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Free enterprise is the business governed by the laws of supply and demand, not restrained
by government interference, regulation or subsidy. And also the freedom of private
businesses to operate for profit with minimal government regulation is most common in free
market. Free enterprises work when ownership, capital and entrepreneurship are combined
to make business activity and to create the profitable and more considerable economic
activity.

Although free enterprise mainly functions through business activity, governments and other
organizations such as labor unions influence the free flow of goods and services.
Governments affect free enterprise function through policies such as tariffs, which place
additional duties on imports of goods, and through corporate tax rates, among other laws.
Free enterprise has the primary benefit of making a nation wealthier, overall. Standards of
living in countries that embrace capitalist systems have increased, particularly since 2000.
It is noted in 2005 that industrial advances and increased free enterprise in countries like
Egypt, Indonesia, Iran, South Korea, Mexico and Nigeria would place these nations among
the next economies to follow Brazil, Russia, India and China into greater prosperity.
Proponents of free enterprise also cite the benefits of liberty that are inherent in free
enterprise. Because free enterprise is based on voluntary activity, capitalism encourages
individuals to decide for themselves what they might buy, where they might work or what
companies they will start or invest with.

History and Philosophy of Entrepreneurship

Entrepreneurship first took off when production levels exceeded local consumption and
people were left with surpluses of the things they produced, whether in the form of
agricultural produce, dairy products, livestock and quite a few manufactured items. This
initially led to a barter system that allowed people exchanged things to satisfy their own
requirements. This further led to the development of the market place where people
gathered to barter or sell their excess production in order to profit themselves. 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. At one time,
entrepreneurship was initiated typically by new immigrants to a land since they were
typically unable to obtain traditional employment due to their foreign origin. The economic
growth of a region thus was proportional to the influx of immigrants. Interestingly,
entrepreneurship, commerce and money lending, were, in those days, less than prestigious
and were actually looked down upon.

One of the first entrepreneurs was Marco Polo. He had ideas of trading with Asia in the 13 th
century and was sure of how he could get there and the materials he could trade. His

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expeditions were financed by venture capitalists in Venice with an assurance that he would
share his profits with them. These loose associations continued to flourish in Europe and
other parts of the world where people with money were willing to back ideas and new
schemes when they were convinced that there was some pecuniary advantage in the end.
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. Government agencies stepped into the act in the 17 th century and made
capital available to people to finance production ventures. The risk involved in such
ventures was the sole responsibility of the entrepreneur and they had to make a fixed
payment to the government, irrespective of any profit they made from the venture. This
change in thinking was necessitated by the industrialization that made its effect felt in that
century. Even Thomas Edison ran into a huge financial crunch when he wanted to finance
his ideas and inventions and had to get his capital from private sources. He was a complete
entrepreneur and left the financing of his ventures to others.

It was during the 17th and 18th century Industrial Revolution that business itself was
becoming part of the new lifestyle, especially in Europe, where most of this development
was taking place. Where some of the entrepreneurships emerged as a result of innovation
For instance, railroads and shipping, cargo, transport; based on new products, others were
merely an expansion of existing businesses in markets that now showed areas of growth.
The present development of entrepreneurship started after the Second World War in the
1950’s when nations were looking to build up their economies from the ravages of the war.
People had new ideas for business or jobs as individuals and started in small ways with
limited capital to form businesses which went on to challenge the well established
companies. The Internet has led to a virtual explosion of new ventures and entrepreneurs
who have found newer and easier ways to do business are taking advantage of the ease of
communication.

Nowadays, an entrepreneur is regarded as one who organizes, controls, purchases raw

materials, arranges materials and machinery to produce the goods. An entrepreneur is also
one who throws in their own expertise and inventiveness and also administers the venture.

An entrepreneur is a person who has possession of a new enterprise, venture or idea and
is accountable for the inherent risks and the outcome. Entrepreneur is a term applied to a
person who is willing to launch a new venture or enterprise and accept full responsibility for
the outcome. Entrepreneurs emerge from the population on demand, and become leaders
because they perceive opportunities available and are well-positioned to take advantage of
them. An individual could be termed as an entrepreneur if he or she sells a product or
service using new systems and/ or mediums of marketing, distribution or production
methods as a basis for a new business venture.

