ENTREPRENURSHIP

&
DEVELOPMENT
 OBJECTIVES
To impart knowledge on the
linkages between
entrepreneurship and
development as well as
importance of
entrepreneurship in overall
socio economic development
at global, regional and
national levels.
 TOPICS
1) Introduction: conceptual issues
in entrepreneurship and
development.
2) Roles of entrepreneurship in
development.
3) Entrepreneurship in practice.
4) Entrepreneurship in Tanzania:
profile and initiatives.
 1.
Conceptual Issues in
Entrepreneurship
and Development
 ENTREPRENEUR
 Entrepreneur is the „actor‟ or a „person‟.
 A person with knowledge, skills, initiative, drive and spirit of
innovation who aims at achieving certain defined goals.
 An entrepreneur identifies opportunities and seizes such
opportunities for economic gains.
 Entrepreneurs - starts up and runs their own business - they are
business owners/managers – the most innovative and growth-
oriented. E.g. Mo Dewij.
 Entrepreneur is a person who bears/takes risks, unites factors of
production (land, labor and capital), to exploit the perceived economic
opportunities in order to create demand, wealth and employment
(Cantillon).
 Entrepreneur is an economic agent who unites all factors of
production in order to produce new products /services (J.B Say).
 Entrepreneurs have an important effect on the economy by
establishing new businesses that provide not only goods & services
to customers, but also job opportunities for individuals in various
industries (Hisrich & Peters, 2002).
 TYPES OF ENTREPRENEURS
a) Novice entrepreneurs - people /organizations without
any experience.
b) Nascent entrepreneurs - individual people
/organizations in the process of creating /innovating a
new product/idea.
c) Serial entrepreneurs - organization/person who
constantly establishes new innovative things and sell.
d) Portfolio entrepreneurs - organization /individual who
owns several organizations /enterprises.
e) Intrapreneur - a person who acts entrepreneurial in the
context of existing organization.
f) Action Oriented entrepreneurs - highly calculative
individuals/organizations who are always willing to
undertake risks in order to achieve certain desires /goals.
 CONT …
Entrepreneur

Independent
Intrapreneur
Entrepreneur

Ubiquitous Elite Elite

Entrepreneur Entrepreneur Intrapreneur

(Morrison et al., 1999)

CONT …
 Independent entrepreneur - the founder or acquirer of a firm; in a
quest for independence.
 Intrapreneur - sets up and runs innovative projects as employees
within an existing organization. E.g. workers.
 Ubiquitous entrepreneur - operating a small business with very
low growth desire and potential.
 Elite entrepreneur - large scale business leader with large
operations and high growth desires and potential.
 Elite intrapreneur - a corporate leader within a firm or organization
with a fairly high percentage shareholding in the operation of either a
family business or has risen high to be a corporation„s top executive.

NB:
The ‘voluntrapreneur’ - sets up and manages projects in the
community for social or financial reasons, usually for no direct
financial reward. E.g. NGOs.
CONT …
 Types of entrepreneurs according to The Lonely
Entrepreneur (2018).
a) Innovators - come up with completely new ideas and
turn them into viable businesses. E.g. Steve Jobs (Apple),
Mark Zuckerberg (Facebook), Bill Gates (Microsoft), etc.
b) Hustlers - focus on starting small with the goal of
becoming bigger in the future. E,g. Warren Buffet,
Dangote, Bakhresa, etc.
c) Imitators - copy certain business ideas and improve
upon them. They are part innovators and part hustlers
who don‟t stick to the terms set by other people and have
a lot of self-confidence.
d) Researchers - take their time to gather all the relevant
information about business idea before putting it into
execution. To them, failure is not an option because they
have analyzed the idea from all angles.
e) Buyers - have the money and specialize in buying
promising businesses.
CLASSIFICATION OF ENTREPRENEURS
Entrepreneurs can be classified into 4 groups:

I: Clarence Danhoff Classification

II: Arthur Cole Classification

III: On the basis of Ownership

IV: On the basis of the scale of the

enterprise
CONT …
I: Clarence Danhoff Classification

a) Aggressive - invent new ideas, new products, new

production methods or processes, discover potential
markets and reorganize the company‟s structure.
b) Fabian - are skeptical about the changes to be made
in the organization.
c) Imitative/adoptive - copy the new inventions made
by the innovative entrepreneurs without adding
any new thing.
d) Drone - are reluctant/conservative. They don‟t want
to make any changes in the way of conducting their
business /activity organization even if they are
suffering the losses or not growing fast.
CONT …
II: Arthur Cole Classification

a) Empirical - follow the rule of thumb.

b)Rational - well informed/revolutionary changes.
c) Cognitive - informed/follow advice.

