Entrepreneurship : History, Definition, Importance, Types

 Entrepreneurship 

Entrepreneurship is the ability and readiness to develop, organize and run a business enterprise, along with any of its uncertainties in order to make a profit. The most prominent example of entrepreneurship is the starting of new businesses.

 

In economics, entrepreneurship connected with land, labour, natural resources and capital can generate a profit. The entrepreneurial vision is defined by discovery and risk-taking and is an indispensable part of a nation’s capacity to succeed in an ever-changing and more competitive global marketplace.

2.1 Entrepreneurship Meaning, Nature and Concept

After learning about the Entrepreneurs, in depth. Let us now understand the deep meaning of entrepreneurship. 

Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by individuals who assume the major risks in terms of equity, time, and/or career commitment to providing value for some product or service. The product or service itself may or may not be new or unique but value must somehow be infused by the entrepreneur by securing and allocating the necessary skills and resources. 

Also, it was generally recognized that entrepreneurs serve as agents of change, provide creative, innovative ideas for business enterprises, and help businesses grow and become profitable. 

Whatever the specific activity they engage in, entrepreneurs in the twenty-first century are considered the heroes of free enterprise. Many of them have used innovation and creativity to build huge enterprises. 

Entrepreneurship is now regarded as the “Pioneer ship” of business. The history of the early industrial development and trade and subsequent innovation in any country is largely the history of its entrepreneurs. 

It describes people with the pioneering spirit, intuition inspiration, and a willingness to work hard and take risks. They are energetic self-starters who make it their mission to meet business challenges, independently and are restless in working for someone else, for a salary.

In a nutshell, the concept of entrepreneurship can be understood as follows:

1. Entrepreneurship involves decision-making, innovation, implementation, forecasting of the future, independency, and success.
2. Entrepreneurship is a discipline with a knowledge base theory and is an outcome of complex socio-economic, psychological, technological, legal, and other factors.
3. It is a dynamic and risky process.
4. It involves a fusion of capital, technology, and human talent.
5. Entrepreneurship is equally applicable to big and small businesses and to economic and non-economic activities.
6. Different entrepreneurs might have some common traits but all of them will have some different and unique qualities.
7. It is the purposeful and organized search for change, conducted after a systematic analysis of opportunities in the business environment.
8. Entrepreneurship is a philosophy and is the way one thinks, one acts, and therefore it can exist in any situation, be it business or government or in the field of education, science, and technology.
9. Entrepreneurship is a creative activity.
10. It is the ability to create and build something from practically nothing.
11. It is a knack of sensing opportunity where others see chaos and confusion.
12. Entrepreneurship is the attitude of the mind to seek opportunities, take calculated risks, and derive benefits by setting up a venture.
13. It is made up of activities to conceive, create, and run an enterprise.

To sum up, “Entrepreneurship is a dynamic process of vision, change and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. Essential ingredients include the willingness to take calculated risks in terms of time, equity, or career, the ability to formulate an effective venture team, the creative skill to organize needed resources, the fundamental skill of building a solid business plan, and, above all, the vision to recognize opportunity where others see chaos, contradiction, and confusion.’’

2.2 History of Entrepreneurship

The term “entrepreneurship” can be traced back to as early as the Middle Ages, when the “entrepreneur” was simply someone who carried out tasks, such as buildings and construction projects by applying all the resources at his disposal. However, it was during the 16th century when “business” was used as a common term, and the “entrepreneur’’ came into focus, as a person, who is responsible for undertaking a business venture.

Entrepreneurship as a term can be traced back to the economists of the 18th century, and it continued to attract the interest of economists in the 19th century. In the twentieth century, the word became synonymous with free enterprise and capitalism.

During the 20th century, within the last two decades, the concept of entrepreneurship has evolved from being a single individual to an entire organization or a corporation.