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Entrepreneurship is the act of an entrepreneur, which can be defined as "one who

undertakes innovations, finance and business acumen in an effort to transform innovations
into economic goods". These definitions vary from an entrepreneur being responsible for
employing resources in high productivity areas to earn profits, to risk bearing, and finally to
an entrepreneur being responsible for organization and control. Actually it is a way of
thinking, reasoning, and acting that is opportunity obsessed, holistic in approach, and
leadership balanced. At the core it is the creation and/or recognition of opportunities and
the ability to seize opportunities

The Entrepreneurship Process

EMERGENCE START GROW MANAGE HARVEST

Innovation, creativity and entrepreneurship

Business ventures have some common factors amongst themselves. But they need to have
some unique selling proposition to survive. Innovation helps a business house to survive
when the waves of change hit the market. It is not about just creation of new ideas and
thoughts but also about translating them into products and services. Therefore innovation
can be defined as the successful exploitation of new ideas incorporating new technology,
design and best practices is the key business process that enables the business to
compete effectively. Innovation requires knowledge, ingenuity and it makes great demands
on diligence, persistence and commitment. Innovation always has to be close to the
market, focused on the market, indeed market driven. Innovation is the specific tool of
entrepreneurs, the means by which they exploit changes as an opportunity for a different
business or a different service. It is capable of being presented as a discipline, capable of
being learnt, capable of being practiced. Usually innovations are being made with a desire
to overcome a need or a problem. Innovation can be at the spark of light and can also take
a generation of experimentations. Innovations usually make the life more comfortable.
Thus, innovation refers to a process of creation, value addition of a product and services
that can solve existing problems or tap opportunities.

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Figure 1

Creativity can be defined as the process of developing an original product, service, or idea
that makes a socially recognized contribution. It is the ability to bring something new into
existence form either an existing or new idea. A creative person conceives an idea, which
is new. Entrepreneurs need new ideas for setting up and run new business ventures. An
entrepreneur who is creative and brings her/his ideas into reality turns out to be successful
in business. Creativity has also become important in the present highly competitive market
where the business needs to differentiate itself from others to survive.

Creativity, innovation and entrepreneurship;

Innovation is different from invention. An invention is discovery of new methods and new
materials, whereas innovation is utilization of inventions to produce new and better quality
of products that give greater satisfaction to the consumer and higher profits to the
entrepreneur. An inventor gives idea and an innovator implements the idea for economic
gain. Some individuals can both e\inventors as well innovators. The entrepreneur
commercially exploits the invention produced by him or by any other person similarly he
also exploits even creative ideas for commercial gains.

The importance of creativity and innovation has swelled with the rising competition
amongst corporate. Successful entrepreneurs are realizing that creativity, innovation and
even incremental value additions are imperative ingredients to survive the ever rising
competition. So the five different ways to act as an entrepreneur are;

1. The introduction of a new good or quality of a good.

2. Introduction of a new methods of production
3. Opening of a new market
4. Utilization of some new sources of supply for raw materials or intermediate goods.
5. Carrying out of some new organizational form of the industry.

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Creativity and innovation have become imperative for thriving in business. Organizations
recognize the fact that to
maintain a competitive advantage they must continually seek to identify, develop and make
best use of all available resources. In response to the rapid rate of change in competition
and the pressures of technological advances, corporate executives are unanimous in their
stated desire to make their employees and their organizations more “entrepreneurial”.
Consequently, the entrepreneurial organization has been seen less as an organization in
which innovativeness is an embedded part of the organization’s process and structure, and
more as the “place” within which, innovations have been developed, innovative people
happen to reside and work, and whose controls are capable of being overcome so that the
top management can reluctantly agree to accept the innovation. Corporate executives then
seek to find means by which to unleash the creative talents of their people and to lower the
built-in barriers to new ideas that could spring up from the depths of the organization.

On the short list of approaches that encourage the creativity that leads to profitable
innovations is to inundate marketing people and scientists with exhortations to “think
outside the box” to network with others with different perspectives. Another approach is to
offer rewards and recognition’s to successful innovators. By-passes to bureaucratic
procedures similarly are created for new ideas. And formal procedure may be established
by which to winnow out and bless the further development of those project proposals which
seem most likely to fit the needs of new product development schedules, or have the
potential to provide useful new directions for research or development.

