Concept of Entrepreneur

Evolution of the word Entrepreneur

The word ‘entrepreneur’ is derived from French word ‘Entrependre’ which means undertaking
the risk of enterprise and further it was used to designate an organizer of musical or other
entertainments. Later in 16th century it was used for army leaders. It was extended to cover civil
engineering activities such as construction in 17th century. But it was Richard Cantillon, an
Irishman living in France who first used the term entrepreneur to refer to economic activities.
According to Cantillon “An entrepreneur is a person who buys factor services at certain prices
with a view to selling its product at uncertain prices”. Entrepreneur, according to Cantillon, is a
bearer of risk, which is non-insurable. Schum peter gave a central position to the entrepreneur
who believed that an entrepreneur was a dynamic agent of change; that an entrepreneur was a
catalyst who transformed increasingly physical, natural and human resources into
correspondingly production possibilities. Since then the term entrepreneur is used in various
ways and various views.
Meaning of Entrepreneur
Entrepreneur is a person who tries to create something new, searches new opportunities, bears
risk, unites various factors of production like land, labour and capital carries innovations and
from his skill and farsightedness faces unforeseen circumstances and thereby earns profits.
Entrepreneurs are the pioneers who are instrumental in the economic development, growth and
development of and prosperity of a country.
Definition of Entrepreneur
There are various views about entrepreneur which are broadly classified into three groups,
namely risk bearer, organizer and innovator.
Entrepreneur as Risk Bear : Richard Cantilon defined entrepreneur as an agent who buys
factors as production at certain prices in order to combine them into a product with a view to
selling it at uncertain prices in future. He illustrated a farmer who pays contractual incomes,
which are certain to land owners and labourers and sells at prices that are ‘uncertain’. He
includes, merchants also who make certain payments in expectation of uncertain receipts. Hence
both of them are risk-bearing agents of production. F.H. Knight described entrepreneur to be a
specialized group of persons who bears uncertainly. Uncertainty is defined as risk, which cannot
be insured against and is incalculable. He made distinction between certainty and risk. A risk can
be reduced through the insurance principle, where the distribution of outcome in a group of
instance is known, whereas uncertainty cannot be calculated.
Entrepreneur as an Organizer : According to J Baptist Say “an entrepreneur is one who
combines the land of one, the labour of another and capital of yet another, and thus produces a
product. By selling the product in the market, he pays interest on capital, rent on land and wages
to laborers and what remains is his/her profit”. Say made distinction between the role of
capitalist as a financer and the entrepreneur as an organizer. This concept of entrepreneur is
associated with the functions of coordination, organization and supervision.
Entrepreneur as an Innovator : Joseph A. Schumpeter Peter in 1934 assigned a crucial role of
‘innovation’ to the entrepreneur. He considered economic development as a dynamic change
brought by entrepreneur by instituting new combinations of factors of production, i.e.
innovations. The introduction of new combination according to him, may occur in any of the
following forms.
(a) Introduction of new product in market
(b) Use of new method production, which is not yet tested.
(c) Opening of new market.
(d) Discovery of new source of raw materials.
(e) Bringing out of new form of organization.
Schum Peter also made distinction between inventor and innovator. An inventor is one who
discovers new methods and new materials. An innovator utilizes inventions and discovers in
order to make new combinations.
Hence the concept of entrepreneur is associated with three elements risk bearing, organizing and
innovating. Hence an entrepreneur can be defined as a person who tries to create something new,
organizes production and undertakes risks and handles economic uncertainty involvement in
enterprise.
Some more important definitions of entrepreneur
1. According to F.A. Walker : “Entrepreneur is one who is endowed with more than average
capacities in the task of organizing and coordinating the factors of production, i.e. land, labour
capital and enterprises”.
2. Marx regarded entrepreneur as social parasite.
3. According to Gilbraith : “An entrepreneur must accept the challenge and should be willing
hard to achieve something”.
4. Peter F. Drucker defines an entrepreneur as one who always searches for change, responds to it
and exploits it as an opportunity. Innovation is the basic tool of entrepreneurs, the means by
which they exploit change as an opportunity for a different business or service.
5. According to E.E. Hagen : “An entrepreneur is an economic man who tries to maximize his
profits by innovation, involve problem solving and gets satisfaction from using his capabilities
on attacking problems”.
6. According to Mark Casson : “An entrepreneur is a person who specializes in taking judgement
decision about the coordination of scarce resources”.
7. Frank Young defined entrepreneur as a change agent.
8. According to Max Weber : “Entrepreneurs are a product of particular social condition in which
they are brought up and it is the society which shapes individuals as entrepreneurs”.
9. International Labour Organization (ILO) defines “entrepreneurs as those people who have the
ability to see and evaluate business opportunities, together with the necessary resources to take
advantage of them and to initiate appropriate action to ensure success”.
10. Akhouri describes “entrepreneur as a character who combines innovative, readiness to take
risk, sensing opportunities, identifying and mobilizing potential resources, concern for
excellence and who is persistent in achieving the goal”.

