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Entrepreneurship
FromWikipedia,thefreeencyclopedia

Entrepreneurshipistheprocessofstartinga
businessorotherorganization.Theentrepreneur
developsabusinessmodel,acquiresthehumanand
otherrequiredresources,andisfullyresponsiblefor
itssuccessorfailure.Entrepreneurshipoperates
withinanentrepreneurshipecosystem.

Contents
1Background
2History
2.1Etymologyandhistoricalusage
2.2Historicalbarriersto
entrepreneurship

Lefttoright,EricSchmidt,SergeyBrinandLarry
PageofGoogle,whichissometimescitedasan
exampleofentrepreneurshipanddisruptive
innovation.

3Whatisanentrepreneur
4Skillset
4.1JosephSchumpeter
4.2FrankKnightandPeterDrucker
4.3Individual/opportunitynexus
4.4Entrepreneurshipandpiracy
5Psychologicalmakeup
6Projectentrepreneurship
6.1Innateabilityvs.publicperception
6.2Entrepreneurialstyles
7Financing
7.1Bootstrapping
7.2Externalfinancing
8Predictorsofentrepreneurialsuccess
9Predictorsofentrepreneurialfailure
10Seealso
11References
12Furtherreading

Background

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Inrecentyears,"entrepreneurship"hasbeenextendedfromitsoriginsinbusinesstoincludesocialand
politicalactivity.Entrepreneurshipwithinanexistingfirmor
largeorganizationhasbeenreferredtoasintrapreneurshipand
mayincludecorporateventureswherelargeentitiesspinoff
subsidiaryorganizations.[1]Entrepreneursareleaderswillingto
takeriskandexerciseinitiative,takingadvantageofmarket
opportunitiesbyplanning,organizing,andemploying
resources,[2]oftenbyinnovatingneworimprovingexisting
products.[3]Morerecently,thetermentrepreneurshiphasbeen
extendedtoincludeaspecificmindset(seealsoentrepreneurial
In2012,AmbassadoratLargefor
mindset)resultinginentrepreneurialinitiatives,e.g.intheform
GlobalWomen'sIssuesMelanne
ofsocialentrepreneurship,politicalentrepreneurship,or
Verveergreetedparticipantsinan
knowledgeentrepreneurship.
AfricanWomen'sEntrepreneurship
ProgramattheStateDepartmentin
Washington,D.C.

AccordingtoPaulReynolds,founderoftheGlobal
EntrepreneurshipMonitor,"bythetimetheyreachtheir
retirementyears,halfofallworkingmenintheUnitedStates
probablyhaveaperiodofselfemploymentofoneormoreyearsoneinfourmayhaveengagedinself
employmentforsixormoreyears.Participatinginanewbusinesscreationisacommonactivityamong
U.S.workersoverthecourseoftheircareers."[4]Inrecentyears,entrepreneurshiphasbeenclaimedasa
majordriverofeconomicgrowthinboththeUnitedStatesandWesternEurope.
Entrepreneurialactivitiesdiffersubstantiallydependingonthetypeoforganizationandcreativity
involved.Entrepreneurshiprangesinscalefromsolo,parttimeprojectstolargescaleundertakingsthat
createmanyjobs.Many"highvalue"entrepreneurialventuresseekventurecapitalorangelfunding
(seedmoney)inordertoraisecapitalforbuildingthebusiness.[5]Manyorganizationsexisttosupport
wouldbeentrepreneurs,includingspecializedgovernmentagencies,businessincubators,scienceparks,
andsomeNGOs.
Beginningin2008,anannual"GlobalEntrepreneurshipWeek"eventaimedat"exposingpeopletothe
benefitsofentrepreneurship"andgettingthemto"participateinentrepreneurialrelatedactivities".

