entrepreneurship: what does it really mean? introduction:

8/14/2019 Entrepreneurship: What Does It REALLY Mean? Introduction:

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Entrepreneurship: What does it REALLY mean?

Introduction:In a world where ideas drive economies, it is no wonder that innovation and entrepreneurshipare often seen as inseparable bedfellows. The governments around the world are starting torealize that in order to sustain progress and improve a countrys economy, the people haveto be encouraged and trained to think out-of-the-box and be constantly developing innovativeproducts and services. The once feasible ways of doing business are no longer guaranteesfor future economic success!

In response to this inevitable change, some governments are rethinking the way the youngare educated by infusing creative thinking and innovation in their nations educationalcurriculum. In the same vein, they are putting much emphasis on the need to train futureentrepreneurs through infusing entrepreneurship components within the educational system,espec! ially at the tertiary level. Some countries have taken this initiative to a higher level byintroducing entrepreneurship education at elementary schools and encouraging them to befuture entrepreneurs when they are of age. In a series of survey funded by Kauffman Centerfor Entrepreneurial Leadership, it was found that nearly seven out of 10 youths (aged 14-19)were interested in becoming entrepreneurs. Being an entrepreneur is now the choice of thenew generation as compared to the preferred career choices of yesteryears such as being adoctor, lawyer or a fighter pilot. In a recent visit to the bustling city of Shanghai in China, aninformal survey was carried out among Chinese youths by the author. The results of thesurvey showed that being an entrepreneur, especially in the field of computer and e-commerce, is perceived as a cool career and is an aspiration for many Chinese youths Priorto the opening up of modern China, being an entrepreneur was perceived as the ou! tcomeof ones inability to hold a good government job and those who dared to venture, were oftenscorned at by their peers. Times have indeed changed.

With this change in mindset and the relative knowledge that entrepreneurs bring forthincreased job creations, the awareness and academic studies of entrepreneurship have alsoheightened. In many tertiary institutes, many courses of entrepreneurship and innovation are

being developed and offered to cater to the increasing demand. The term "entrepreneurship"has also evolved with numerous variations. The proliferation of jargons such as netpreneur,biotechpreneur, technopreneur and multipreneur are coined to keep up with the ever-changing times and business conditions that surround us.

In view of these changes, it is important that the definition of entrepreneurship be refined orredefined to enable its application in this 21st century. To put it succinctly, "Good science hasto begin with good definitions (Bygra! ve & Hofer, 1991, p13)." Without the proper definition, itwill be laborious for policymakers to develop successful programs to inculcateentrepreneurial qualities in their people and organizations within their country.

The paper will provide a summary of the definitions of entrepreneurship provided by scholarsin this subject area. The author will also expand on one of the definitions by JosephSchumpeter to create a better understanding of the definition of the term "entrepreneurship"as applied in todays business world.

Entrepreneurship through the Years:

It was discovered that the term entrepreneurship could be found from the French verbentreprende in the twelfth century though the meaning may not be that applicable today.This meaning of the word then was to do something without any link to economic profits,which is the antithesis of what entrepreneurship is all about today. It was only in the early


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1700s, when French economist, Richard ! Cantillon, described an entrepreneur as one whobears risks by buying at certain prices and selling at uncertain prices (Barreto, 1989, Casson1982) which is probably closer to the term as applied today.

In the 1776 thought-provoking book The Wealth of Nations, Adam Smith explained clearlythat it was not the benevolence of the baker but self-interest that motivated him to providebread. From Smiths standpoint, entrepreneurs were the economic agents who transformeddemand into supply for profits.

In 1848, the famous economist John Stuart Mill described entrepreneurship as the foundingof a private enterprise. This encompassed the risk takers, the decision makers, and theindividuals who desire wealth by managing limited resources to create new businessventures.

One of the definitions that the author feels best exemplifies entrepreneurship was coined byJoseph Schumpeter (1934). He stated that the entrepreneur is one who applies "innovation"within th! e context of the business to satisfy unfulfilled market demand (Liebenstein, 1995).In elaboration, he saw an entrepreneur as an innovator who implements change withinmarkets through the carrying out of new combinations. The carrying out of new combinationscan take several forms:

The introduction of a new good or standard of quality;

-The introduction of a novel method of production;

-The opening of a new market;

-The acquisition of a new source of new materials supply; and

-The carrying out of the new organization in any industry.

Though the term innovation has different meanings to different people, several writerstended to see "innovation" in the form of entrepreneurship as one not of incremental changebut quantum change in the new business start-ups and the goods/services that they provide(egs, Bygrave, 1995; Bygrave & Hofer, 1991).

In the view of Drucker (1985), he perceived entrepreneurship as the creation! of a neworganization, regardless of its ability to sustain itself, let alone make a profit. The notion of anindividual who starts a new business venture would be sufficient for him/her to be labeled asan entrepreneur. It is this characteristic that distinguishes entrepreneurship from the routinemanagement tasks of allocating resources in an already established business organization.Though the definition tends to be somewhat simplistic in nature, it firmly attaches the nature

of entrepreneurial action with risk-taking and the bearing of uncertainty by the individual(Swoboda, 1983)

In a Delphi study, Gartner (1990) found eight themes expressed by the participants thatconstitute the nature of entrepreneurship. They were the entrepreneur, innovation,organization creation, creating value, profit or non-profit, growth, uniqueness, and the owner-manager. The themes could be seen as a derivative and expansion of Schumpters earlierconcept.

