Entrepreneurship
Entrepreneurship is the creation or extraction of economic value in ways that generally entail beyond the minimal amount of risk (assumed by a traditional business), and potentially involving values besides simply economic ones.
"Entrepreneur" redirects here. For other uses, see Entrepreneur (disambiguation).
An entrepreneur is an individual who creates and/or invests in one or more businesses, bearing most of the risks and enjoying most of the rewards.[1] The process of setting up a business is known as "entrepreneurship". The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures.
More narrow definitions have described entrepreneurship as the process of designing, launching and running a new business, often similar to a small business, or (per Business Dictionary) as the "capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit".[2] The people who create these businesses are often referred to as "entrepreneurs".[3][4]
In the field of economics, the term entrepreneur is used for an entity which has the ability to translate inventions or technologies into products and services.[5] In this sense, entrepreneurship describes activities on the part of both established firms and new businesses.
Perspectives on entrepreneurship[edit]
In the 21st century the governments of nation states have tried to promote entrepreneurship, as well as enterprise culture, in the hope that it would improve or stimulate economic growth and competition. After the end of supply-side economics, entrepreneurship was supposed to boost the economy.[6]
As an academic field, entrepreneurship accommodates different schools of thought. It has been studied within disciplines such as management, economics, sociology, and economic history.[7][8] Some view entrepreneurship as allocated to the entrepreneur. These scholars tend to focus on what the entrepreneur does and what traits an entrepreneur has. This is sometimes referred to as the functionalistic approach to entrepreneurship.[9] Others deviate from the individualistic perspective to turn the spotlight on the entrepreneurial process and immerse in the interplay between agency and context. This approach is sometimes referred to as the processual approach,[9] or the contextual turn/approach to entrepreneurship.[10][11]
The exploitation of entrepreneurial opportunities may include:[15]
The economist Joseph Schumpeter (1883–1950) saw the role of the entrepreneur in the economy as "creative destruction", Which he defined as launching innovations that simultaneously destroy old industries while ushering in new industries and approaches. For Schumpeter, the changes and "dynamic economic equilibrium brought on by the innovating entrepreneur [were] the norm of a healthy economy".[16] While entrepreneurship is often associated with new, small, for-profit start-ups, entrepreneurial behavior can be seen in small-, medium- and large-sized firms, new and established firms and in for-profit and not-for-profit organizations, including voluntary-sector groups, charitable organizations and government.[17]
Entrepreneurship may operate within an entrepreneurship ecosystem which often includes:
In the 2000s, usage of the term "entrepreneurship" expanded to include how and why some individuals (or teams) identify opportunities, evaluate them as viable, and then decide to exploit them.[19] The term has also been used to discuss how people might use these opportunities to develop new products or services, launch new firms or industries, and create wealth.[20] The entrepreneurial process is uncertain because opportunities can only be identified after they have been exploited.[21]
Entrepreneurs exhibit positive biases towards finding new possibilities and seeing unmet market needs, and a tendency towards risk-taking that makes them more likely to exploit business opportunities.[22][23]
Types of entrepreneurship[edit]
Cultural[edit]
According to Christopher Rea and Nicolai Volland, cultural entrepreneurship is "practices of individual and collective agency characterized by mobility between cultural professions and modes of cultural production", which refers to creative industry activities and sectors. In their book The Business of Culture (2015), Rea and Volland identify three types of cultural entrepreneur: "cultural personalities", defined as "individuals who buil[d] their own personal brand of creativity as a cultural authority and leverage it to create and sustain various cultural enterprises"; "tycoons", defined as "entrepreneurs who buil[d] substantial clout in the cultural sphere by forging synergies between their industrial, cultural, political, and philanthropic interests"; and "collective enterprises", organizations which may engage in cultural production for profit or not-for-profit purposes.[52]
In the 2000s, story-telling has emerged as a field of study in cultural entrepreneurship. Some have argued that entrepreneurs should be considered "skilled cultural operators"[53] that use stories to build legitimacy, and seize market opportunities and new capital.[54][55][56] Others have concluded that we need to speak of a 'narrative turn' in cultural entrepreneurship research.[57]
Ethnic[edit]
