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MODULE 5

ENTREPRENEURSHIP AND
DEVELOPMENT

BY
DR ALMAS MAZIGO

What is Entrepreneurship?
Robert

D.

Hisrich,

M.

Peters

&

D.A

Shepherd

define

Entrepreneurship as the process of creating something new of


value by devoting (giving) the necessary time and effort; by
accepting

and

acknowledging

the

necessary

financial,

psychological, and social risks, and Finally, receiving the


resulting rewards be it monetary and personal satisfaction and
freedom to do what you want.
Briefly, entrepreneurship is a process of creating something
new and assuming the risks and rewards (Robert D.Hisrich,
M.P.Peters & D.A Shepherd )

A. H.Cole defines
Entrepreneurship as

a purposeful activity of an
individual

or

associated
undertaken

group

of

individuals,
to

initiate,

maintain or organize profit

What are the different


outcomes of engaging in
entrepreneurship?

Innovation or newness product or service


Organizing resources finance, people,
physical and information resources
Creating new product or service
Generating
wealth
(personal
and/or
communal)
Taking risk in a business venture
Prepared to face uncertainty
Create job opportunity
Increase the abundance of wealth generation
for the nation.

What is an Entrepreneur?
An entrepreneur is a person who has
already started or is in the process of
starting an enterprise.
For Joseph Schumpeter, an Entrepreneur
is an innovator who brings economic
development through new combinations
of factors of production.

Functions of an
entrepreneur
An

entrepreneur

performance
HUMAN

in

is

responsible

areas

RESOURCE,

of:

for

the

PRODUCTION,

SALES/MARKETING,

TECHNOLOGY, and FINANCE

Functions can be further categorized as:Risk-bearing

function,

Organisational

functional, Innovative function, Decision

Risk-bearing function:
The

functions

of

an

entrepreneur as risk bearer


are specific in nature. The
entrepreneur

assumes

all

possible risks of business,

Organisational Function:
The entrepreneur brings together various
factors of production, ensures continuing
management and renders risk-bearing
functions as well. Entrepreneur is an
organiser who determines the lines of
business to expand and capital to employ
more judiciously.

Innovative Function:
The

basic

function

an

entrepreneur performs is to
innovate
services,
information

new

products,

ideas

and

for

the

Managerial Function:
Entrepreneur

performs

managerial

function like determination of business


objectives,
plans,

formulation

product

analysis

of

production

and

market

research, organisation of sales procuring


machine and material, recruitment of
men

and

operations.

undertaking

of

business

Decision Making Function:


an entrepreneur determines the business objectives
suitable for the enterprise,
develops an organization and creates an atmosphere for
maintaining a cordial relationship with subordinates and
all employees of the organization,
decides in securing adequate financial resources for the
organisation,
decides in introducing advanced modern technology in
the enterprise,
decides the development of a market for the product,
develops new product or modify the product in
accordance with the changing consumers preference,
also decides to maintain good relations with the public
authorities as well as with the society at large for
improving the firms image before others.

Characteristics
Competency
of
(people)

or
an

Personal
Entrepreneur

Initiative
Sees and Acts on Opportunities
Persistence
Information seeking
Concern for High Quality Work and Output Increased Productivity
Commitment to Work Contract
Efficiency Orientation
Systematic and organized planning
Problem Solving
Self Confidence
Assertiveness Negotiation with suppliers & customers
Persuasive & Influential Peers and stakeholders
Inspirational employees
Effective Communicator external & internal of organization

TYPES OF ENTREPRENEURS
There are different types
of entrepreneurs on the
modes or objectives or
ventures.

1) ACCORDING TO THE TYPE


OF BUSINESS
i) Business entrepreneurs:-who start business units
after developing ideas for new products/services.
ii) Trading entrepreneurs:-who undertake buying &
selling of goods, but not engage in manufacturing.
iii)

Corporate

entrepreneurs:-who

establish

and

manage corporate form of organization which have


separate legal existence.
iv)

Agricultural

entrepreneurs:-

who

undertake

activities like raising and marketing of crops, fertilizers


and other allied activities.

2) ON THE BASIS OF STAGES


OF DEVELOPMENT
i) First generation entrepreneurs:-who do not
possess any entrepreneurial background. They
start industry by their own innovative skills.
ii)

Second

generation

entrepreneurs:-who

inherit the family business and pass to next


generation.
iii)

Classical

entrepreneurs:-who

aims

to

maximize economic returns at a level consistent


with the survival of the unit with or without an
element of growth.

3) ON THE BASIS OF
MOTIVATION
i)

Pure

entrepreneurs:-who

basically

motivated

entrepreneurs

for

are

to

become

their

personal

satisfaction, ego etc..


ii) Induced entrepreneurs:- who are
induced to take up entrepreneurial role
by

the

assistance

government
subsidies etc.

and

including

policy

of

incentives,

4) ON THE BASIS OF
TECHNOLOGY
i) Technical entrepreneurs: - who are task
oriented and craftsman type. They prefer doing
to thinking.
ii) Non-technical entrepreneurs:- who are not
concerned with technical side, but rather with
marketing and promotion.
iii) Professional entrepreneurs: - who start a
business unit, but later sell the running business
and start a new unit later.