History
Etymologyandhistoricalusage
Firstusedin1723,todaythetermentrepreneurimpliesqualitiesofleadership,initiativeandinnovation
inbusiness.EconomistRobertReichhascalledteambuilding,leadership,andmanagementability
essentialqualitiesfortheentrepreneur.[6][7]
Anentrepreneurisafactorinmicroeconomics,andthestudyofentrepreneurshipreachesbacktothe
workinthelate17thandearly18thcenturiesofRichardCantillonandAdamSmith,whichwas
foundationaltoclassicaleconomics.
Inthe20thcentury,entrepreneurshipwasstudiedbyJosephSchumpeterinthe1930sandotherAustrian
economistssuchasCarlMenger,LudwigvonMisesandFriedrichvonHayek.Theterm
"entrepreneurship"wascoinedaroundthe1920s,whiletheloanfromFrenchofthewordentrepreneur
datestothe1850s.

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Initially,economistsmadethefirstattempttostudytheentrepreneurshipconceptindepth[8]Richard
Cantillon(16801734)consideredtheentrepreneurtobearisktakerwhodeliberatelyallocatesresources
toexploitopportunitiesinordertomaximizethefinancialreturn.[9][10]Cantillonemphasizedthe
willingnessoftheentrepreneurtoassumeriskandtodealwithuncertainty.Thus,hedrawsattentionto
thefunctionoftheentrepreneur,anddistinguishesclearlybetweenthefunctionoftheentrepreneurand
theownerwhoprovidesthemoney.[9][11]AlfredMarshallviewedtheentrepreneurasamultitasking
capitalist.Heobservedthatintheequilibriumofacompletelycompetitivemarket,therewasnospotfor
entrepreneursasaneconomicactivitycreator.[12]

Historicalbarrierstoentrepreneurship
RootingbacktothetimesofthemedievalGuild,inGermanycraftsmanshipaspecialpermissionto
operateasanentrepreneurwasthesmallproofofcompetence(KleinerBefhigungsnachweis),which
restrictedtrainingofapprenticestocraftsmenwhoheldaMeistercertificate.Thisinstitutionwas
introducedin1908afteraperiodofsocalledfreedomoftrade(Gewerbefreiheit,introducedin1871)in
theGermanReich.However,thesmallproofofcompetencewasnotrequiredtostartabusiness.In1935
andin1953,thegreaterproofofcompetencewasreintroduced(GroerBefhigungsnachweis
Kuhlenbeck)andrequiredthatcraftsmenobtainaMeistercertificatetotrainapprenticesandbefore
beingpermittedtosetupanewbusiness.[13]

Whatisanentrepreneur
Entrepreneur( i /ntrprnr/),isaloanwordfromFrench.[14]Itisdefinedasanindividualwho
organizesoroperatesabusinessorbusinesses.Creditforcoiningthetermentrepreneurgenerallygoes
totheFrencheconomistJeanBaptisteSay,butinfacttheIrishFrencheconomistRichardCantillon
defineditfirst[15]inhisEssaisurlaNatureduCommerceenGnral,orEssayontheNatureofTradein
General,abookWilliamStanleyJevonsconsideredthe"cradleofpoliticaleconomy"[16]Cantillonused
thetermdifferently.BiographerAnthonyBreernotedthatCantillonsawtheentrepreneurasarisktaker
whileSayconsideredtheentrepreneura"planner".
Cantillondefinedthetermasapersonwhopaysacertainpriceforaproductandresellsitatanuncertain
price:"makingdecisionsaboutobtainingandusingtheresourceswhileconsequentlyadmittingtherisk
ofenterprise."ThewordfirstappearedintheFrenchdictionaryentitled"DictionnaireUniverselde
Commerce"compiledbyJacquesdesBruslonsandpublishedin1723.[17]
Successfulentrepreneurshavetheabilitytoleadabusinessinapositivedirectionbyproperplanning,to
adapttochangingenvironmentsandunderstandtheirownstrengthsandweakness.[18]

Skillset
Theentrepreneuriscommonlyseenasaninnovatorageneratorofnewideasandbusiness
processes.[20]Managementskillandstrongteambuildingabilitiesareoftenperceivedasessential
leadershipattributesforsuccessfulentrepreneurs.[21]PoliticaleconomistRobertReichconsiders
leadership,managementability,andteambuildingtobeessentialqualitiesofanentrepreneur.[22][23]