2.3 Definition of Entrepreneurship

1. According to Peter F. Drucker “Entrepreneurship is defined as a systematic innovation, which consists in the purposeful and organized search for changes, and it is the systematic analysis of the opportunities such changes might offer for economic and social innovation”.
2. According to Ricardo Cantillon “Entrepreneurship entails bearing the risk of buying at a certain price and selling at uncertain prices.”
3. In the words of Joseph A. Schumpeter “Entrepreneurship is any kind of innovative function that could have a bearing on the welfare of an entrepreneur.”
4. According to Robert K. Lamb “Entrepreneurship is that form of social decision making performed by economic innovators.”
5. As per A.H.Cole “Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or aggrandize profit by production or distribution of economic goods and services.”
6. The concept of Entrepreneurship has also been defined as “a special skill or ability to mobilize the factors of production – Land, labour and capital and use them to produce new goods and services”.
7. Entrepreneurship can also be described as a process of action, which an entrepreneur undertakes to establish his/her enterprise.

2.4 Characteristics of Entrepreneurship:

Not all entrepreneurs are successful; there are definite characteristics that make entrepreneurship successful. A few of them are mentioned below:

• Ability to take a risk- Starting any new venture involves a considerable amount of failure risk. Therefore, an entrepreneur needs to be courageous and able to evaluate and take risks, which is an essential part of being an entrepreneur.
• Innovation- It should be highly innovative to generate new ideas, start a company and earn profits out of it. Change can be the launching of a new product that is new to the market or a process that does the same thing but in a more efficient and economical way.
• Visionary and Leadership quality- To be successful, the entrepreneur should have a clear vision of his new venture. However, to turn the idea into reality, a lot of resources and employees are required. Here, leadership quality is paramount because leaders impart and guide their employees towards the right path of success.
• Open-Minded- In a business, every circumstance can be an opportunity and used for the benefit of a company. For example, Paytm recognised the gravity of demonetization and acknowledged the need for online transactions would be more, so it utilised the situation and expanded massively during this time.
• Flexible- An entrepreneur should be flexible and open to change according to the situation. To be on the top, a businessperson should be equipped to embrace change in a product and service, as and when needed.
• Know your Product-A company owner should know the product offerings and also be aware of the latest trend in the market. It is essential to know if the available product or service meets the demands of the current market, or whether it is time to tweak it a little. Being able to be accountable and then alter as needed is a vital part of entrepreneurship.

2.5 Importance of Entrepreneurship:

• Creation of Employment- Entrepreneurship generates employment. It provides an entry-level job, required for gaining experience and training for unskilled workers.
• Innovation- It is the hub of innovation that provides new product ventures, market, technology and quality of goods, etc., and increase the standard of living of people.
• Impact on Society and Community Development- A society becomes greater if the employment base is large and diversified. It brings about changes in society and promotes facilities like higher expenditure on education, better sanitation, fewer slums, a higher level of homeownership. Therefore, entrepreneurship assists the organisation towards a more stable and high quality of community life.
• Increase Standard of Living- Entrepreneurship helps to improve the standard of living of a person by increasing the income. The standard of living means, increase in the consumption of various goods and services by a household for a particular period.
• Supports research and development- New products and services need to be researched and tested before launching in the market. Therefore, an entrepreneur also dispenses finance for research and development with research institutions and universities. This promotes research, general construction, and development in the economy.

2.6 Types of Entrepreneurship

1. Small business entrepreneurship
2. Scalable start-up entrepreneurship.
3. Large companies or big business entrepreneurship.
4. Social entrepreneurship.

Just like Entrepreneurs, Entrepreneurship has its meaning, Concept and nuances, each with distinct vision and goals that cater to different sectors, ambitions, and strategies in the business world. So, let’s understand each type in detail, with their unique features, the challenges they address, and the impact they have on the economy and society at large.

1 Small business entrepreneurship

Small business entrepreneurship is defined as an independent or solely owned company that is limited in size and revenue, depending on the industry. These companies primarily operate within a local community or region and focus on serving their nearby customers through personalized service and a deep understanding of the local market dynamics.

The best feature they have is to exhibit adaptability and their ability to respond quickly to local market shifts and customer preferences. One might not expect revolutionary innovations from these businesses but they brought up novel approaches within their niche or community.