CHARACTERISTICS OF ENTREPRENEUR:
1. Entrepreneur is an agent:
 An entrepreneur is perceived as an economic agent who assembles materials for
producing goods at a cost that ensures profits and re-accumulation of capital.

 Also acts as a change agent who brings about changes in the structure and formation of
the organization, market and the arena of goods and services.

2. Entrepreneur is a risk-taker:
 A risk-taking ability is essential for an entrepreneur.
 Without the will to explore the unknown, one cannot discover something unique.
 And this uniqueness might make all the difference.
 Entrepreneurs have a differentiated approach towards risks.
 Good entrepreneurs are always ready to invest their time and money.
 But, they always have a backup for every risk they take.

3. Entrepreneur is a profit maker:

 An entrepreneur is an individual who establishes and manages the business for the
principal purpose of profit and growth.

4. Entrepreneur is an achievement motivator:

 David C. McClelland has initiated this concept of the entrepreneur by calling him “as
per sun with a strong desire for achievement.”
 Meredith and others have expressed the same concept while they termed
“entrepreneurs are action-oriented, highly’ motivated individuals.”
 Therefore, entrepreneurs have to have a deep-rooted need for achieving their goals

5. Passion:
  Work should be your passion. So when you work, you enjoy what you’re doing
and stay highly motivated.
 Passion acts as a driving force, with which, you are motivated to strive for better.
 It also allows you the ability to put in those extra hours in the office which can or
may make a difference.
 At the beginning of every entrepreneurial venture or any venture, there are
hurdles but your passion ensures that you are able to overcome these roadblocks
and forge ahead towards your goal.

6. Creativity:
 Creativity gives birth to something new.
 For without creativity, there is no innovation possible.
 Entrepreneurs usually have the knack to pin down a lot of ideas and act on them.
 Not necessarily every idea might be a hit.
 But the experience obtained is gold.
 Creativity helps in coming up with new solutions for the problems at hand and
allows one to think of solutions that are out of the box.

7. Professionalism:
 Professionalism is a quality which all good entrepreneurs must possess.
 An entrepreneurs mannerisms and behavior with their employees and clientele
goes a long way in developing the culture of the organization.

8. Knowledge:
 Knowledge is the key to success.
 An entrepreneur should possess complete knowledge of his niche or industry.
 For only with knowledge can a difficulty be solved or a crisis is tackled.
 He should know what his strengths & weaknesses are so that they can be worked
on and can result in a healthier organization.

9. Open-mindedness towards learning, people, and even failure:

 An entrepreneur must be accepting.
 The true realization of which scenario or event can be a useful opportunity is
necessary. To recognize such openings, an open-minded attitude is required.
 An entrepreneur should be determined.
 He should face his losses with a positive attitude and his wins, humbly.
 Any good businessman will know not to frown on a defeat.