III: On the basis of Ownership

a) Self/Individual - one-dimensional-entrepreneur.
b) Public - undertaken by government through its various
development agencies.
c) Mass - emerges in an economy where there is favorable
climate of motivation and encouragement for developing a
wide range of entrepreneurship.
CONT …
IV: On the basis of the scale of the enterprise

a) Micro enterprise 1-4 employees up to 5 M

b) Small enterprise 5- 20 employees, 5-200M
c) Medium enterprise (20-100 employees, 200-800m
d) Large enterprise( More than 100 employees, over 800M

NB:
An enterprise is the business organization which provides
goods and services, creates jobs, contributes to national
income, exports and overall economic development.
CHARACTERISTICS OF ENTREPRENEURS
 There is no single quality/skill to define an entrepreneur.
 Successful entrepreneurs:
 come in various ages, gender, race and social
status.
 they differ in education and experience.
 they share certain personal attributes including:
creativity, commitment, determination,
flexibility, leadership, passion, self-confidence,
and „SMART‟.

NB:
Every entrepreneur has these qualities in different
degrees. However, many entrepreneurial skills can be
obtained through education (trainings & workshops),
networking and research.
 CONT …
 Baum, Locke, and Smith (2001) identified the
following traits:
1) Tenacity - entrepreneurs do not give up.
2) Proactivity - entrepreneurs plan ahead.
3) Passion for work - entrepreneurs believe in
what they are doing and are passionate about
their ventures.
4) Opportunism - entrepreneurs can identify
opportunities and act on them.
5) Vision - entrepreneurs have visions of what
they want to achieve and how they want to do
it.
6) Dynamism - entrepreneurs are go-getters and
are energetic.
CONT …
 Stokes & Wilson (2010), came up with the
‘big 5’ personality dimensions of
entrepreneurs:

1) Need to achieve.
2) Need for autonomy.
3) Internal locus of control (drive &
determination).
4) Calculated risk taking.
5) Entrepreneurial self-efficacy
(creativity/innovativeness).
 ENTREPRENEURSHIP
 Entrepreneurship is the „act‟ or „process‟.
 Entrepreneurship is a multidisciplinary concept, … its meaning
and use varies. Some scholarly definitions are:
 „the creation of new enterprise‟.
 „a creative and innovative response to the environment‟.
 „the process of starting something and making it prosper
while offering people the services and products they need‟.
Thus,
 Entrepreneurship is the process of starting a new business
venture through identifying opportunities and acting on
them. Here an entrepreneur works independently.
 Intrapreneurship is the practice of applying
entrepreneurial skills and approaches within an
established company. For this case, independence to the
entrepreneur is limited.
CONT …
 Basically, there are generally 4 factors
that define entrepreneurship:
 Development of new ideas.
 Allocation of resources such as time,
effort, and capital.
 Acceptance and assuming of the risks
involved.
 Reward in the end in terms of personal
satisfaction, profits, and independence
among others.
 THE MOTIVES BEHIND ENTREPRENEURSHIP
 There are internal (intrinsic) and external
(extrinsic) factors that motivate people to become
entrepreneurs.
 Intrinsic - a person‟s orientations and inner drives
such as: high need to achieve certain goals,
independence, personal satisfaction, self-
actualization, etc.
 Extrinsic - environment such as: availability of
supportive government policies, existence of
enterprising cultures, support institutions such as
incubation centers, training institutions, accessibility
to credit, etc.
TRIGGERS FOR ENTREPRENEURSHIP
There are several factors that influence people/
organizations decision to identify /exploit
entrepreneurial opportunities. These include :
(i) Desire and the ability to bring something new
into existence(Creativity). Entrepreneurs are
special people /organizations who specializes in path
breaking innovations.
(ii) Want to be rewarded according to their
energy/effort ( Material rewards).
(iii) Inefficiencies within the existing market caused
by information asymmetries or imitations to satisfy
certain known but unfulfilled market demand.
(iv) ) Emergence of significant changes in social,
political and demographic forces.
(v) Inventions and discoveries that produces new
knowledge , innovations and technology.
 THEORIES OF ENTREPRENEURSHIP DEVELOPMENT
a) Psychological Theory by Mc Celland, 1961
Argue that entrepreneurs are people with specific/special
personal, behaviors, attitudes and psychological attributes that
differentiate an entrepreneur from a non entrepreneur.
b) Contextual Theory (Morris Lewis,1993)
Argue that Entrepreneurial Opportunities (EO) are not
uniformly spread or present themselves in neat packages neither
occurs in a defined manner.
 Plenty of diverse EO VS few or none.
 Exploitation of such EO depends on both
endogenous (internal) and exogenous (external
factors)
c) Strategic Theory
Argue that it is the ability of the individual entrepreneur that
matters most in terms of manipulating and exploiting the EO
in order to maximize gains out of it.
ARE ENTREPRENEURS MADE OR BORN ?

