Monday October 28, 2024
Topic: An Overview of Entrepreneurship
Week: 1
Introduction
Entrepreneurship is one of the four (4) pillars of free enterprise society namely, land, labor, capital,
and entrepreneurship. Entrepreneurship is the process of creating a new enterprise.
The word “entrepreneur” is derived from a 17th century French word, Entreprendre which was
defined a person who undertook the risk of a new enterprise. The entrepreneur also is one who
undertakes to organize, manage, and assume the risks of a business.
Evolution of Entrepreneurship
The recognition of entrepreneurs date back to 18th century in France when a French economist,
Richard Cantillon associated the “risk bearing” activity in the economy with the entrepreneur.
Richard Cantillon popularized the concept of entrepreneurship in economics.
At this same period in England, the industrial evolution was evolving with the entrepreneur playing
a visible role in risk taking and the transformation of resources.
The association of entrepreneurship and economics has long been the accepted norm. Until the
1950s, majority of the definitions and references to entrepreneurship came from economists. For
instance, Richard Cantillon (1725), the renowned French economist, Jean Baptiste Say (1803), and
a 20th century economic genius, Joseph Schumpeter (1934), all wrote about entrepreneurship and
its impact on economic development.
The word “entrepreneurship” became synonymous or closely linked with free enterprises and
capitalism. Also, it was generally recognized that entrepreneurs serve as agents of change, provide
creative and innovative ideas for business enterprises, and help businesses grow and become
profitable.
Whatever the specific activity they engage in, entrepreneurs in the 21st century are considered to
be the heroes of free enterprise. Many of them have used innovation and creativity to build
multimillion dollar enterprises, create new products and services, and assume the risks associated
with these ventures.
Definitions of Entrepreneurship
Entrepreneurship can be defined as the process of creating and managing a business to achieve
desired objectives.
Entrepreneurship can be defined as the dynamic process of creating incremental wealth. This
wealth is created by individuals who assume the major risks of setting up a business in terms of
equity/sourcing for funds, time, and/or career commitment of providing value for product or
service. The product or service itself may or may not be new or unique but value must somehow
be infused by the entrepreneur by securing and allocating the necessary skills and resources.
Entrepreneurship can be defined as the process by which an individual uses the factors of
production that is, land, labor, and capital along with his own entrepreneurial skill to transform a
business opportunity into a reality or profitable venture.
Key Concepts in Entrepreneurship
The key concepts in entrepreneurship include:
1. Entrepreneur,
2. Intrapreneurship,
3. Intrapreneurs, and
4. Management
1. Entrepreneur
An entrepreneur is an individual who undertakes the risk of creating a new enterprise. He/she has
the ability to see and evaluate business opportunities, assemble the necessary resources to take
advantage of the opportunities, and take a personal stake in the success or failure of the enterprise.
2. Intrapreneurship
Intrapreneurship refers to employees’ initiatives in organizations to undertake something new
without being asked to do so.
3. Intrapreneurs
Intrapreneurs refers to employees within an organization that create an innovative idea and nurture
or champion it over a period of time. Intrapreneurs work inside the organization while
entrepreneurs work outside the organization. Intrapreneurs focuses on innovation and creativity
and transforms an idea into a profitable venture while operating within a business firm.
4. Management
Management can be defined as the process of planning, organizing, directing, and controlling the
efforts of organizational members and the use of organizational resources in order to achieve stated
organizational goals.
Risks of Entrepreneurship
Risk is the inability to predict in an exact form the outcome of an action.
Entrepreneurs face the following types of risks when creating a new enterprise. These risks
include:
1. Business risk,
2. Financial risk,
3. Career risk,
4. Family and social risk, and
5. Psychological risk.
1. Business Risk
This is the risk of business failure. In America, over 30% of all independent small businesses fail
during the first two years of their startup or operation and 8% of every ten businesses within ten
years.
2. Financial Risk
This is the risk of losing financial investments or resources.
3. Career Risk
This is the risk of leaving a secured job for a venture with a highly uncertain future.
4. Family and Social Risks
Starting and running a young business require over 80 hours of work weekly. This leaves little
time for family and friends. Demands of entrepreneurship often strain marriages and friendships.
5. Psychological Risk
This is the risk of a deep sense of personal failure if the business does not beat the odds and
succeed.
Factors Influencing Entrepreneurship
Realizing a lot of risks that entrepreneurs face coupled with the time and energy required for
success, one wonders why people are still interested to take the entrepreneurial plunge.
Entrepreneurs launch businesses because of one or more entrepreneurial motivations. Some of
these motivations include:
1. Desire for Personal Autonomy/Desire to Work Independently
Many young graduates do not like to take up paid employment. They desire long before they
finished their tertiary education of setting up their own business. A very good example of such
young and successful entrepreneur is Barrister Jimoh Ibrahim of Global Fleet who never worked
for any organization before venturing into business.
