What is Entrepreneurship?
The definition of entrepreneurship has been debated among scholars, educators, researchers, and policy makers since the concept was first established in the early 1700’s. The term “entrepreneurship” comes from the French verb “entreprendre” and the German word “unternehmen”, both means to “undertake”. Bygrave and Hofer in1891 defined the entrepreneurial process as ‘involving all the functions, activities, and actions associated with perceiving of opportunities and creation of organizations to pursue them’. Joseph Schumpeter introduced the modern definition of ‘entrepreneurship’ in 1934. According to Schumpeter, “the carrying out of new combinations we call ‘enterprise’,” and “ the individuals whose function it is to carry them out we call ‘entrepreneurs’.” Schumpeter tied entrepreneurship to the creation of five basic “new combinations” namely: introduction of a new product, introduction of a new method of production, opening of a new market, the conquest of a new source of supply and carrying out of a new organization of industry. Peter Drucker proposed that ‘entrepreneurship’ is a practice. What this means is that entrepreneurship is not a state of being nor is it characterized by making planes that are not acted upon. Entrepreneurship begins with action, creation of new organization. This organization may or may not become self-sustaining and in fact, may never earn significant revenues. But, when individuals create a new organization, they have entered the entrepreneurship paradigm. The Supply of Entrepreneurship and Economic Development :
British economists such as Adam Smith, David Ricardo, and John Stuart Mill briefly touched upon the concept of entrepreneurship, though they referred to it under the broad English term “business management”. Whereas the writings of Smith and Ricardo suggest that they undervalued the importance of entrepreneurship, Mill goes out of his way to stress the significance of entrepreneurship for economic growth. In his writings, Mill claims that entrepreneurship requires ‘no ordinary skill”, and he laments the fact that there is no good English equivalent word to encompass the specific meaning of the French term ‘entrepreneur’.
The necessity of entrepreneurship for production was first formally recognized by Alfred Marshall in 1890. In his famous treatise Principles of Economics, Marshall asserts that there re four factors of production: land, labour, capital and organization. Organization is the coordinating factor, which brings the other factors together, and Marshall believed that entrepreneurship is driving element behind organization. By creatively organizing, entrepreneurs create new commodities or improve “the plan of producing an old commodity”. In order to do this, Marshall believed that entrepreneurs must have a thorough understanding about their industries, and they must be natural leaders. Additionally, Marshall’s entrepreneurs must have the ability to foresee changes in supply and demand and be willing to act on such risky forecasts in the absence of complete information. Marshall also suggests that the skills associated with entrepreneurship are rare and limited in supply. He claims that the abilities of entrepreneur are “so great and so numerous that very few people can exhibit them in all in a very high degree”. Marshall, however, implies that people can be taught to acquire the abilities that are necessary to be an entrepreneur. Unfortunately, the opportunities for entrepreneurs are often limited by economic environment, which surrounds them. Additionally, although entrepreneurs share some common abilities, all entrepreneurs are different, and their success depend on the economic situations in which they attempt their endeavors. One school of thought on entrepreneurship suggests that role of the entrepreneur is that of a risk-bearer in the face of uncertainty and imperfect information. Knight...