There are 4 important issues to be considered

in responding to the question whether
entrepreneurs are made or born
(i) Psychological Characteristics - ability
to control events in one‟s life as well as
having high risk taking propensity
(Calculated risks).
(ii) Access to information and knowledge
on business including value chains using
Social Capital/Networks.
 CONT …
(iii) Creative Processing - the ability to exploit EO
require people who are enterprising and have
creative skills, aptitudes, insights on how to exploit
EO and market the new products/ services.
(iv) Cognitive Heuristics - ability to use simple
strategies for making quick and effective decision or
judgment(s).( Ready to do many trials.

NB:
There are very few naturally born entrepreneurs but
many are man made.
 2.
Roles of
Entrepreneurship
in Development
 ROLES OF ENTREPRENEURSHIP IN DEVELOPMENT

 There is a very important role for

entrepreneurs to spark economic development
by:
 Starting new businesses,
 Creating jobs, and contributing to
improvement in various key goals such as:
 GDP,
 Exports,
 Standard of living,
 Skills development and
 Community development.
CONT …
 Wealth creation and sharing - entrepreneurs invest their own
resources by establishing the business entity and attract capital
from various investors, lenders and the public. This mobilizes
public wealth and allows people to benefit from the success of
entrepreneurs and growing businesses.
 Job creation - by definition and nature, entrepreneurs are job
creators. When you become an entrepreneur, there is one less job
seeker in the economy, and then you provide employment for
multiple other job seekers. This is why most governments insists
on private sectors and support new startups so as to stimulate
economic development.
 Balanced regional development - the growth of industries
and business in less developed and backward areas leads to
infrastructure improvements like better roads, stable electricity
and water supply, schools, hospitals, shopping malls and other
public and private services that would not otherwise be
available.
CONT …
 GDP and per capita income - in Tanzania, Micro, Small
and Medium Enterprises (MSME) sector, comprised of many
people that provide employment for millions of Tanzanians
and hence contributing to the growth of country‟s GDP. The
MSMEs make use of even more resources like land, labor and
capital to develop products and services that add to the
national income, national product and per capita income of
the country.
 A decent standard of living - entrepreneurs play a key role
in increasing the standard of living in a community by not
only creating jobs, but also by developing and adopting
innovations that lead to improvements in the quality of life of
their employees, customers, and other stakeholders in the
community.
CONT …
 Exports - the growing business will eventually need foreign
markets. Access to bigger and foreign markets will result into
currency inflows and access to the latest cutting-edge
technologies and processes being used in more developed
foreign markets.
 Community development - economic development doesn‟t
always translate into community development. Community
development requires infrastructure for education and
training, healthcare, and other public services. For example,
you need highly educated and skilled workers in a community
to attract new businesses. If there are educational
institutions, technical training schools and internship
opportunities, that will help build the pool of educated and
skilled workers.
 3.
Entrepreneurship in
Practice
 ENTREPRENEURSHIP IN PRACTICE
 In order to establish a business venture with an entrepreneurial
system an entrepreneur needs to take the following steps.
 Search for business idea.
 Process the idea.
 Select the best idea.
 The first and for most step in starting a small business is to find
out a suitable business idea and give a practical shape to the
idea.
 To think of a goal for the business in the long run rather than to
look for the immediate tomorrow is called basic business idea.
 The basic business idea is to meet the broadest needs of the
customers and has a long life.
 The basic business idea facilitates choice of product under an
over all plan - a ‘goal’ without ‘plan’ is just a ‘wish’.
CONT …
 Business start-up and beyond:
 Do what you love.
 Keep a source of cash - approach potential business investors and lenders.
Normally traditional lenders do not like new ideas. They always love
businesses with proven track records..
 You need a team (find a mentor to guide you).
 Get some clients, make the contacts (build network around your business).
 Write it & plan it.
 Do the research - through reading books, internet surfing and asking
questions (competition, customer behavior, market risks & opportunities).
 Get professional help - you don‟t have to be expert in everything about your
business.
 Be professional – have things like business cards, a business email address &
a website.
 Solidify your legal framework – Does your business need to be registered? Do
you need a legal framework for your employees? Tax issues, etc.
 Apply the 50/30/20 rule of Money & the 80/20 rule (Pareto principle)
 CHALLENGES OF ENTREPRENEURSHIP
In practice, entrepreneurship is faced with a lot of challenges:
(1) Individual Factors
 Low-level risk taking attitude when it comes to making
decision to get into business.
 Limited knowledge on business economics. Lack of
entrepreneurs‟ knowledge and exposure to business
management skills.
 Lack of support - most new entrepreneurs operate
individually or in groups in their own homes and often lack of
social, cultural and business support.
 Lack of basic life skills such as self-confidence, self -
motivation and communication.
 Lack of exposure restricts entrepreneurs from identifying
businesses with higher growth potential.
 Limited access to training and experience in packaging,
marketing and branding their products and services
CONT …
(2) Legal constraints
Most of the laws and regulations affecting businesses
(including licensing procedures) were designed for relatively
large enterprises and are therefore beyond the reach of most
SMEs, particularly those owned by women and young
entrepreneurs.
(3) Institutional factors
 Income taxes perceived to be prohibitively excessive
The level of taxes in Tanzania discourages people from
starting new firms.
 Corruption and bureaucracy especially the young ones
are not ready to negotiate with corrupt public officials.
 Poor coordination of institutions promoting
entrepreneurship and in particular MSEs.
CONT …
(4) Structural Factors
 Prohibitive requirements to access capital
Although there are many potential sources of
funding, but a major stumbling block for
Tanzanian entrepreneurs is the cost and
requirements needed to access funding - which
are believed to be prohibitive, especially for newer
firms.
 Insufficient and unreliable infrastructures
The poor quality and limited span of road and rail
networks alongside unreliable supply of electricity
and poor communication, infrastructures - these
have been found to have negative impact on the
cost of doing business in Tanzania
 4.
Entrepreneurship in
Tanzania: Profile
and Initiatives
ENTREPRENEURSHIP IN TANZANIA:
PROFILE AND INITIATIVES
 Tanzania is one of the least developed countries and the
unemployment level is very high, at 11% in 2006, though the
country is endowed with rich natural resource base.
 The education system in Tanzania has to deliberately
develop values, attitudes, knowledge and skills that
enable graduates to see and realize the potentials around
them.
 Because of the importance of entrepreneurship to the growth
and prosperity of the country, mainstreaming
entrepreneurship in the education and training system has
been emphasized by both the National Higher Education
Policy (URT, 1999) and the Small and Medium Enterprise
(SME) Development Policy (URT, 2003).
CONT …
 The aim of this mainstreaming is to:
 promote “a culture that is entrepreneurial”,
 emphasize “individual entrepreneurial initiatives”,
 encourage the education system “to create job creators”,
and
 respond to the changing world of science and technology
and the corresponding ever-changing needs of people.