Small businesses often struggle with the economy due to limited access to large audiences, making it challenging to scale their operations and increase their market approach compared to larger corporations or big brands within their niche. Also, there is a continuous threat of global economic fluctuations, which can significantly impact their stability and growth.

Small businesses create Social Stability, while they might not be major innovators, but they contribute to enhancing community well-being and a considerable percentage of job creation.

The best examples to understand this concept are Local bakeries, salons, single-location restaurants, local grocery shops etc.

2 Scalable Start-up Entrepreneurship

Scalable start-up entrepreneurship can be defined as a profitable business model that has the potential for significant growth and expansion, with innovative technology or a unique approach to a market need, allowing them to quickly scale and dominate sectors, often transforming or creating entirely new industries.

Unique, innovative products or services and advanced technology are their best features. These core values distinguished them in the market with new and improvised solutions. These innovations can range from revolutionary software to groundbreaking products, providing solutions that meet unaddressed needs.

It is often noticed that scalable startups need a substantial initial investment to develop their product and services, to manage rapid scaling, marketing, research and development, and to ensure that they have the infrastructure and resources ready to grow quickly and sustainably.

Having a highly skilled team with the right approach to drive innovation and technology which ensures to bring out problem-solving products or services is the biggest challenge they face during their initial stage. Along with this, dealing with multiple Regulatory and Legal Issues as they expand in different geographical markets can create complexities in their scalable business.

Scalable startups have the potential to disrupt existing markets by introducing lower prices and more choices for consumers. This directly benefits society by enhancing purchasing power and economic stability. As these startups grow, they create new jobs, contributing to economic growth and providing employment opportunities to the

3 Large Companies or Big Business Entrepreneurship

Large Companies or Big Business Entrepreneurship can be defined as a commercial entity that has substantial market influence, extensive resources, and operates in multiple locations. These entities have huge annual revenue and a large number of employees to undertake large-scale projects, influence market trends, and drive significant economic growth.

Large Companies usually have a global presence, operating across multiple countries, depending on the nature of their business. They emphasise on steady growth over a certain period of time rather than leading an overnight revolution.

Large companies are often at risk of disruption from newer, more innovative players that can move quickly to exploit emerging trends and technologies. The best example to understand this concept is how OYO Rooms, founded in 2013 shook up the hospitality industry and challenged major hotel chains like Taj, Oberoi, and ITC Hotels

On the other side, These Big Corporations often set new industry standards, pushing the envelope of what’s possible and encouraging industry-wide innovation contributing to a huge impact on society. Along with this, Large firms have the resources to address major societal challenges through their entrepreneurial projects. For example, they can invest in sustainable technologies or healthcare innovations that have far-reaching societal impacts.

4 Social Entrepreneurship

In the broad sense, social entrepreneurship refers to innovative activity with a social objective in either the ‘for-profit sector’, such as in social-purpose commercial ventures or in the ‘non-profit sector’, or across sectors, such as hybrid structural forms which blend for profit and non-profit approaches.

Under the narrow definition, Social Entrepreneurship refers to the phenomenon of applying business expertise and market-based skills in the non-profit sector, such as when non-profit organizations develop innovative approaches to earn income and reinvest that capital for the betterment of society.

They explore new ideas, to make an impact as a socially aware organization. Not only do they have an idea that must be implemented, but also they know how to implement it and are realistic in their vision of implementing it.

While traditional businesses often secure funding based on their innovative ideas and potential for profit, social enterprises must convince investors of the value of their social impact. Also,  scaling a social enterprise can be challenging as it does not have a sustainable profit outcome.

Social entrepreneurship plays a critical role in driving social change, offering new avenues for addressing social issues by combining innovation, resourcefulness, and opportunity to create solutions that are sustainable, impactful, and capable of scaling to benefit society at large.

The best example to understand this concept is Anshu Gupta, He founded the non-governmental organization Goonj which brings inequality between urban and rural region