JosephSchumpeter
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AccordingtoSchumpeter,anentrepreneuriswillingandabletoconvertanewideaorinventionintoa
successfulinnovation.[24]EntrepreneurshipemployswhatSchumpetercalled"thegaleofcreative
destruction"toreplaceinwholeorinpartinferiorofferingsacrossmarketsandindustries,
simultaneouslycreatingnewproductsandnewbusinessmodels.Thus,creativedestructionislargely
responsibleforlongtermeconomicgrowth.Theideathatentrepreneurshipleadstoeconomicgrowthis
aninterpretationoftheresidualinendogenousgrowththeoryandassuchcontinuestobedebatedin
academiceconomics.AnalternatedescriptionbyIsraelKirznersuggeststhatthemajorityofinnovations
maybeincrementalimprovementssuchasthereplacementofpaperwithplasticintheconstructionofa
drinkingstrawthatrequirenospecialqualities.
ForSchumpeter,entrepreneurshipresultedinnewindustriesand
innewcombinationsofcurrentlyexistinginputs.Schumpeter's
initialexampleofthiswasthecombinationofasteamengineand
thencurrentwagonmakingtechnologiestoproducethehorseless
carriage.Inthiscasetheinnovation,thecar,was
transformational,butdidnotrequirethedevelopmentofdramatic
newtechnology.Itdidnotimmediatelyreplacethehorsedrawn
carriage,butintime,incrementalimprovementsreducedthecost
andimprovedthetechnology,leadingtothemodernauto
industry.

BritishentrepreneurKarrenBradyhas
anestimatednetworthof82

DespiteSchumpeter'searly20thcenturycontributions,
million[19]
traditionalmicroeconomictheorydidnotformallyconsiderthe
entrepreneurinitstheoreticalframeworks(insteadassumingthat
resourceswouldfindeachotherthroughapricesystem).Inthistreatmenttheentrepreneurwasan
impliedbutunspecifiedactor,consistentwiththeconceptoftheentrepreneurbeingtheagentofx
efficiency.
ForSchumpeter,theentrepreneurdidnotbearrisk:thecapitalistdid.Schumpeterbelievedthatthe
equilibriumidealwasimperfectSchumpeter(1934)demonstratedthatchangingenvironment
continuouslyprovidesnewinformationabouttheoptimumallocationofresourcestoenhance
profitabilitysomeindividualsacquirethenewinformationbeforeothers,recombinetheresourcesto
gainanentrepreneurialprofit.SchumpeterwasoftheopinionthatentrepreneursshifttheProduction
PossibilityCurvetoahigherlevelusinginnovations.[25]

FrankKnightandPeterDrucker
ForFrankH.Knight[26]andPeterDrucker,entrepreneurshipis
abouttakingrisk.Theentrepreneuriswillingtoputhisorher
careerandfinancialsecurityonthelineandtakerisksinthe
nameofanidea,spendingtimeaswellascapitalonanuncertain
venture.Knightclassifiedthreetypesofuncertainty:
Risk,whichismeasurablestatistically(suchasthe
probabilityofdrawingaredcolorballfromajar
containing5redballsand5whiteballs).
Ambiguity,whichishardtomeasurestatistically(suchas

DellWomen'sEntrepreneurNetwork
eventinNewYorkCity,May2013

theprobabilityofdrawingaredballfromajarcontaining
5redballsbutwithanunknownnumberofwhiteballs).
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TrueUncertaintyorKnightianUncertainty,whichisimpossibletoestimateorpredictstatistically,
suchastheprobabilityofdrawingaredballfromajarwhosenumberofredballsisunknownas
wellasthenumberofothercoloredballs.
Entrepreneurshipisoftenassociatedwithtrueuncertainty,particularlywhenitinvolvessomethingreally
novel,whosemarketdidnotalreadyexist.However,evenifarelatedmarketalreadyexists,nothing
guaranteesthatroomexistsforaparticularnewentry.
Theplaceoftheentrepreneurintraditionaleconomictheorypresentstheoreticquandaries.William
Baumolhasaddedgreatlytothisareaandwasrecentlyhonoredforthisworkatthe2006annualmeeting
oftheAmericanEconomicAssociation.[27]