10. Entrepreneur is a reward receiver:

 An entrepreneur is a person who creates something new of value by devoting time
and efforts and in turn receives monetary and personal rewards.
FUNCTIONS OF AN ENTREPRENEUR
An entrepreneur has to perform a number of functions right from the generation of idea up to the
establishment of an enterprise. He also has to perform functions for successful running of his
enterprise. Entrepreneur has to perceive business opportunities and mobilize resources like man,
money, machines, materials and methods. The following are the main functions of an
entrepreneur.
1. Idea Generation: The first and the most important function of an Entrepreneur is idea
generation. Idea generation implies product selection and project identification. Idea generation
is possible through vision, insight, keen observation, education, experience and exposure. This
needs scanning of business environment and market survey.
2. Determination of Business Objectives: Entrepreneur has to state and lay down the business
objectives. Objectives should be spelt out in clear terms. The entrepreneur must be clear about
the nature and type of business, i.e. whether manufacturing concern or service oriented unit or a
trading business so that he can very well carry on the venture in accordance with the objectives
determined by him.
3. 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 the fund from
internal source as well as external source. He should be aware of different sources of funds. He
should also have complete knowledge of government sponsored schemes such as PMRY, SASY,
REAP etc. in which he can get government assistance in the form of seed capital, fixed and
working capital for his business.
4. Procurement of Machines and Materials: Another important function of an entrepreneur is
to procure raw materials and machines. Entrepreneur has to identify cheap and regular sources of
raw materials which will help him to reduce the cost of production and face competition boldly.
While procuring machineries, he should specify the technical details and the capacity. He should
consider the warranty, after sales service facilities etc. before procuring machineries.
5. Market Research: Market research is the systematic collection of data regarding the product
which the Entrepreneur wants to manufacture. Entrepreneur has to undertake market research
persistently to know the details of the intending product, i.e. the demand for the product, size of
the market/customers, the supply of the product, competition, the price of the product etc.
6. Determining form of Enterprise: Entrepreneur has to determine form of enterprise
depending upon the nature of the product, volume of investment etc. The forms of ownership are
also proprietorship, partnership, Joint Stock Company, co-operative society etc. Determination of
ownership right is essential on the part of the entrepreneur to acquire legal title to assets.
7. Recruitment of Manpower: To carry out this function, an entrepreneur has to perform the
following activities.
a. Estimate man power requirement for short term and long term
b. Laying down the selection procedure.
c. Designing scheme of compensation.
d. Laying down the service rules.
e. Designing mechanism for training and development.
8. Implementation of the Project: Entrepreneur has to develop schedule and action plan for the
implementation of the project. The project must be implemented in a time bound manner. All the
activities from the conception stage to the commissioning stage are to be accomplished by him in
accordance with the implementation schedule to avoid cost and time over run. He has to organize
various resources and coordinate various activities. This implementation of the project is an
important function of the entrepreneur. All the above functions of the entrepreneur can precisely
be put into three categories of innovation, risk bearing, and organizing and managing functions.