 The Global Entrepreneurship and Development Institute

(GEDI) - ranks countries by their levels of entrepreneurship.
 Tanzania ranks 118 out of 137 countries globally in their 2017
Global Entrepreneurship Index, with the strongest area being
opportunity perception and the weakest being start-up
skills (Argidius, 2017).
 PROFILES OF SUCCESSFUL
ENTREPRENEURS AND KEY LESSONS
 Dr. Reginald Abraham Mengi (c.1943 – May 2, 2019) was a
Tanzanian billionaire, businessperson, philanthropist, and
author of the book I Can, I Must, I Will.
 Said Salim Bakhresa (born1949 at Zanzibar - age 71) – started
as a small restaurateur in the 1970s. At the age of 14, he dropped
out of school to become a salesperson.
 Ruge Mutahaba & Joseph Kusaga - they collaborated in
running Clouds Disco resulting in the starting of Clouds Media
Group in Arusha and later in Dar es Salaam. Clouds produces
information and entertainment for young audiences that works to
inspire and empower young Tanzanians to engage in finding
entrepreneurial opportunities.
 Yusufu Said Mfinanga - started business as a small
restaurateur during the construction of Kibaha Education Center
located in Pwani region. He now owns Njuweni Hotel and the
Njuweni Instute of Hotel Management & Tourism.
CONT …
 Chris Kirubi - Kenyan billionaire comes from a poor
family.
 Aliko Dangote started business when he was only
about 20 years old.
 Isaac Durojaiye started the first mobile toilet
manufacturing company in Africa when he was about
30 years old.
 Bill Gates together with Paul Allen founded
Microsoft.
 Michael Dell - owner of Dell Computer.
 Sergey Brin and Larry Page - founded Google.
 Warren Buffet started investing when he was only
13 years old.
 Steve Jobs started his Apple vision before he was 15.
 Mark Zuckerberg started Facebook when he was
about 19 years old.
 READINGS
 Nnaude, W. (2011). Entrepreneurship and
Economic Development. Basingstoke:
Palgrove Mackmillan and UNU-WIDER.
 King, K. and McGrath, S. (1999). Enterprise
in Africa: Between Poverty and Growth.
London: Intermediate Technology
Publications.
 Rutashobya, L. and Olomi, R. (1999). African
Entrepreneurship and Small Business
Development. Dar es Salaam, DUP.