Unit 1: Introduction

Concept of Entrepreneurship

Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort,
assuming the accompanying financial, psychic, and social risks, receiving the resulting rewards of monetary and
personal satisfaction and independence.
“Entrepreneurship is the process whereby an individual or group of individuals use organized efforts to pursue
opportunities to create value and grow by fulfilling wants and needs through innovations and uniqueness, no matter
what resource the entrepreneur currently has”.

Entrepreneurship has long been described by researchers and writers with terms such as new, innovative, flexible,
dynamic, creative, and risk-taking.

Common Theme of Entrepreneurship

 Process
 The Entrepreneur
 Innovation
 Organization Creation
 Creating Value
 Profit or non-profit
 Growth
 Uniqueness

Nature and Development of Entrepreneurship

Historical Evolution Of Entrepreneurship: The development of the theory of entrepreneurship parallels to a great extent
the development of the term itself. The word entrepreneur is French and, literally translated, means "between-taker" or
"go-between."

1. Earliest Period
An early example of the earliest definition of an entrepreneur as a go-between is Marco Polo, who attempted
to establish trade routes to the Far East. As a go-between, Marco Polo would sign a contract with a money
person (forerunner of today's venture capitalist) to sell his goods. A common contract during this time pro-
vided a loan to the merchant adventurer at a 22.5 percent rate, including insurance. While the capitalist was
a passive risk bearer, the merchant-adventurer took the active role in trading, bearing all the physical and
emotional risks. When the merchant-adventurer successfully sold the goods and completed the trip, the
profits were divided with the capitalist taking most of them (up to 75 percent), while the merchant-
adventurer settled for the remaining 25 percent.

2. Middle Ages
In the Middle Ages, the term entrepreneur was used to describe both an actor and a person who managed large
production projects. In such large production projects, this individual did not take any risks, but merely
managed the project using the resources provided, usually by the government of the country. A typical
entrepreneur in the Middle Ages was the cleric—the person in charge of great architectural works, such as
castles and fortifications, public buildings, abbeys, and cathedrals.
3. 17th Century
The reemergent connection of risk with entrepreneurship developed in the 17th century, with an-entrepreneur
being a person who entered into a contractual arrangement with the government to perform a service or to
supply stipulated products. Since the contract price was fixed, any resulting profits or losses were the
entrepreneur's.
4. 18th Century
In the 18th century, the person with capital was differentiated from the one who needed capital. In other
words, the entrepreneur was distinguished from the capital provider (the present-day venture capitalist). One
reason for this differentiation was the industrialization occurring throughout the world. A venture capitalist
is a professional money manager who makes risk investments from a pool of equity capital to obtain a high
rate of return on the investments.

5. 19th and 20th Centuries

In the late 19th and early 20th centuries, entrepreneurs were frequently not distinguished from managers and
were viewed mostly from an economic perspective:

Briefly stated, the entrepreneur organizes and operates an enterprise for personal gain. He pays current prices for
the materials consumed in the business, for the use of the land, for the personal services he employs, and for the
capital he requires. He contributes his own initiative, skill, and ingenuity in planning, organizing, and
administering the enterprise. He also assumes the chance of loss and gain consequent to unforeseen and
uncontrollable circumstances. The net residue of the annual receipts of the enterprise after all costs have been
paid, he retains for himself.

In the middle of the 20th century, the notion of an entrepreneur as an innovator was established:

The function of the entrepreneur is to reform or revolutionize the pattern of production by exploiting an
invention or, more generally, an untried technological method of producing a new commodity or producing
an old one in a new way, opening a new source of supply of materials or a new outlet for products, by organizing
a new industry.

6. Today (21st Century)

The concept of an entrepreneur is further refined when principles and terms from a business, managerial, and
personal perspective are considered. In particular, the concept of entrepreneurship from a personal perspec-
tive has been thoroughly explored in this century. This exploration is reflected in the following three defini-
tions of an entrepreneur:
In almost all of the definitions of entrepreneurship, there is agreement that we are talking about a kind of behavior
that includes:
1. Initiative taking.
2. The organizing and reorganizing of social and economic mechanisms to turn re-sources and situations to
practical account,
3. The acceptance of risk or failure.

To an economist, an entrepreneur is one who brings resources, labor, materials, and other assets into combina-
tions that make their value greater than before, and also one who introduces changes, innovations, and a new
order.

To a psychologist, such a person is typically driven by certain forces - the need to obtain or attain something, to
experiment, to accomplish, or perhaps to escape the authority of others.

To one businessman, an entrepreneur appears as a threat, an aggressive competitor, whereas to another

businessman the same entrepreneur may be an ally, a source of supply, a customer, or someone who creates wealth
for others, as well as finds better ways to utilize resources, reduce waste, and produce jobs others are glad to
get.
Conclusion

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

Although each of these definitions views entrepreneurs from a slightly different perspective, they all contain
similar notions, such as newness, organizing, creating, wealth, and risk taking.