Individual/opportunitynexus
AccordingtoShaneandVenkataraman,entrepreneurshipcomprisestwo"enterprisingindividuals"and
"entrepreneurialopportunities",andresearchersshouldstudythenatureoftheindividualswhorespond
totheseopportunitieswhenothersdonot,theopportunitiesthemselvesandthenexusbetween
individualsandopportunities.[28]

Entrepreneurshipandpiracy
Recentresearchventuresembarkedonstrikinglinksbetweenentrepreneurshipandpiracy.Inthis
context,theclaimismadeforanonmoralapproachtopiracyasasourceofinspirationfor
entrepreneurshipeducation[29]aswellasforresearchinentrepreneurship[30]andbusinessmodel
generation.[31]

Psychologicalmakeup
Studiesshowthatthepsychologicalpropensitiesformaleandfemaleentrepreneursaremoresimilar
thandifferent.Empiricalstudiessuggestthatmaleentrepreneurspossessstrongnegotiatingskillsand
consensusformingabilities.
JesperSrensenwrotethatsignificantinfluencesonthedecisiontobecomeanentrepreneurare
workplacepeersandsocialcomposition.Srensendiscoveredacorrelationbetweenworkingwith
formerentrepreneursandhowoftentheseindividualsbecomeentrepreneursthemselves,comparedto
thosewhodidnotworkwithentrepreneurs.[32]Socialcompositioncaninfluenceentrepreneurialismin
peersbydemonstratingthepossibilityforsuccess,stimulatingaHecandoit,whycantI?attitude.As
Srensenstated,Whenyoumeetotherswhohavegoneoutontheirown,itdoesntseemthatcrazy.[33]
AsperCattellspersonalityframework,bothpersonalitytraitsandattitudesarethoroughlyinvestigated
bypsychologists.However,incaseofentrepreneurshipresearch,thesenotionsareemployedby
academicstoo,butvaguely.AccordingtoCattell,personalityisasystemthatisrelatedtothe
environment.Hefurtheraddsthatthesystemseeksexplanationtothecomplextransactionsconducted
bybothtraitsandattitudes.Thisisbecausebothofthembringaboutchangeandgrowthinaperson.
So,personalityisthatwhichinformswhatanindividualwilldowhenfacedwithagivensituation.
Simplyput,apersonsresponseistriggeredbyhis/herpersonalityandthesituationfaced.[34]

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Innovativeentrepreneursmaybemorelikelytoexperiencewhatpsychologist,MihalyCsikszentmihalyi
callsflow.Flowoccurswhenanindividualforgetsabouttheoutsideworldgivenapowerfulinsight.
Csikszentmihalyisuggestedthatbreakthroughinnovationsoccuratthehandsofindividualsinthat
state.[35]Otherresearchhasconcludedthatastronginternalmotivationisavitalingredientfor
breakthroughinnovation.[36]FlowcanbecomparedtoMariaMontessori'sconceptofnormalization,a
statethatincludesachildscapacityforjoyfulandlengthyperiodsofintenseconcentration.[37]
CsikszentmihalyiacknowledgedthatMontessorispreparedenvironmentofferschildrenopportunitiesto
achieveflow.[38]Thusqualityandtypeofearlyeducationmayinfluenceentrepreneurialcapability.

