Entrepreneurship: Origin and Evolution

• Entrepreneurship involves setting up a business, taking on financial risks, and hoping for a profit.
• Innovation is a key element that ties together all types of entrepreneurship.

Origin and Evolution of the Term "Entrepreneur"

• The word "entrepreneur" comes from the 13th-century French word "entrepredre," meaning to undertake.
• The term stems from French origins, referring to someone who acts as an intermediary.
• Early references trace back to 18th-century economists like Richard Cantillon, Anne-Robert Jacques Turgot, and Francois Quesnay.
• People in charge of large construction projects during the Middle Ages were referred to as entrepreneurs, though they bore no risks.
• The term was linked to business in the 16th century, referring to a person engaged in business.
• Richard Cantillon was the first to use the term entrepreneur academically, emphasizing the risk-bearing aspect of business without guaranteed profits, and identified the entrepreneur as an adventurer.
• Daniel Defoe embodied the entrepreneur through Robinson Crusoe, depicting him as a man of projects, a projector, and an adventurer who manages his island like a business, this shows the meaning of the term "private enterprise".
• By the seventeenth/eighteenth centuries, "entreprendre" was associated with risk-taking, where entrepreneurs entered contractual relationships with the government for services or goods, bearing the risk of profit and loss.
• In the 19th century, Jean Baptiste Say described the entrepreneur as someone with knowledge and judgment who seeks opportunities to earn profits by reallocating resources to areas of high productivity.
• John Stuart Mill described the entrepreneur as more than a venture capitalist, but also one who managed the venture
• Alfred Marshall linked Say's and Mill's ideas, claiming the entrepreneur was one who coordinated land, labor, capital, and organization.

20th Century Concepts of Entrepreneurship

• Frank H. Knight classified two types of risks: measurable risks that can be insured and unmeasurable risks, where the entrepreneur takes on "true" uncertainty in unpredictable situations.
• Joseph Schumpeter's greatest insights were that innovation is the driving force for capitalism and economic progress, and entrepreneurs are the agents of innovation.
• Innovation includes new combinations or "creative destruction."
• The entrepreneur acts in an enterprising manner regarding innovation, not as an inventor.
• Innovation is about how it is brought commercially into the market.
• Entrepreneurship is no longer focused on who is doing the innovating, but more on the actions of "whos".

Joseph Schumpeter’s Five Types of Innovation:

• Product - Introduction of a new product or quality.
• Process - Introduction of new production method.
• Business Model - Opening of a new market.
• Source of Supply - Conquest of supply of new materials or parts.
• Mergers and Divestments - Organization of any industry.

Additional Perspectives on Entrepreneurship

• Ludwig Von Misses argued consumer sovereignty determines what is produced, and innovation depends on customers.
• Peter Drucker believed entrepreneurship involves changing the yield of resources or the value obtained by the consumer, with innovation as the instrument.
• Entrepreneurship involves creating and developing economic activity through risk-taking, creativity, innovation, and sound management.

Anatomy of an Entrepreneur:

• Brain - A pool of ideas.
• Eyes - Looking for investors and opportunities.
• Ears - Listening to customers' feedback.
• Mouth - Communicating the vision.
• Stomach – Trust your gut.
• Heart - Full of passion.
• Feet - Dream high but stick to the ground.
• Legs - Keeps them going in tough times.

Personal Entrepreneurial Competencies (PECs)

• Entrepreneurial Competencies: Key characteristics for effective entrepreneurial functions.
• Three components of PECs: planning cluster, achievement cluster, and power cluster.
• Planning Cluster: includes goal setting, information seeking, systematic planning, and monitoring.
• Achievement Cluster: includes opportunity seeking, persistence, commitment to work, risk-taking, and demand for efficiency and quality.
• Power Cluster: includes persuasion and negotiation and self-confidence.

Key Differences Between Entrepreneurs and Businessmen:

• Entrepreneurs start businesses with new ideas, focusing on innovation.
• Businessmen start from existing ideas, focusing on stability
• Entrepreneurs hire based on potential, create strong cultures, have limited budgets, and take longer to achieve results.
• Businessmen hire based on traits, invest in tools and tactics, invest in big teams, and seek quick results.
• Entrepreneurs identify opportunities in the market and process market information, bringing innovation.
• Entrepreneurs take and accept risks, establish new ventures, improve existing ones, and act as managers.

How Entrepreneurs Steer:

• Entrepreneurs create ventures by identifying, pursuing, and exploiting opportunities.
• Entrepreneurs actively seek new opportunities to pursue.
• Entrepreneurs identify opportunities by processing market information.
• Entrepreneurs create new value for customers with innovation.
• Entrepreneurs willingly take and accept risks.
• Entrepreneurs establish new ventures and improve existing ones.
• Entrepreneurs are managers and leaders, knowing the details of their ventures.

Impact of Entrepreneurship:

• Spurs economic growth, creating new products, services, and supporting economic activities.
• Creates jobs, requiring entrepreneurs to hire people, both directly and indirectly.
• Brings innovations, solving problems and creating competition.
• Creates wealth not only for the entrepreneur but the nation with taxes.

The Entrepreneurs Journey

• Opportunity is the key component of entrepreneurship.
• Opportunity identification resulted well though out definitions, processes and evaluations of opportunities.
• Opportunity recognition: sensing market needs, recognizing a fit between market needs and resources, creating a new fit in a business concept.
• Opportunity identification is important to start new businesses and recognizing an opportunity can generate both personal and societal wealth.
• Opportunity Identification is a continuous process throughout the entrepreneurial process.
• One's ability to identify opportunities spurs numerous investigations.
• Opportunity' Types: Tacit and codified.

The action principles:

• Be self starting
• Be proactive
• Be persistent