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Entrepreneurship is the practice of starting new organizations, particularly new businesses. Entrepreneurship is often a difficult undertaking, as a majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entreprenuership may involve creating many job opportunities.
Many "high-profile" entrepreneurial ventures seek venture capital or angel funding in order to raise capital to build the business. The first round of funding is usually at least $200,000 but first round funding of $25 million or more is not unheard of. In exchange for this money, investors receive equity in the company. The founders of an entrepreneurial venture can expect to exchange as much as 50% of the company for the first round of investments.
According to Joseph Schumpeter (1950), entrepreneurship is a form of "creative destruction" that simultaneously creates new business models and eliminates others. This creative destruction is one of the drivers of economic growth and change. According to Schumpeter, the entrepreneur is the person that develops an idea and builds it into an economic force. The Austrian School of economics also views entrepreneurship as the driving force in economic development.
For K. Knight (1967) and Peter Drucker (1970) entrepreneurship is about taking risk. The entrepreneur is the person that puts up capital to be used in an uncertain venture.
Another view of entrepreneurship is that it is the process of discovering, evaluating and exploiting opportunities. According to this view an entrepreneur could be defined as "Someone who acts without regard to the resources currently under his control in relentless pursuit of opportunity " (Jeffry Timmons).
Pinchot (1985) coined the term intrapreneurship to describe entrepreneurial activities inside large organizations.
The entrepreneurial personality
Entrepreneurs have many of the same character traits as leaders. They are often contrasted with managers and administrators who are said to be more methodical and less impetuous.
According to David McClelland (1961), the entrepreneur is primarily motivated by an overwhelming need for achievement. He has a strong "urge to build".
Collins and Moore (1970) studied 150 entrepreneurs and concluded that they are tough, pragmatic people driven by needs of independence and achievement. They seldom are willing to submit to authority.
Bird (1992) sees entrepreneurs as Mercurial, that is, prone to insights, brainstorms, deceptions, ingeniousness, resourcefulness, cunning, opportunistic, creative, and unsentimental.
Busenitz and Barney (1997) claim entrepreneurs are prone to overconfidence and over generalizations.
According to Cole (1959), there are four types of entrepreneur: the innovator, the calculating inventor, the over-optimistic promoter, and the organization builder.
Burton W. Folsom, Jr. distinguishes between what he calls a "political enterpreneur" who seeks profit for his business by using political influence to obtain favors and arrangements with government from a "market entrepreneur" who seeks to profit without utilizing political influence.
Typical characteristics of entrepreneurship
- There is a leader, the entrepreneur, who is the driving force behind economic events.
- Inside the mind of this entrepreneur is a vision of a future state that is preferred to the present state.
- Through a semiconscious process of intuition and insight, rooted in experience, the entrepreneur develops this vision and a strategy of how to implement it.
- This vision is promoted diligently and passionately by the entrepreneur. The job for many provides a feeling of being "alive" or the satisfaction of serving society.
- The strategy is deliberate and the overall vision is clear, however details may be malleable, incomplete, and emergent.
- Entrepreneurial strategies tend to go along with simple centralized organizational structures that respond quickly to the entrepreneur's directives.
- Entrepreneurial strategies tend to be used in niche markets that have not been noticed by the large industry leaders.
See also
References
- Bird, B. (1992)"The Roman God Mercury: An Entrepreneurial Archetype", Journal of Management Enquiry, vol 1, no 3, September, 1992.
- Busenitz, L. and Barney, J. (1997) "Differences between entrepreneurs and managers in large organizations", Journal of Business Venturing, vol 12, 1997.
- Cole, A. (1959) Business Enterprise in its Social Setting, Harvard University Press, Boston, 1959.
- Collins, J. and Moore, D. (1970) The Organization Makers, Appleton-Century-Crofts, New York, 1970.
- Drucker, P. (1970) "Entrepreneurship in Business Enterprise", Journal of Business Policy, vol 1, 1970.
- Fulton Jr., Burton W. (1987) The Myth of the Robber Barons, Young America.
- Knight, K. (1967) "A descriptive model of the intra-firm innovation process", Journal of Business of the University of Chicago, vol 40, 1967.
- McClelland, D. The Achieving Society, Van Nostrand, Princeton NJ, 1961.
- Pinchot, G. (1985) Intrapreneuring, Harper and Row, New York, 1985.
- Schumpeter, J. (1950) Capitalism, Socialism, and Democracy, 3rd edition, Harper and Row, New York, 1950.
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