable business plan for you to make the right choices.
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Devote your time, energy and assets to the prospective business to achieve good success.
1.7.3 Principle Number 3: Invest in people and build successful teams
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Assemble a team of people with requisite skills, who share your vision and passion
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Always receive feedback to know your strength(s) or weakness(es)
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Link yourself with customers, suppliers, investors, etc. for business success.
1.7.4 Principle Number 4: Always Build an Engaging Value
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Define your organisational value, make it clear and always emphasize it.
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Value is a tool that motivates your team to perform optimally that may have been viewed
as unbearable.
1.7.5 Principle Number 5: You must break the link between the hours worked and the
values you create
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Don’t just work hard, work smart.
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You must be focused and persistent to achieve the desired result(s).
1.9. CONCEPT OF ENTREPRENEURSHIP DEVELOPMENT
Entrepreneurship development (ED) refers to the process of enhancing entrepreneurial skills and
knowledge through structured training and institution-building programmes. This accelerates
employment generation and economic development.