2. Job Dissatisfaction
Many employees are not satisfied with their jobs either due to poor remuneration package or job
conditions. Due to these situations, an employee that is entrepreneurially inclined and has the
necessary resources may decide to venture into small scale business.
3. Loss of Paid Employment
When some employees lose their employment and can’t secure another comparable employment
in good time, they may not have any alternative option rather than setting up their own small scale
business. It is said that necessity is the mother of inventions. In entrepreneurship, we can say loss
of paid employment is the mother of venturing.
4. The Desire to Identify Unexplored Opportunities
An entrepreneur may stumble into unexplored opportunities that he has the resources to exploit.
This bright opportunity may engineer him to set up a small business of his own in order to exploit
the opportunity.
5. Continuity of Family Business due to Inheritance
Some people go into this type of business as a result of the compelling need to run the family
business,
6. Success recorded by a friend or colleague from running his own business can serve as a
motivating factor for one to establish his own business,
7. Desire to own a personal business after retirement from paid employment,
8. Greater expectation of return on investment from venturing into an entrepreneurship
business, and
9. An investor may stumble into a unique business idea that has an enviable and sustainable
market potentials.
Resources of Entrepreneurship
The resources of entrepreneurship are the assets which the business makes use of. These
resources include:
1. Tangible resources, and
2. Intangible resources.
1. Tangible Resources
These are resources or assets that can be quantified and observed. These resources include:
i.
Natural resources,
ii.
Human resources,
iii.
Capital,
iv.
Physical assets, and
v.
Infrastructural facilities.
i.
Natural Resources
The productive capacity of an entrepreneur can be partly explained by the natural resource
endowments such as land, climate, and water that the entrepreneur is blessed with. The
entrepreneur that is investing into sawmill in the Southern part of Nigeria is able to add value to
the trees in the bush because of the climatic condition which is rainforest. The rainforest is
naturally blessed with good timbers.
ii.
Human Resources
Labor is the human effort either physical or mental that is exerted in the production of goods and
services. It is through the use of labor and other resources that the natural resources are exploited
and converted into other more valuable goods and services. The drive, direction, and desire to get
the resources of business activated and committed to production of goods and services is at the
discretion of human mind and interest.
iii.
Capital
Capital can be described as all the man-made items that workers use in production and distribution
or man-made items used for the creation of further wealth.
The capital resources of a business can be classified into fixed and current capital. Fixed capital
include buildings, machinery, equipment, and vehicles while current capital include stock in
goods, cash at hand, etc.
iv.
Physical Assets
Physical assets such as buildings, machineries, plants, raw materials, etc. are needed by an
entrepreneur to pursue his or her dreams.
v.
Infrastructural Facilities
The success of entrepreneurship depends on the quality, effectiveness, and efficiency of
infrastructural facilities available within the environment it operates.
A nation that is blessed with good roads, telecommunication facilities, power, water, and
transportation system will have entrepreneurs striving better than a nation that is deprived of all
these.
2. Intangible Resources
These are resources of the firm that are difficult to quantify and examine physically. The intangible
resources of entrepreneurship include:
i.
Government Policies
The enabling environment created by the government through its policies and laws will impact
heavily on entrepreneurship development.
ii.
Entrepreneur’s Reputation and Goodwill
The integrity, reputation, and goodwill of the entrepreneur is a great resource that can impact on
the success or otherwise of the business venture.
iii.
iv.
v.
Entrepreneur’s skills, knowledge, and reasoning ability,
Decision making abilities of the workforce, and
Technology.
Characteristics of Entrepreneurs
Every success bound entrepreneurs must possess the following attributes:
1. Mental ability,
2. Clear objectives,
3. Business secrecy,
4. Human relations ability,
5. Communication ability, and
6. Technical knowledge.
1. Mental Ability
Mental ability consists of intelligence and creative thinking.
2. Clear Objectives
An entrepreneur should have a clear objective as to the exact nature of the goods to be produced
and subsidiary activities to be undertaken.
3. Business Secrecy
An entrepreneur must be able to guard business secrets.
4. Human Relations Ability
The most important personality traits contributing to the success of an entrepreneur are emotional
stability, personal relations, consideration, and tactfulness. An entrepreneur must build and
maintain good relations with his customers if he want them to keep patronizing his business.
5. Communication Ability
An entrepreneur who can effectively communicate with customers, employees, suppliers, and
creditors will be more likely to succeed than the entrepreneur who cannot.
6. Technical Knowledge
An entrepreneur must have a reasonable level of technical knowledge. He should possess adequate
knowledge of the tools, procedures, and techniques used in carrying out different operations in his
organization. He should be familiar with tasks assigned to staff who work under him.