Projectentrepreneurship
Projectentrepreneusareindividualswhoareengagedintherepeatedassemblyoftemporary
organizations.[39]Theseareorganizationsthathavelimitedlivesdevotedtoproducingasingular
objectiveorgoalandgetdisbandedveryrapidlywhentheprojectends.Industrieswhereprojectbased
enterprisesarewidespreadinclude:music,movies,software,television,construction,andnewmedia.[40]
Whatmakesprojectentrepreneursdistinctivefromatheoreticalstandpointisthattheyhavetorewire
thesetemporaryventureswhenevernewprojectopportunitiesemerge.Asaresult,theyareexposed
repeatedlytoproblemsandtaskstypicaloftheentrepreneurialprocess.[41]Indeed,projectentrepreneurs
facetwocriticalchallengesthatinvariablycharacterizethecreationofanewventure:locatingtheright
opportunitytolaunchtheprojectventureandassemblingthemostappropriateteamtoexploitthat
opportunityeffectively.Resolvingthefirstchallengerequiresprojectentrepreneurstoaccessan
extensiverangeofinformationneededtoseizenewinvestmentopportunities.Resolvingthesecond
challengerequiresassemblingacollaborativeteamthathastofitwellwiththeparticularchallengesof
theprojectandhastofunctionalmostimmediatelytoreducetheriskthatperformancemightbe
adverselyaffected.

Innateabilityvs.publicperception
Individualsusewhatisdescribedas"aninnateability"orquasistatisticalsensetogaugepublic
opinion.[42]Peopleassumetheycansenseandfigureoutwhatothersarethinking.[43]
TheMassmediaplayalargepartindeterminingwhatthedominantopinionis,sinceour
directobservationislimitedtoasmallpercentageofthepopulation.Themassmediahave
anenormousimpactonhowpublicopinionisportrayed,andcandramaticallyimpactan
individual'sperceptionaboutwherepublicopinionlies,whetherornotthatportrayalis
factual.[44]
Theabilityofentrepreneurstoinnovaterelatestoinnatetraits,includingextroversionandaproclivity
forrisktaking.AccordingtoJosephSchumpeter,thecapabilitiesofinnovating,introducingnew
technologies,increasingefficiencyandproductivity,orgeneratingnewproductsorservices,are
characteristicqualitiesofentrepreneurs.Also,manyscholarsmaintainthatentrepreneurshipisamatter
ofgenes,andthatitisnoteveryonewhocanbeanentrepreneur.[45]
Ithas,however,beenarguedthatentrepreneursarenotthatdistinctiveandthatitisessentiallypoor
conceptualizationsof"nonentrepreneurs"thatmaintainlaudatoryportraitsof"entrepreneurs."[46][47]

Entrepreneurialstyles
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Differencesinentrepreneurialorganizationsoftenpartiallyreflecttheirfounders'heterogenous
identities.FauchartandGruberhaveclassifiedentrepreneursintothreemaintypes:Darwinians,
CommunitariansandMissionaries.Thesetypesofentrepreneursdivergeinfundamentalwaysintheir
selfviews,socialmotivations,andpatternsofnewfirmcreation.[48]

Financing
Bootstrapping
Entrepreneursmayattemptto"bootstrap"acompanyratherthanseekingexternalinvestors.One
consensusdefinitionofbootstrappingseesitas"acollectionofmethodsusedtominimizetheamountof
outsidedebtandequityfinancingneededfrombanksandinvestors".[49]Mostcommonly,entrepreneurs
engaginginbootstrappingincurpersonalcreditcarddebt,buttheymayutilizeawidevarietyof
methods.Whilebootstrappinginvolvesincreasedriskforentrepreneurs,theabsenceofanyother
stakeholdergivestheentrepreneurmorefreedomtodevelopthecompany.Manysuccessfulcompanies
includingDellComputerandFacebookstartedbybootstrapping.
Typesofbootstrappinginclude:[50]
ownerfinancing
sweatequity
minimizationofaccountspayable
jointutilization
delayingpayment
minimizinginventory
subsidyfinance
personaldebt

Externalfinancing
Manybusinessesneedmorecapitalthancanbeprovidedbytheownersthemselves,andinthiscase,a
rangeofoptionsisavailableincluding:
Angelinvestors
Venturecapitalinvestors.
Crowdfunding
Hedgefunds
AlternativeAssetManagement
Someofthesesourcesprovidenotonlyfunds,butalsofinancialoversight,accountabilityforcarrying
outtasksandmeetingmilestones,andinsomecasesbusinesscontactsandexperienceinmanycasesin
returnforanequitystake.

