University of Mines and TechnologyTarkwa
Lecture One: Entrepreneurship and small
business
OUTLINE
 The Evolution of Entrepreneur and Entrepreneurship
 Definitions of Entrepreneurship and Entrepreneur
 Types of Entrepreneurs
 Reasons Why People Become Entrepreneurs
 Definition of Personality
 Characteristics of Entrepreneur
 Functions of an Entrepreneur
 Types of Entrepreneur
 The entrepreneur’s Role in Business
 Intrapreneurship and Intrapreneur
 Entrepreneurship and the Environment
 Advantages and Disadvantages of Entrepreneurship
 The Role of Small Business in Economic Development
1
Evolution of Entrepreneur and Entrepreneurship
2
 The word ‘entrepreneur’ is derived from the French word ‘entreprendre’ which means ‘to undertake’.
 EARLY PERIOD: The earliest notion of an entrepreneur as an intermediary dates back to Marco Polo.
He sought to establish trade routes to the Far East and would enter into contracts with venture
capitalists to sell his goods. The venture capitalist assumed the risk, while the merchant adventurer
managed the trading. After successfully selling the goods and completing his trips, the profits were
shared by the capitalist and the merchant.
 MIDDLE AGES: The term entrepreneur referred to a person who was managing large projects. He did
not take any risk but managed the projects using the resources provided. These projects were often
commissioned by wealthy individuals, noble families or even the church.
•
An example is the cleric who was in charge of great architectural works such as castles, public
buildings, and cathedrals.
 17th CENTURY: In the 17th century, an entrepreneur was defined as an individual who engaged in
contractual agreements with governments to provide specified services or goods. In these agreement,
the entrepreneur assumed the responsibility of bearing any financial risks associated with their
ventures, thereby either reaping profits or bearing losses.
Evolution of Entrepreneur and Entrepreneurship
cont’d
3
 18th CENTURY: In the 18th century, Richard Cantillon, a notable French economist, is credited with applying the
term "entrepreneur" to business and is often regarded as its founder. Cantillon's definition of an entrepreneur
emphasized the core aspect of uncertainty in their activities.
• According to Cantillon, an entrepreneur is an individual who purchases factor services, such as labor and capital, at
certain prices with the intention of selling the resulting goods or services at uncertain prices in the future. The key
distinction in Cantillon's definition lies in the element of risk and uncertainty associated with entrepreneurial
endeavors.
• By emphasizing the uncertain nature of entrepreneurial activities, Cantillon's definition highlighted the unique role of
entrepreneurs as risk-takers and opportunity-seekers.
 19th CENTURY: During the 19th century, the roles of entrepreneurs and managers were not clearly distinguished,
as they were primarily perceived from an economic perspective. An entrepreneur was seen as an individual who
willingly assumed risks and utilized their own initiative and skills to establish and operate a business venture. They
were responsible for planning, organizing, and leading their enterprise, taking on the primary decision-making and
strategic responsibilities.
Evolution of Entrepreneur and Entrepreneurship cont’d
4
 20th CENTURY: In the early 20th century, there was a shift in the perception of entrepreneurs, particularly influenced by the work
of economist David Dewing. During this period, Dewing equated the role of the entrepreneur with that of a business promoter.
According to Dewing's perspective, a promoter was an individual who played a crucial role in taking innovative ideas and
transforming them into viable and profitable businesses.
•
However, Joseph Schumpeter provided a different perspective, describing an entrepreneur as an innovator who pioneers
untested technologies and introduces new products or methods to the market.
•
This expanded view of the entrepreneur in the early 20th century highlights the importance of their ability to transform ideas into
profitable ventures, emphasizing their role as innovators, organizers, and promoters of business opportunities.
 21st CENTURY: This era is characterised by globalisation and digital age. With the advent of the internet and digital
technologies, barriers to entry have significantly decreased, enabling individuals from around the world to embark on
entrepreneurial journeys.
•
E-commerce, social media, and digital marketing have emerged as critical tools for modern entrepreneurs, revolutionizing the
way businesses operate and reach their target audience.
•
Modern entrepreneurs are often seen as visionaries who identify and exploit new opportunities. Prominent examples of such
modern entrepreneurs include Elon Musk, known for his ventures like Tesla and SpaceX, Jeff Bezos, the founder of Amazon, and
Mark Zuckerberg, who co-founded Facebook.
Definition of Entrepreneur and Entrepreneurship
5
The term entrepreneur is used in various ways and various views. These views are broadly classified into three
groups, namely risk bearer, organizer and innovator.