There is a wide range of corporate approaches to overcoming built-in barriers to creativity

and innovation, and these approaches range widely in how well they work. A great deal of
importance and attention has been given, appropriately enough, to the need to enhance
innovation in organizations. Making a corporation more creative, more innovative, more
entrepreneurial has gone from being a nicety or a slogan; it is now a minimum requirement
in many industries simply to stay in the competitive game. Since it has become a challenge
taken more seriously than ever before, the question of how to do it has become one asked
in deadly earnestness. And, in fact, the notion of introducing entrepreneurship within the
established organization is even more complicated than it might seem.

Role of entrepreneurs in the economy

Entrepreneurs act as the locomotives for the economic development of the country. There
are various roles which Entrepreneurs play in the economy. Through Entrepreneurship,
new businesses and opportunities are explored. Entrepreneurship also promotes efficient
mechanism of production like right allocation of capital, labor and
technology. Entrepreneurship increases the innovation in an economy which brings
evolution in the social system. Entrepreneurship also results in the growth of the industrial
sector which ultimately increases the economic growth of the economy. Entrepreneurs also

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explore resources and make them valuable for the economy. For example, economic
development of Estonia is contributed by the development of enterprise sector, which
shows development because of contributions of Entrepreneurs.

Employment creation

Entrepreneurship gives rise to employment opportunities increasing the standards of living,

this booms business since there is a chance to purchase goods and services by a high
percentage of citizens due to high employment.

Economic Development

Entrepreneurship is basically concerned with creating wealth through production of goods

and services. This results in a process of upward change whereby the real per capita
income of a country rises overtime or in other words economic development takes place.
Thus entrepreneurial development is the key to economic development. In fact it is one of
the most critical inputs in the economic development of a region. It speeds up the process
of activating factors of production leading to a higher rate of economic growth, dispersal of
economic activities and development of backward regions. If a region is unable to throw up
a sufficient number of entrepreneurs then alien entrepreneurs usually step in to provide
goods and services needed by the people.

Industrial growth

The industrial health of a society depends on the level of entrepreneurship existing in it. A
country might remain backward not because of lack of natural resources or lack of capital
as it is many times believed, but because of lack of entrepreneurial talents or it inability to
tap the latent entrepreneurial talents existing in that society. Entrepreneurs historically have
altered the direction of national economies, industry or markets- Japan, Singapore, Korea,
Taiwan to name a few.

Development contribution by network reaction

Entrepreneurship also injects development by starting a chain reaction when the

entrepreneur continuously tries to improve the quality of existing goods and services and
add new ones. E.g. when computers came into the market there was continuous
improvement in the models, their functions etc. like personal computers, laptops, palmtops
etc. Not only had this fostered the development of the software industry, computer
education institutes, computer maintenance and stationery units etc, but also other
industries like banking, railways, education, travel, films, medical and legal transcriptions,
business process outsourcing [BPOs] etc. In this manner by harnessing the entrepreneurial
talent a society comes out of traditional lethargy to modern industrial culture.

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Investment procuring

Whenever new organizations and businesses start, with them comes major investments.
This increases employment opportunities in the places of investments. In turn it increases
the purchasing power of people which is spent on goods inside the country. If a place
makes an image of favorable entrepreneurship opportunities, it attracts investments from
not only inside the country, but also from the International market.

Improved standard of living

Employment and other outcomes of new set ups, improves the overall condition of the
place. It increases the standard of living of the people. With more investments in the place
a lot will be spent on communication networks, etc, for example better road accesses. A
developing country needs entrepreneurs who are competent to perceive new opportunities
and are willing to incur the necessary risk in exploiting them.

To summarize the entrepreneur is an individual or team who identifies the opportunity,

gathers the necessary resources, creates and is ultimately responsible for the performance
of the organization. Entrepreneur and entrepreneurship are two sides of the same coin; in
which entrepreneur is an individual who creates and establishes a business,
entrepreneurship is the process adapted by entrepreneur to do so. Entrepreneurs are
hardworking, independent, innovative and risk-taking individuals with high need for
achievement.

Ensures higher Productivity through innovation

Facilitates the redistribution of income and wealth

Facilitate the development of rural areas

Creates a competitive market and benefits customers

Increases exports and reduces imports

facilitate development of several ancillary units.

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