The term "ethnic entrepreneurship" refers to self-employed business owners who belong to racial or ethnic minority groups in the United States and Europe. A long tradition of academic research explores the experiences and strategies of ethnic entrepreneurs as they strive to integrate economically into mainstream U.S. or European society. Classic cases include Jewish merchants and tradespeople in large U.S. cities in the 19th and early 20th centuries as well as Chinese and Japanese small business owners (restaurants, farmers, shop owners) on the West Coast.[58] In the 2010s, ethnic entrepreneurship has been studied in the case of Cuban business owners in Miami, Indian motel owners of the U.S. and Chinese business owners in Chinatowns across the United States. While entrepreneurship offers these groups many opportunities for economic advancement, self-employment and business ownership in the United States remain unevenly distributed along racial/ethnic lines.[59] Despite numerous success stories of Asian entrepreneurs, a recent statistical analysis of U.S. census data shows that whites are more likely than Asians, African-Americans and Latinos to be self-employed in high prestige, lucrative industries.[59]
Religious[edit]
Religious entrepreneurship refers to both the use of entrepreneurship to pursue religious ends as well as how religion impacts entrepreneurial pursuits. While religion is a central topic in society, it is largely overlooked in entrepreneurship research.[60] The inclusion of religion may transform entrepreneurship including a focus on opportunities other than profit as well as practices, processes and purpose of entrepreneurship.[61][62] Gümüsay suggests a three pillars model to explain religious entrepreneurship: The pillars are the entrepreneurial, socio-economic/ethical, and religio-spiritual in the pursuit of value, values, and the metaphysical.[63]
Feminist[edit]
A feminist entrepreneur is an individual who applies feminist values and approaches through entrepreneurship, with the goal of improving the quality of life and well-being of girls and women.[64] Many are doing so by creating "for women, by women" enterprises. Feminist entrepreneurs are motivated to enter commercial markets by desire to create wealth and social change, based on the ethics of cooperation, equality and mutual respect.[65][66] These endeavours can have the effect of both empowerment and emancipation.[67]
Institutional[edit]
The American-born British economist Edith Penrose has highlighted the collective nature of entrepreneurship. She mentions that in modern organizations, human resources need to be combined to better capture and create business opportunities.[68] The sociologist Paul DiMaggio (1988:14) has expanded this view to say that "new institutions arise when organized actors with sufficient resources [institutional entrepreneurs] see in them an opportunity to realize interests that they value highly".[69] The notion has been widely applied.[70][71][72][73]
Millennial[edit]
The term "millennial entrepreneur" refers to a business owner who is affiliated with millennials (also known as Generation Y), those people born from approximately 1981 to 1996.[74] The offspring of baby boomers and early Gen Xers,[75] this generation was brought up using digital technology and mass media. Millennial business owners are well-equipped with knowledge of new technology and new business models and have a strong grasp of its business applications. There have been many breakthrough businesses that have come from millennial entrepreneurs such as Mark Zuckerberg, who created Facebook.[76] Despite the expectation of millennial success, there have been recent studies that have proven this to not be the case. The comparison between millennials who are self-employed and those who are not self-employed shows that the latter is higher. The reason for this is because they have grown up in a different generation and attitude than their elders. Some of the barriers to entry for entrepreneurs are the economy, debt from schooling, and the challenges of regulatory compliance.[77]
Nascent[edit]
A nascent entrepreneur is someone in the process of establishing a business venture.[78] In this observation, the nascent entrepreneur can be seen as pursuing an opportunity, i.e. a possibility to introduce new services or products, serve new markets, or develop more efficient production methods in a profitable manner.[79][80] But before such a venture is actually established, the opportunity is just a venture idea.[81] In other words, the pursued opportunity is perceptual in nature, propped by the nascent entrepreneur's personal beliefs about the feasibility of the venturing outcomes the nascent entrepreneur seeks to achieve.[82][83][84] Its prescience and value cannot be confirmed ex ante but only gradually, in the context of the actions that the nascent entrepreneur undertakes towards establishing the venture as described in Saras Sarasvathy's theory of Effectuation,[85] Ultimately, these actions can lead to a path that the nascent entrepreneur deems no longer attractive or feasible, or result in the emergence of a (viable) business. In this sense, over time, the nascent venture can move towards being discontinued or towards emerging successfully as an operating entity.
The distinction between the novice, serial and portfolio entrepreneurs is an example of behavior-based categorization.[86] Other examples are the (related) studies by,[87][88] on start-up event sequences. Nascent entrepreneurship that emphasizes the series of activities involved in new venture emergence,[89][90][91] rather than the solitary act of exploiting an opportunity. Such research will help separate entrepreneurial action into its basic sub-activities and elucidate the inter-relationships between activities, between an activity (or sequence of activities) and an individual's motivation to form an opportunity belief, and between an activity (or sequence of activities) and the knowledge needed to form an opportunity belief. With this research, scholars will be able to begin constructing a theory of the micro-foundations of entrepreneurial action.
