Chapter 1

Nature and development of Entrepreneurship/History of

Entrepreneurship
A French word Entrepreneur means “Go between” on “Between Takes”.

i. Earliest Period:
Marcopolo (Venice Italia) contract Money man
Merchant Adventurer Venture Capitalist

Having Ability of taking risk but no money Business having money

but no ability
Profit distributed 25% 75%

ii. Middle ages.

Entrepreneur-An actor who manages large govt. projects (buildings,
castles etc)

• Project was provided by Govt.

• Resources provided by Govt.
• No risks were involved.

iii. In the 17th century.

• Risk was involved as contract price was fixed.
• Royal bank was allowed to operate.
• Richard Cantillon (father of Term Entrepreneurship)

Richard Cantillon defines: “Entrepreneur” is a person who buys at a certain

prices and sells at an uncertain price, thus operating at a risk”

iv. In the 18th Century:

Capital user contract Capital Provider
(Having Ability but no capital) (Having capital but no
ability)
Edison ------ Invention through R&D -------- (Commercialized)
Requires capital for (Lab, Buy equipment)
Era of industrialization.

v. In the 19th and 20th century ( 21st century)

Entrepreneurship was viewed from economic prospective.
Entrepreneur contributes his role in the economic development of the country
(Job opportunities, facilities, supplies profit)
-The Entrepreneur adopt and develop new technology in creation of projects.
-Innovation-Improvements
(Innovation in methodology, products, Innovation in business, in develop with the
customers) Ability to create and conceptualize and understand all forces at work.
Newness can be anything e.g. new product or new distribution system.
Definition of Entrepreneurship
Economic definition:
“Entrepreneurship is a dynamic process of creating incremental wealth.

General Definition:
“Entrepreneurship is a process of creating something new assuming risks and
rewards”.

Business definition:
“Entrepreneurship is a process of creating something new with value by
devoting necessary time and effort assuming the company financial psychic and
social risk and receiving the resulting rewards and personal satisfaction and
independence”

Components of definition
Basic Aspects.

i. Value creation (Benefit/utility to stake holders)

ii. Devotion of time and effort. (Active Participation)
iii. Risks (Financial, social and psychic)
iv. Rewards (Monetary, personal satisfaction and social acceptance)
(Society recognize and appreciate businessman)

Entrepreneur Vs Inventions:
Characteristics of Invention:

• Highly driven (motivated)

• Motivated by work
• Highly Creative
• Well educated
• Free thinker
• Problem solver
• High self confidence
• Risk taker
• Able to tolerate ambiguity
• Don’t give much importance to money.

Differences:

Difference in education:
Inventor is supposed to be highly educated, entrepreneur may not be highly
educated.
Money Orientation: Inventor does not give much importance to money whereas
Entrepreneur is concerned with money (profit).
Entrepreneurs love their organization whereas inventor loves his creation
(invention)
ENTREPRENEURIAL PROCESS:
Entrepreneur process consists of four phases.

1. Identify and evaluate the opportunity.

Opportunity Identification:
It may result due to Entrepreneur’s alertness to possibilities or by developing a
mechanisms of opportunities identification.

He is a Keen Observer, having meeting plans up and generates new ideas

Sources of Opportunity include.

i. Consumers
ii. Business Associates
iii. Distribution Channel
iv. Technical People
v. Research and Development

Opportunities Analysis.

Careful screening and evaluation of each opportunity in terms of returns, values,

risks, fit with personal skills, deferential advantages and window of opportunities.
Risks involved are competition, technology, market and amount of capital.
Prepare an Opportunity Analysis plan that includes product, assess opportunity,
and assess Entrepreneur and team, specification of activities and sources of
capital

2. Develop a business plan:

It is a time consuming and most difficult phase of the process. (for making a
business plan a safe estimate of time required is 200 hrs)
Understand basic issues to develop the opportunity, determine the sources
required obtain the resources and manage the venture these things are spelled
out in a written document called as Business Plan.

3. Determine the resources required

Appraise the current resources.

Acquire the needed resources in time with giving little control and ownership.

4. Manage the Entrepreneur:

Use resources to implement the business plan.

Implement the management style and determine key variables for success.
Types of Start up

An Entrepreneur can start from any three types of Enterprise.

i. Life style firm: Goes from a similar pattern, privately held, low growth and
less research and development private ownership 30 to 40 employees
after several years start from 4 to 5. Annual revenue $ 2 million.

ii. Foundation company: 40 – 400 employees after 5 – 10 years. Annual

revenue $ 10 – 20 million. Attract private investors. Get investment from
investors but donot make share in market, don’t go public.

iii. High potential venture: More than 500 employees after 5-10 years.
Annual revenue
$ 20-30 million, receives greatest interest and publicity.

ROLE OF ENTREPRENEUR IN ECONOMIC

DEVELOPMENT.
1. Initiating and constituting change in structure of business and society.
2. Equal distribution of wealth
3. Creation of capital

Types of innovations include.

Ordinary innovation
Technological innovation
Break through innovation (Anything that changes the previous thing as a major
change)

1) Government as an innovator:

Government bridges the gap between science and market place by providing
resources and consultancy, Commercialization, Technology transfer and R & D
Problems: include lack of business skills, bureaucratic approach and red tape-
ism

2) Corporate Entrepreneurship

Corporate Entrepreneurship is Entrepreneurship within an existing organization

usually by creation by SBU’s (Strategic Business unit)
Existing organization has resources but due to bureaucracy structured
organizations and short term orientation they prevent creativity.

3) Independent Entrepreneurship
Creation of new organization and most affected method of bridging the gap
between science and market place.
Problems: Problem includes lack of managerial knowledge, marketing or
financial resources, unrealistic inventions and improper interaction with
stakeholder.
ETHICS AND SOCIAL RESPONSIBILITY OF ENTREPRENEUR:

Business Ethics is the study of behavior and morals in a business situation.

Entrepreneur is not only the money maker but also shows an ethical behavior.

Entrepreneur has to create a balance between ethics, economic expediency

(profit) and social responsibility differentiating him from a manager.

Entrepreneurs are sensitive to peer pressures and general social norms in

community.

FUTURE OF ENTREPRENEURSHIP.
Common aspects are risks taking, creativity, independence and reward.

Entrepreneurship is expected to have a Bright Future

Universities are offering this subject more, even Entrepreneurial Sciences has
been taught.

Government encouragement and providing facilities roads, communications and

tax incentive.

Increased societal support that is honorable and prestigious pursuit.

Encouraging and constructive role of mass media e.g. article and media
interviews.