TYPES OF ENTREPRENEURS
Today various types of entrepreneur are found engaged in different types of activities, not
only in industrial activities but also in agriculture and commercial activities. Today we can
recognize entrepreneur in industry, service and business sectors which are technically called as
ISB sectors. Entrepreneurs are classified in a number of ways as discussed below. Clearance
Danhof’s Classifications Danhof classifies Entrepreneur into four types.
1. Innovative Entrepreneur: This category of entrepreneur is characterized by smell of
innovativeness. This type of entrepreneur senses the opportunities for introduction of new ideas,
new technology, discovering of new markets and creating new organizations. Such entrepreneur
can work only when certain level of development is already achieved and people look forward to
change and improve. Such entrepreneurs are very much helpful for their country because they
bring about a transformation in life style.
2. Adoptive or Imitative Entrepreneur : Such entrepreneurs imitate the existing entrepreneur
and set their enterprise in the same manner. Instead of innovation, he may just adopt the
technology and methods innovated by others. Such types of entrepreneur are particularly suitable
for under developed countries for imitating the new combination of production already available
in developed countries.
3. Fabian Entrepreneur: Fabian entrepreneurs are characterized by great caution and
skepticism, in experimenting any change in their enterprise. They imitate only when it becomes
perfectly clear that failure to do so would result in a loss of the relative position in the
enterprises.
4. Drone Entrepreneur: Such entrepreneurs are conservative or orthodox in outlook. They
always feel comfortable with their old fashioned technology of production even though
technologies have changed. They never like to get rid of their traditional business, traditional
machineries and traditional system of business even at the cost of reduced returns. Arthur H Cole
Classification
Arthur H Cole classifies entrepreneurs as empirical, rational and cognitive entrepreneur.
Empirical : He is an entrepreneur who hardly introduces anything revolutionary and follows the
principle of rule of thumb.
Rational : The rational entrepreneur is well informed about the general economic conditions and
introduces changes, which look more revolutionary.
Cognitive : Cognitive entrepreneur is well informed, draws upon the advice and services of
experts and introduces changes that reflect complete break from the existing scheme of
enterprise.
Classification Based on the Scale of Enterprise
Small Scale : These entrepreneurs do not possesses the necessary talents and resources to initiate
large scale production and to introduce revolutionary technological charge.
Large scale : They possess the necessary financial and other resources to initiate and introduce
new technological changes. They possess talent and research and development facilities.
Other Classification
Following are some more types of entrepreneurs listed by hehavior scientists.
Solo Operators: These are the entrepreneurs who essentially work alone, introduce their own
capital and if essential employ very few employees. In the beginning most of the entrepreneurs
start their enterprises like them.
Active Partners : Such entrepreneurs jointly put their efforts and resources. They actively
participate in managing the daily routine of the business concern. Entrepreneurs who only
contribute their funds but not actively participate in the business are called simple ‘Partners’.
Inventors : Such entrepreneurs are creative in character and feel happy in inventing new
products, technologies and methods of production. Their basic interest lies in research and
innovative activities.
Challengers : According to such entrepreneurs, if there is no challenge in life, there is no charm
in life. Such entrepreneurs plunge into industry/business because of the challenge it presents.
When one challenge seems to be met, they begin to look for new challenges. They convert odds
and adversities into opportunities and make profit.
Buyers : These are the entrepreneurs who do not like to face the hassles of building
infrastructure and other facilities. They simply purchase the existing one and by using their
experience and expertise try to run the enterprise successfully.
Life Timers : Such entrepreneurs take business as an integral part of their life. Family
enterprises, which mainly depend on exercise of personal skill, fall in this category.
Industrial Entrepreneurs : Such entrepreneurs engage in manufacturing and selling products.
Service Entrepreneurs : Such entrepreneurs engage in service activities like repair, consultancy,
beauty parlor etc., where entrepreneurs provide service to people.
Business Entrepreneurs : They are also called as trading entrepreneurs which buy and sell
goods.
Agricultural Entrepreneurs : They engage themselves in agricultural activities like
horticulture, floriculture, animal husbandry, poultry etc.
Corporate Entrepreneurs : Corporate entrepreneurs undertakes their business activities under
legally registered company or trust.
Rural Entrepreneurs : Entrepreneur’s selecting rural-based industrial opportunity in either
khadi or village industries sector or in farm entrepreneurship are regarded as rural entrepreneurs.
According to Kkhadi and Village Industry Commission (KVIC) village or rural industry means
any industry located in rural areas, population of which do not exceed 10,000, which produces
any goods or services in which fixed investment of an artisan or a worker does not exceed one
thousand rupees.
Women Entrepreneurs: According to Government of India an women entrepreneur is defined
as an enterprise owned and controlled by a woman and having minimum financial interest upto
51% of the capital and giving at least 51% employment to women.

DISTINCTION BETWEEN ENTREPRENEUR AND MANAGER

INTRAPRENEURS
 A new breed of entrepreneurs is coming to the fore in large industrial organizations. They
are called as ‘Intrapreneurs’.
 In large organizations, the top executives are encouraged to catch hold of new ideas and
then convert them into products through R & D activities within the framework of
organizations.
 It is found in developed countries that such Intrapreneurs in large number are leaving the
organization and started their own enterprises.
 Many of such Intrapreneurs have become exceedingly successful in their ventures.

DISTINCTION BETWEEN ENTREPRENEUR AND INTRAPRENEUR