Expanding on Schump! ! eters Definition:


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After digesting the numerous definitions of entrepreneurship, one would tend to see a stronglink between these two terms: entrepreneurship and innovation. In retrospect, most of thedefinitions tended to be, to some extent, a re-work and expansion of Schumpeters definitionof entrepreneurship (which is that of innovation being applied in a business context). Asdefining the term of innovation is highly debatable and would merit a paper on its own, theauthor has thus, for convenience, summarised the definition of innovation. Innovation can beperceived simply as the transformation of creative ideas into useful applications by combiningresources in new or unusual ways to provide value to society for or improved products,technology, or services.

In the authors opinion, the difficulties of defining "innovation" could be the reason for thequandary one finds in attempting to arrive at a clear-cut definition of the term "Entrepreneurship".!

Take for example, if someone starts another run-of-the-mill hot dog stand in the streets ofNew York, will he termed as an entrepreneur? According to Druckers definition, he will beseen as one. However, if the above definition by Schumpeter was used as a guideline, theanswer is probably NO. Why? The core of the matter lies in what is so innovative aboutsetting up another hot-dog stand which are in abundance in New York. On the contrary, if heis the first one to start a stand selling hot-dogs with Oriental Sweet and Sour sauce topping;he could be termed as an entrepreneur (even based on Schumpeters requirement) as hehas done what others have not done before. In the context of entrepreneurship, creativityand innovation are key points in the whole scheme of things.

In this manner, by adding "innovative" features to a product or services and setting up abusiness based on these additional features to compete in the existing market, new entrantsmay be ! able to gain this competitive advantage over existing market players.

In the case of the hot-dog seller, it may be argued that his addition of Oriental Sweet andSour sauce toppings may be seen as nondescript. This runs in contrary to some scholarsdefinition of entrepreneurship as requiring quantum changes in the products/ services to be

justified as being entrepreneurial (Bygrave, 1985; Bygrave & Hofer, 1991).

Consistent with creating new products for sale, someone who starts a business by providinga totally new way of serving his customers/ clients is considered to be entrepreneurial too.Though, it is often argued that there are no real new products or services in a case whereone does not look to the past products and services for ideas for improvements. Thus, thenotion of incremental improvements should be accepted as being innovative too.

Innovation in the business sense may not necessarily involve, in the physical sense, theintroduction o! f a new product or service. It can be in the form of what is commonly known ascreative imitations. For example, if an individual starts selling a product that is already

common in his area or country, he will not be seen as being entrepreneurial. However, if heis the first to sell the same product in a virgin locale or to an untouched market segment, hewill be seen as an entrepreneur in his own rights.

Take Muhammad Yunus, for example. Yunus became an entrepreneur when he started amicro-loan program for the poor villagers in a rural part of Bangladesh named Grameen, withonly US$26. The loan was divided among 42 villagers to assist them to buy small items suchas combs, scissors, needles and other necessities to start their own home businesses. In thepast 22 years, Grameen Bank has grown with over $2 billion loans granted. It has nowbecome a model for several micro-loan facilities.


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From the following example, Yunus created banking and lending facilities i! n Grameenspecifically for the poor villagers. Banking and lending money activities are not new butYunus was the first to provide such facilities in a rural part of Bangladesh and that isdefinitely innovation and risk-bearing on his part as a social entrepreneur. In short, innovationneed not arise mainly from a new product or service but it could be an old product or servicefinding a new market for penetration.

An individual could be termed as an entrepreneur if he or she sells a product or service usingnew systems and/ or mediums of marketing, distribution or production methods as a basis fora new business venture. A good example will be Jeff Bezos, the founder of Amazon, thesuccessful Web-based bookstore. He was one of the first to sell books on a large scale usingan online store and also patented the one-click system for online buying. Though sellingbooks is not an innovation in itself, Jeff Bezos was innovative in the use of the Internet thenas a viable ! marketing and sales channel for selling books.

Another example from the field of e-commerce is Stuart Skorman, the founder of Reel.com.Reel.com is essentially one of the first cyber movie store with a very large inventory of over a100 000 videos. Though setting a movie store was revolutionary then, Reel.com maindistinction was being known as the first online store to expand by opening an offline store.The founder felt that by doing so, the online store could be an advertisement for the offlinestore and vice versa, thus strengthening this click and mortar business venture- an exampleof creativity and innovation applied in a profitable business context.

Conclusion:

This paper has started as an attempt to redefine the term of entrepreneurship but ended upupdating the wheel, based on the definition as proposed by Schumpeter. The paperexpanded on this influential work by giving examples to illustrate what innovation inentrepreneurship was and hope ! that along the way, new insights were unearthed in thestudy of defining entrepreneurship.

In summary, the author hopes that this paper would further encourage the infusion ofcreative thinking and innovation within the educational system to nurture futureentrepreneurs with a competitive edge. In the authors view, the characteristics andcapabilities to set up a new business venture based on doing things that have not donebefore should be encouraged. Innovation needs to be the cornerstone of entrepreneurship asopposed to the mere setting up of another new enterprise without implementing changes oradding features of improvements to the products and services provided and/ or its businessprocesses.

Dr.Alvin Chan is a Research Fellow at a research forum in Asia. In addition, he acts as an

Advisor for several organizations such as CambridgePI (Europe) and Tumble Tots

(Singapore and Asia-Pacific). Contact Dr. Chan at [email protected]. Article onentrepreneurship, meaning by Dr. Alvin Chan

entrepreneurship: what does it really mean? introduction:

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