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Chapter 1
The Nature of
Entrepreneurship
By: Wondimagegn U. (Ass. professor)

Introduction
What words comes in your mind when

you read the word Entrepreneurship?
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Introduction
The origin of the word ‘entrepreneur’ is from a

French word, entreprender, where an
entrepreneur was an individual commissioned to
undertake a particular commercial project.
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Entrepreneurship is the art of identifying viable
business opportunities and mobilizing resources to
convert those opportunities into a successful
enterprise through creativity, innovation, risk taking
and progressive imagination.
Robert Hisrich (1985), definition that:

 … a process of creating something
different with value by devoting the
necessary time, and effort assuming
the accompanying financial,
psychological, and social risks, and
receiving the resulting rewards of
monetary and personal satisfaction.
In general, the process of entrepreneurship includes five
critical elements.
These are:
1) The ability to perceive an opportunity.
2) The ability to commercialize the perceived opportunity i.e.
innovation
3) The ability to pursue it on a sustainable basis.
4) The ability to pursue it through systematic means.
5) The acceptance of risk or failure.
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Other definition, views the term entrepreneur from three
perspectives; i.e. from the economist, psychologist and capitalist
philosopher’s point of view.
i. To an economist an entrepreneur is one who brings resource, labor,

materials, and other assets into combination that makes their value
greater than before and also one who introduces changes innovations.
ii. To a psychologist an entrepreneur is a person typically driven by

certain forces need to obtain or attain something, to experiment and
to accomplish.
iii. For the capitalist philosopher an entrepreneur is one who creates
wealth for others as well, who finds better way to utilize resources
and reduce waste and who produce job others are glad to get.
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Definitions of Entrepreneurship and Entrepreneur
Entrepreneurship Entrepreneur
O Entrepreneur is a
O Entrepreneurship can be
described as a process of person who starts an
setting up an enterprise. enterprise.
O Entrepreneurship is a
creative activity. The O The entrepreneur is
process of creation is the actor and
called entrepreneurship. entrepreneurship is
the act.
O Entrepreneurship is the
O The outcome of the
attitude of mind to seek
opportunities, take calculated actor and the act is
risks and derive benefits by called the enterprise.
setting up a venture.
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Types of Entrepreneurs
• Entrepreneurship can take three different forms. They are:
1. The individual entrepreneur: is someone who started; acquired
or franchised his/her own independent organization.
2. Intrapreneur: is a person who does entrepreneurial work within
large organization. The process by which an intrapreneur affects
change is called Intrapreneurship.
3. The Entrepreneurial Organization: The entrepreneurial
function need not be embodied in a physical person. Every social
environment has its own way of filling the entrepreneurial
function.
• An organization that creates such an internal environment is
defined as entrepreneurial organization.
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Personality Traits of Successful
Entrepreneurs
A). Need for Achievement
B). Willingness to take risk
C). Self-Confidence
D). Innovation and creativity
E). Total commitment
F). Effective time
management:
G). An Ability of leadership
H). An ability of decision
making
I). Desire for Independency
Why people consider setting
up their own businesses?
“Pull' Influence
 Some individuals are attracted
towards business ownership by
positive motives such as:
 Independence:
 Market opportunity:
 Financial incentives:
 Community service:
"Push" influence
 Many people are pushed into
founding a new enterprise by variety
of factors including;
 Unemployment:
 Disagreement with previous
employer
 Challenge: Overcoming
Challenge gives psychological
satisfaction
Role of Entrepreneurs in Economic Development
Entrepreneurial development is the most important input in the
economic development of any country. The objectives of:
Industrial development,
Balanced regional growth, and
Generation of employment opportunities are achievable
through entrepreneurial development.
Entrepreneurs are at the core of industrial development which
results in
Greater employment opportunities to the unemployed youth,
Increase in per capita income,
Higher standard of living and
Increased revenue to the government in the form of income,
sales tax, export duties, import duties etc.
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Phases of Business Environment
 Business environment may be classified into two broad categories;
namely, B. Internal
• External; and Environment
• Internal environment
A. External Environment Internal environment is the
• It is the environment which is environment which is under the
external to the business and control of a given organization.
hardly to influence Raw Material
independently. The following Production/Operation
are the components of external Finance
environment: Human Resource
• Economic Environment
• Legal Environment
• Political Environment
• Socio-Cultural Environment
• Demographic Environment
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Creativity, Innovation and Entrepreneurship
These three terminologies are chronologically interrelated and it
is very important to look in to them to get their full picture.
 Creativity
• Creativity is the ability to come up with new idea and to
identify new and different ways of looking at a problem and
opportunities.
 Thus, creativity is the development of ideas about products,
practices, services, or procedures that are novel and potentially
useful to the organization.
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Innovation
 Innovation lies at the heart of the entrepreneurial process and is a means
to the exploitation of opportunity.

 It is the implementation of new idea at the individual, group or
organizational level.
 There are four distinct types of innovation, these are as follows:
 Invention - described as the creation of a new product, service or
process
 Extension - the expansion of a product, service or process
 Duplication - a replication of an already existing product, service
or process.
 Synthesis - the combination of existing concepts and factors into a
new formulation.
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From Creativity to Entrepreneurship
 Creativity is the ability to develop new ideas and to discover new ways of looking at
problems and opportunities.
 Innovation is the ability to apply creative solution to those problems and opportunities
in order to enhance people’s lives or to enrich society.
⁂ Entrepreneurship = creativity + innovation.
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Chapter 1

By: Wondimagegn U. (Ass. professor)

What words comes in your mind when

The origin of the word ‘entrepreneur’ is from a

Robert Hisrich (1985), definition that:

i. To an economist an entrepreneur is one who brings resource, labor,

ii. To a psychologist an entrepreneur is a person typically driven by

useful to the organization.

to the exploitation of opportunity.

⁂ Entrepreneurship = creativity + innovation.

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