Predictorsofentrepreneurialsuccess
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Factorsthatmaypredictentrepreneurialsuccessincludethefollowing:[51]
Market
Businesstobusiness(B2B)model,notbusinesstoconsumer(B2C)
Highgrowthmarket
Targetcustomer'smissedbyothers
Industry
Growingindustry
Hightechnologyimpactontheindustry
Lowcapitalintensity
Smallaverageincumbentfirmsize
Team
Large,diverseventureteam,notindividualentrepreneurs
Graduatedegrees
Managementexperience
Workexperienceinthestartupindustry
Employedfulltimepriortonewventure,asopposedtounemployed
Priorsuccessfulentrepreneurialexperience
Fulltimeinvolvementinthenewventure
Motivatedbyhighprofits,notindependence
Numberanddiversityofindividual'ssocialties
Company
Writtenbusinessplan
Activityfocusedonasingleproductorservice
Competitionbasedonadimensionotherthanprice
Early,frequentandintensemarketing
Tightfinancialcontrols
$100,000+startupcapital
Corporation,notsoleproprietorship
Status
Wealth
DominantRace,Ethnicity,orGenderinaSociallyStratifiedCulture[52]

Predictorsofentrepreneurialfailure
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LowBusinessAcumen,failingtoaddvalueinconsumerslives.
JackofallTrade,doingwhateveryoneisdoingandnotdoingwhatonecandothebest.
Shortsightedness,failingtocreatelonglastingsolutionsfortodaysvices.
Extravagance,satisfyingunnecessarywantsandmisuseofresourcesathand.
Insecurity,notbuildinganefficientteam.[53]

Seealso
Listofentrepreneurs
Businessopportunity
Corporatesocialentrepreneurship
Corporateentrepreneurship
Entrepreneurshipecosystem
Universityspinoff
Spiralofsilence
SmallBusinessAdministration
BusinessAdministration
Innovation

References
1. ^Shane,ScottAndrew(2000).AGeneralTheoryofEntrepreneurship:TheIndividualopportunityNexus
(https://books.google.com/books?id=0FxO_Wsh30kC).EdwardElgarPublishing.ISBN9781781007990.
2. ^Deakins&Freel2012.
3. ^Johnson,D.P.M.(2005)."AGlossaryofPoliticalEconomyTerms,2005"
(https://libraries.ucsd.edu/info/resources/glossarypoliticaleconomyterms).AuburnUniversity.
4. ^PaulD.Reynolds(30September2007).EntrepreneurshipintheUnitedStates:TheFutureIsNow
(https://books.google.com/books?id=gPBP7oP9p4C).Springer.ISBN9780387456713.
5. ^MarkVanOsnabrugge,RobertJ.Robinson(2000).AngelInvesting.JohnWiley&Sons.ISBN07879
52028.
6. ^Muljadi,Paul(ed.).Entrepreneurship(https://books.google.com/books?id=eNy7hArvOUC).PaulMuljadi.
7. ^Crainer,StuartDearlove,Des(2000).GenerationEntrepreneur.FTPress.p.202.
8. ^Landstrom,H.(31December2007).PioneersinEntrepreneurshipandSmallBusinessResearch
(https://books.google.com/books?id=oSjccQt5zTsC).Springer.ISBN9780387236339.
9. ^abCantillon,Richard(1755).Essaisurlanatureducommerceengnral.London:MacMillan.
10. ^Stevenson,H.Jarillo,J.(26May2007).Cuervo,lvaroRibeiro,DomingoRoig,Salvador,eds.A
ParadigmofEntrepreneurship:EntrepreneurialManagement,in(https://books.google.com/books?id=2v
aWpdgoPQC&pg=5).Entrepreneurship:Concepts,TheoryandPerspective(SpringerScienceBusiness
Media).pp.5.ISBN9783540485438.

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