 Entrepreneur as Risk Bearer: According to Richard Cantillon, the entrepreneur as a risk bearer is an agent who
buys factors of production at certain prices in order to combine them into a product with the of selling it at uncertain
prices in the future.
• This viewpoint emphasizes the entrepreneur's role in taking on the uncertainties and risks associated with investing
in and operating a business.
 Entrepreneur as an Organizer: The entrepreneur as an organizer, as described by Jean-Baptiste Say, is someone
who brings together land, labor, and capital from different sources to produce a marketable product.
• By selling the product, the entrepreneur pays rent for the use of land, wages to laborers, and interest on capital,
with the remaining amount being their profit.
• This perspective highlights the entrepreneur's role in coordinating and organizing various resources to create value.
 Entrepreneur as an Innovator: Joseph A. Schumpeter introduced the concept of the entrepreneur as an innovator.
According to Schumpeter, entrepreneurs play a crucial role in driving economic development through dynamic
changes and innovations.
 Hence, an entrepreneur can be defined as a person who tries to create something new, organizes production,
undertakes risks, and handles economic uncertainty associated with running the business enterprise.
Definition of Entrepreneur and Entrepreneurship cont’d
6
The term "entrepreneur" can be viewed from two distinct perspectives: that of an economist and that of a
psychologist.
From an economist's perspective, an entrepreneur is someone who combines resources, labor, materials,
and other assets in ways that increase their collective value. This individual is also an agent of change,
introducing innovations and new methods that drive economic progress.
From a psychologist's perspective, an entrepreneur is driven by intrinsic motivations, such as the need to
achieve, experiment, accomplish goals, or perhaps to escape the authority and constraints imposed by
others. This drive propels them to undertake the challenges and uncertainties associated with
entrepreneurial ventures.
 Entrepreneurship
Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations,
particularly
new
businesses
generally
in
response
to
identified
opportunities.
In general, entrepreneur refers to the person and entrepreneurship defines the process.
Reasons why people become entrepreneurs
7
People become entrepreneurs and start their firms for various reasons, but three primary motivations often
stand out:
 Being one’s own boss (Independence and Autonomy): Many people are driven by a strong desire to be
their own boss, make their own decisions, and control their professional
lives. Thisanalysis
sense of freedom and
General dominance
self-reliance can be gratifying and serve as a source of motivation for many individuals.
 To pursue their ideas (passion). Many individuals have a strong desire to work in fields they are
genuinely passionate about, and starting their firm gives them the chance to align their work with their
interests. TSLS was employed to resolve endogeneity issue
associated with the link between DFI, FL and DL
 Financial rewards. Entrepreneurship offers the potential for financial success and wealth creation. By
running their own firms, entrepreneurs have the opportunity to create value, generate profits, and build
personal wealth.
Instrumental variable quintile regression
Entrepreneurial Personality
8
 Personality is defined as the characteristics of an individual that cause consistent patterns in that individual’s
behaviour over time.
 Personality is discussed in terms of traits.
 A trait is a characteristic, usually expressed as a dimension on which a person can be measured
 Personality trait therefore, refers to relatively enduring characteristics inside the individual that are likely to
predispose that individual of particular beliefs, attitudes and behaviour.
Characteristics of Entrepreneur
In order to be successful, an entrepreneur should have the following qualities:
 Opportunity-seeking
 Risk Taking
 Planning
 Goal Setting
 Persuasion
 Persevering
 Problem-solving
 Self-confidence
Functions of an entrepreneur
9
 Idea Generation: Idea generation involves the entrepreneur's ability to come up with innovative and creative
business concepts. This process may involve brainstorming, market research, trend analysis, and personal
experiences to spark innovative ideas for potential business ventures.
 Determination of Business Objectives: Once the entrepreneur has generated an idea, they need to establish clear
and specific business objectives. These objectives define the direction and purpose of the venture.
 Raising of Funds: All the activities of the business depend upon the finance and hence fund raising is an important
function of an Entrepreneur
•
An Entrepreneur can raise funds from internal sources as well as external sources.
• He should also have complete knowledge of government-sponsored schemes like MASLOC, Youstart, NEIP in
which he can get government assistance in the form of seed capital, fixed and working capital for his business.
 Recruitment of Manpower: Entrepreneurs are responsible for identifying the required skills, competencies, and
experiences needed for their business and recruiting suitable personnel.
• This function involves selecting and hiring individuals who align with the company's values and can contribute to
achieving its objectives.