Entrepreneural Process

Steps in the Entrepreneurial Process

1. Discovery: The stage in which the entrepreneur generates ideas, recognizes opportunities and studies the
market.
 Consider your hobbies or skills
 Consider consumer needs and wants
 Conduct Surveys and questionnaires – test the market
 Study demographics
2. Concept Development:
Develop a business plan: a detailed proposal describing the business idea.
Concept Development
– Choose business location
– Will a patent or trademark be required?

3. Resourcing: The stage in which the entrepreneur identifies and acquires the financial, human, and capital
resources needed for the venture startup, etc.
Start-up resources
 Identify potential investors
 Hire employees
 Apply for loans, grants and assistance
 4. Actualization: The stage in which the entrepreneur operates the business and utilizes resources to achieve
its goals/objectives.

5. Harvesting: The stage in which the entrepreneur decides on venture’s future growth, development, or
demise.

 What is your 5-year or 10-year plan?

 Consider adding locations or providing different products/services.
 Will you go public?

Ethics and Responsibilities of Entrepreneur

The entrepreneur has to include his social obligations and social values as inputs into the decision and action
process, along with organisational, economic, technological and other relevant values and variables. The most
important social obligation of an entrepreneur is to reconcile and balance the various conflicting interests in the best
possible manner. The various stakeholders are:

1. Employees: Employees need security of job, higher wages, full employment, better conditions of work and
opportunities for self-development and promotion. They also desire their work itself to be rewarding and to
contribute something good to the society in general. Management, as a part of its social responsibilities, is
expected to provide for their social security, welfare, grievances settlement machinery and sharing of
excess profits.
2. Stockholders: An entrepreneur must provide safe, fair adequate and stable long-run rate of return and
steady capital appreciation to the shareholders for their investments. It must also provide regular, accurate
and adequate information about the working of the company.

3. Suppliers: Dealings with the suppliers should be based on integrity, impartiality and courtesy. Terms and
conditions regarding delivery of goods and payment of prices must be reasonably fair. Producers may make
available to the suppliers the benefits of their information and research so as to promote indigenous growth
or for the improvement of the quality of their products.

4. Customers: In the words of Henry Ford, an entrepreneur must provide, “those goods and services which
the society needs at a price which the society can afford to pay.” Entrepreneurial ventures must meet the
requirements of the customers of different classes, tastes and with different purchasing power at the right
time, place, and price and in right quality. He must handle the complaints of the customers carefully and
efficiently and cooperate to the maximum extent with the consumers associations. A customer must also be
protected against the ill effects of monopolistic and restrictive business practices.

5. Government: Entrepreneurs must abide by the laws of the country in their true spirit. The must conduct
their affairs as may cause the minimum possible social damage such as air or water pollution. They must
help in the proper implementation of all social improvement policies adopted by the Government. They
must pay taxes honestly and promptly.

6. Trade Associations and Competitors: An entrepreneur should develop healthy inter-business

relationships with fellow-entrepreneurs. He must adopt fair trade practices regarding prices, quality, terms
and conditions of sale and after-sales service. The policy of under-cutting or restricted trade practices
should be avoided. An entrepreneur must patronise business associations to ensure development of healthy
business practices.
 7. Community: The entrepreneurs should manage their business with such competence and skill that it
inspires confidence and pride in the mind of the people. They must encourage democratic institutions and
assist national integration. Enterprise, on the whole, should act on the ideas of social justice without
discrimination of any kind. Business must set high standards of morality and put in all efforts to minimise
social damage. It must help in bringing about a cultural, social and economic revolution in the society and
lead to the economic growth of the backward regions of the world.

Business Ethics:

 Ethics refers to the “study of whatever is right and good for humans, business ethics concerns itself with the
investigation of business practices in light of human values. Ethics is the broad field of study exploring the
general nature of morals and the specific moral choices to be made by the individual in his relationship
with others.
 Ethics involves the rules and principles that define right and wrong decisions and behaviours. ethical
considerations do play a role in the decisions you make and the actions you take with your entrepreneurial
venture. You need to be aware of the ethical consequences of these.
 Entrepreneurs with a relatively new company who have few role models usually develop an internal ethical
code. Entrepreneurs tend to depend on their own personal value systems much more than other managers
when determining ethically appropriate courses of action.

Role of entrepreneurship in economic development

 Promotes Capital formation

 Optimum utilization of resources

 Promotion of employment opportunities

 Balances regional development

 Reduced concentration of economic power

 Backward and forward Linkage

 Promote foreign trade

 Industrialization

Promoting entrepreneurship in Nepal

 Promoting entrepreneurship by motivating young generation to commercial farming.

 Celebrate and recognize successful local entrepreneurs.

 Investing in education and vocational education and training as means to strengthen the skills base of the
Nepalese labour force. This should be coupled with more flexible labour market policies that encourage
skills combination and labor mobility.

 Governments should enact agreements and strategies aimed at improving the regulatory environment for
business and promotion competition.

 Attract investments in the most dynamic sectors.

 Make more efficient use of the business incubator model to facilitate the establishment and growth of small
and medium enterprises (SMEs).