Scholars interested in nascent entrepreneurship tend to focus less on the single act of opportunity exploitation and more on the series of actions in new venture emergence,[89][92][91] Indeed, nascent entrepreneurs undertake numerous entrepreneurial activities, including actions that make their businesses more concrete to themselves and others. For instance, nascent entrepreneurs often look for and purchase facilities and equipment; seek and obtain financial backing, form legal entities, organize teams; and dedicate all their time and energy to their business[93]
Project-based[edit]
Project entrepreneurs are individuals who are engaged in the repeated assembly or creation of temporary organizations.[94] These are organizations that have limited lifespans which are devoted to producing a singular objective or goal and get disbanded rapidly when the project ends. Industries where project-based enterprises are widespread include: sound recording, film production, software development, television production, new media and construction.[95] What makes project-entrepreneurs distinctive from a theoretical standpoint is that they have to "rewire" these temporary ventures and modify them to suit the needs of new project opportunities that emerge. A project entrepreneur who used a certain approach and team for one project may have to modify the business model or team for a subsequent project.
Project entrepreneurs are exposed repeatedly to problems and tasks typical of the entrepreneurial process.[96] Indeed, project-based entrepreneurs face two critical challenges that invariably characterize the creation of a new venture: locating the right opportunity to launch the project venture and assembling the most appropriate team to exploit that opportunity. Resolving the first challenge requires project-entrepreneurs to access an extensive range of information needed to seize new investment opportunities. Resolving the second challenge requires assembling a collaborative team that has to fit well with the particular challenges of the project and has to function almost immediately to reduce the risk that performance might be adversely affected. Another type of project entrepreneurship involves entrepreneurs working with business students to get analytical work done on their ideas.
Entrepreneurial behaviours[edit]
Uncertainty perception and risk-taking[edit]
Theorists Frank Knight[103] and Peter Drucker defined entrepreneurship in terms of risk-taking. The entrepreneur is willing to put his or her career and financial security on the line and take risks in the name of an idea, spending time as well as capital on an uncertain venture. However, entrepreneurs often do not believe that they have taken an enormous amount of risks because they do not perceive the level of uncertainty to be as high as other people do. Knight classified three types of uncertainty:
Entrepreneurship training and education[edit]
Michelacci and Schivardi are a pair of researchers who believe that identifying and comparing the relationships between an entrepreneur's earnings and education level would determine the rate and level of success. Their study focused on two education levels, college degree and post-graduate degree. While Michelacci and Schivardi do not specifically determine characteristics or traits for successful entrepreneurs, they do believe that there is a direct relationship between education and success, noting that having a college knowledge does contribute to advancement in the workforce.[156]
Michelacci and Schivardi state there has been a rise in the number of self-employed people with a baccalaureate degree. However, their findings also show that those who are self-employed and possess a graduate degree has remained consistent throughout time at about 33 percent. They briefly mention those famous entrepreneurs like Steve Jobs and Mark Zuckerberg who were college dropouts, but they don't consider these cases to be exceptional as many entrepreneurs view formal education as costly due to the time that needs to be spent on it. Michelacci and Schivardi believe that for an individual to reach the full success they need to have education beyond high school. Their research shows that the higher the education level the greater the success. The reason is that college gives people additional skills that can be used within their business and to operate on a higher level than someone who only "runs" it.[156]
Resources and financing[edit]
Entrepreneurial resources[edit]
An entrepreneurial resource is any company-owned asset that has economic value creating capabilities. Economic value creating both tangible and intangible sources are considered as entrepreneurial resources. Their economic value is generating activities or services through mobilization by entrepreneurs.[157] Entrepreneurial resources can be divided into two fundamental categories: tangible and intangible resources.[158]
Tangible resources are material sources such as equipment, building, furniture, land, vehicle, machinery, stock, cash, bond and inventory that has a physical form and can be quantified. On the contrary, intangible resources are nonphysical or more challenging to identify and evaluate, and they possess more value creating capacity such as human resources including skills and experience in a particular field, organizational structure of the company, brand name, reputation, entrepreneurial networks that contribute to promotion and financial support, know-how, intellectual property including both copyrights, trademarks and patents.[159][160]
Factors that may predict entrepreneurial success include the following:[168]