Functions and types of entrepreneurs
10
 Implementation of the Project: Once the necessary resources, including funds and manpower, are in place,
entrepreneurs must execute their business plans effectively.
• This function involves taking concrete steps to transform ideas into reality.
• Successful implementation requires strong leadership, effective decision-making, and the ability to adapt to
changing circumstances.
Types of Entrepreneurs
Today various types of Entrepreneurs are found engaged in different types of activities, not only in industrial activities
but also in agriculture and commercial activities. Entrepreneurs are classified in a number of ways as discussed below.
A. According to the Type of Business
o Business entrepreneur: discovers an idea to start a business and then builds a business to give birth to his idea.
o Industrial entrepreneur: undertakes manufacturing activities.
o Corporate entrepreneur: also known as an intrapreneur is an employee within a larger organization who identifies
opportunities for innovation and growth within the company and takes initiative to develop new products, services,
or processes.
o Trading Entrepreneur: engages in buying and selling of goods.
o Agricultural entrepreneur: Also known as agripreneur involved in agricultural activities such as raising and marketing
of crops, fertilizers, and other inputs of agriculture
Types of entrepreneurs
11
B. According to the use of technology
o Technical entrepreneurs: They are extremely task-oriented. They are of craftsman type. They develop new and
improved quality goods because of their craftsmanship.
o Non-technical entrepreneurs: They lack specialized technical skills but possess other valuable qualities or
expertise that contribute to their entrepreneurial success. Thus, they are not concerned with the technical aspects
of the product. They develop marketing techniques and distribution strategies to promote their business.
o Professional entrepreneurs: they leverage their expertise gained from a specific profession to start and grow a
business. This type of entrepreneur often comes from fields such as law, medicine, accounting, or consulting
C. According to Motivation
o Pure entrepreneurs: Driven by innovation and a strong entrepreneurial spirit, they create and grow businesses
from their vision and innate qualities
o Induced entrepreneurs: Start businesses due to external influences or incentives, such as government support or
market conditions.
o Motivated entrepreneurs: Driven by specific motivations like personal achievement, financial gain, or solving a
specific problem.
o Spontaneous entrepreneurs: Act on sudden inspiration or opportunity, often without extensive planning, relying on
their intuition and adaptability
Types of entrepreneurs
12
D. Classification by Clarence H. Danhof
Clarence H. Danhof's classification of entrepreneurs is a widely recognized framework that categorizes entrepreneurs
based on their roles, behaviors, and attitudes toward innovation and risk. Danhof identified four distinct types of
entrepreneurs:
o Innovative entrepreneurs: They are characterized by their ability to innovate and bring new ideas, products, or
processes to the market
o Adoptive/imitative entrepreneurs: they adapt and improve upon existing innovations.
o Fabian entrepreneurs: Exhibit caution and hesitation towards new changes.
o Drone entrepreneurs: Resist changes and prefer to stick to their traditional methods of business operations.
E. According to Entrepreneurial Activity
Based on entrepreneurial activity, entrepreneurs are classified as:
o Novice Entrepreneur: A novice entrepreneur is someone who is new to entrepreneurship and typically starting
their first business venture.
o Serial Entrepreneur: A serial entrepreneur is an individual who continuously comes up with new ideas and starts
multiple businesses over time.
o Portfolio Entrepreneur: Also known as parallel entrepreneur manages several businesses simultaneously, rather
than starting one business, selling it, and then moving on to the next. These entrepreneurs diversify their risk by
investing in and running multiple businesses at the same time.
F. Classification Based on the Scale of Enterprise
o Small Scale
o Large scale
Distinction between Entrepreneur and Manager
13
 Entrepreneurs are creators and innovators who start and own businesses, take significant risks, and focus on growth
and strategic direction. Managers on the other hand are responsible for the operational execution of a business,
focusing on efficiency, stability, and performance within an established framework.
 The Entrepreneur’s Role in Business
 The entrepreneur combines economic factors such as capital, material, labour, and resources to create or add value
to a product or service for consumers.
 Entrepreneurs enhance economic efficiency by providing competitive pressures on established players in a market.
 The entrepreneur accepts uncertainty by taking risks and managing risk situations.
 Entrepreneurs maximize investors’ returns and thereby emphasizing the importance of firm’s stakeholders.
 Entrepreneur processing market information by analyzing and synthesizing them in order to exploit the opportunity
identified on the market.
Entrepreneurship and the Environment
13
The level of entrepreneurial activity in any economy is determined by a number of environmental factors. These factors
are:
 The Economic Environment
 The economic environment covers factors such as population, interest rates and inflation that influence business activities. For
example, as the number of people in an economy grows, the population’s carrying capacity for new organizations is increased.
Consequently there are more opportunities for new ventures.
 Monetary policies also affect interest rates and exchange rates. If interest rates are high it means it is expensive to borrow money,
this increases cost of production.
 In addition, the general state of the economy also affects prices of resources and demand for goods and services. If the economy
is in a recession demand for goods and services are low because people do not have the money to buy things.
 Technological Environment
 The rate of technological development in an economy is another dimension of the environment which affects business operations.
 Technological development and infrastructure also influence communication, transportation and production processes.
 It affects the quality of raw materials, employee productivity, consumer needs and tastes.
Entrepreneurship and the Environment cont’d
13
 Political Environment
 The political climate in any country affects entrepreneurship.
 If the government is unstable or corrupt entrepreneurship will be discouraged because business owners cannot be certain whether
they will be allowed to access any rewards they accumulate from their efforts and whether they can obtain returns that are
commensurate to the risks they take.
 Entrepreneurs prefer free market economies with democratic governments and freedom of choice. Such environments ensure
efficient allocation of resources and create opportunities.
 Legal Environment
 The ease and cost of forming a business entity, such as a corporation, limited liability company (LLC), or partnership, can
significantly impact entrepreneurial activity. Favorable incorporation laws can encourage more startups.
 Efficient and fair dispute resolution mechanisms, such as courts and arbitration, are essential for resolving business conflicts
without excessive time and cost.
 In general, the legal system minimizes distortions to the free market system and encourages entrepreneurs to respond to
opportunities.
 A poor legal system breeds corruption, distorts operation of the free market and prevents efficient allocation of resources.
Entrepreneurship and the Environment cont’d
13
 Socio-cultural Environment
 Cultural values and norms shape consumer preferences and behaviors, influencing the types of products and services that are in
demand. Entrepreneurs must understand these cultural nuances to tailor their offerings effectively.
 Religious beliefs and practices can influence business operations, including the types of businesses that are considered acceptable
and the ethical standards they must adhere to.
 Social support systems and networks such as friends, family, and business support groups promote entrepreneurship.
 Competitive Environments: Refers to the level of competition in the industry in which the firm operates. It also comprises
a number of components.
 The first is the intensity of competition within the industry.
 Competition may be monopolistic (no competitors) or perfect (all industry participants compete directly against each other).
 In most cases businesses are able to differentiate their products from those of their competitors and are therefore able to enjoy
some degree of monopoly. In other words most industries have monopolistic competition.
 The second component of the competitive environment is the ease with which firms can enter the industry.
 Prospective businesses may be deterred from joining the industry where there are significant entry barriers such as large capital
requirements, requirements of specific skills and knowledge, patented products, regulatory policies and economies scale.
Entrepreneurship and the Environment cont’d
13
 The availability of substitute products is the third component of the competitive environment.
 If there are close substitutes to a product this will limit the price a firm can charge for the products.
 Consumers will switch to the new product if the price is low enough to enable them to recoup the cost of
switching.
 This means if there a close substitutes profit margins are likely to be low in the industry.
Advantages and Disadvantages of Entrepreneurship
 Advantages
 Develop new markets
 Discover new sources of materials
 Mobilize capital resources
 Introduce new technologies, new industries and new products.
 Create employment.
 Disadvantages
 Work schedule
 Long hours of work
 Complete responsibility
 Discouragement
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The role of small business in economic development
13
• Small businesses enable individuals to develop entrepreneurial and managerial skills that are needed as a
foundation for local investment and sustained industrialization.
• The indigenous technology employed by these businesses is more likely to use local raw materials and equipment,
thereby saving foreign exchange which might otherwise be spent on imports.
• In Ghana, small businesses are major sources of employment, income, and personal development for the rural and
urban poor and for women due to their labour-intensive methods of operation.
• Largely resource-based, small businesses in Ghana contribute to forward and backward linkages between
agriculture and industry on the one hand and between different sub-sectors of industry on the other.
• Small businesses contribute to government revenue through taxes.
• Small firms encourage rural-urban linkages in that some of the raw materials and finished goods they produce are
consumed by the rural and urban sectors and vice versa.
• Small businesses make more efficient use of scarce factors of production than large-scale businesses because they
are usually labour intensive, with only small capital investments.
THANK YOU