5) ON THE BASIS OF CAPITAL


OWNERSHIP
i) Private entrepreneurs:- individual or group
set up enterprise, arrange finance, share risk etc..
ii) State entrepreneurs:- means the trading or
industrial venture undertaken by the state or the
government itself.
iii) Joint entrepreneurs: - the combination of
private and government entrepreneurs

OTHER CLASSIFICATIONS 6)
ACCORDING TO GENDER
AND AGE

i) Men entrepreneurs
ii) Women entrepreneurs
iii) Young entrepreneurs
iv) Old entrepreneurs
v) Middle-aged
entrepreneurs

7) ACCORDING TO AREA

i) Urban entrepreneurs
ii) Rural entrepreneurs

8) ACCORDING TO SCALE
i)Large scale entrepreneurs
ii)Medium

scale

entrepreneurs
iii)Small scale entrepreneurs
iv)Tiny scale entrepreneurs

9) OTHERS

i) Spiritual Entrepreneurs
ii) Social entrepreneurs
iii) Edupreneurs

Spiritual Entrepreneurs
Those

offering

service

relating to or affecting the


human spirit, body, mind
and emotions a holistic
approach to happiness and

Social entrepreneurs
Individuals with innovative
solutions to societys most
pressing
They

are

persistent,

social

problems.

ambitious
tackling

and
major

Edupreneurs
Persons

within

the

education

sector

and/or

public

schools

responsibility

who
in

take

creating

and developing a program,

Generally
Entrepreneurs organise the
factors of productions-land,
labour

and

capital,

and

establish a business venture


and

carries

out

the

INNOVATION AND
ENTREPRENEURSHIP #1
Innovation is one of the strongest foundation and
characteristics of entrepreneur and entrepreneurship.

Many people tend to relate (associate) small business and


entrepreneurship. To many people entrepreneurs are those
who run small business. The fact is entrepreneurship is
not small business.

INNOVATION AND
ENTREPRENEURSHIP #2

What makes a business or an


enterprise entrepreneurial are the
typical

characteristics

of

entrepreneurs and entrepreneurship


in

particular

innovation,

pro-

What is innovation? #1
Entrepreneurship is normally seen
as continuous search for change
and

exploiting

change

as

an

opportunity. Again innovation is


seen

as

the

purposeful

and

What is innovation? #2
Innovation

is

the

purposeful

introduction and application of


ideas, services or products into a
new situation.
Innovation is a purposeful and

TYPES OF INNOVATION #1
1.
Social
and
Economic
innovation
Social innovations are based in
cultural aspects and ideas
Economic innovation is based in
new products and new services

TYPES OF INNOVATION #2
2.
Technical
and
Administrative
innovation
These are innovations in
the organization structure
and management of people
Technical
innovation

TYPES OF INNOVATION #3
Administrative innovations are
sometimes equated with social
innovation; they occur in the social
systems of an organization. They
include innovation in the ways of

The Benefits of Entrepreneurship


#1
Opportunity to create your own destiny:
Entrepreneurship

provides

individuals

with

the

opportunity to do and achieve what is important to


them and/or their society, and in turn, realize their
socio-economic dreams.
Opportunity to make a Difference: More and
more entrepreneurs start businesses because they
see this as an opportunity to make a difference in
their personal lives and in their communities.

The Benefits of Entrepreneurship # 2


3. Opportunity to reach your full potential:
Entrepreneurs see their business as a vehicle of
self-expression of personal desire and eventual
self-actualization of their personal goals the
pinnacle of their career success.
4. Opportunity to reap extraordinary profits:
The profit earned by an entrepreneur are an
important motivation and indication

factor for

further increased performance. Thus these could


spur them to greater achievement and success.
(Personal or social profits)

The Benefits of Entrepreneurship # 3


5. Societal Responsibility and Recognition:
Entrepreneurs

are

among

the

most

admired,

respected and trusted individuals of society as


they help to contribute employment, business
opportunities

and

other

socio-economic

benefits in a locality.
6. Opportunity to engage in work of their
choice:

Entrepreneurs

businesses

that

tend

give

to
them

engage

in

personal

satisfaction; and beneficial to their organization,

The Drawbacks of
Entrepreneurship #1
1.

Uncertainty

of

Income

engaging

in

entrepreneurial activities is no guarantee that


an entrepreneur will earn enough money and
survive. Great effort and proper and effective
management need to used to realize success
2. Risk of losing your entire Investment
entrepreneurs may run into financial difficulties
that may eventually lead to personal failures
and/or bankruptcy.

The Drawbacks of
Entrepreneurship #2
3. Long Hours and Hard Work: Entrepreneurs
tend to pour all their effort and resources to achieve
their personal and social entrepreneurial objectives.
Are

generally

workaholic,

working

under

tremendous pressure, making big sacrifice and


depriving themselves of personal and social
lives to produce the result they expect.

The Drawbacks of
Entrepreneurship #3
4. Lower Quality of Life until the business get established: To
be successful the entrepreneur must engage him or herself to
produce the kind of result he expects. He/she cannot rest until and
certain the business has stabilized and established
5. High level of stress: Starting the business can be a very
rewarding experience, but it can be stressful. An entrepreneur have
left the comfort and security of secured job to venture into their own
business. Failure can bring about tremendous personal failure,
and in turn creates intense levels of anxiety and stress.
Financial burden may increase and the entrepreneur may face
difficulty sustaining the business or may decide to call it for day and
wind up the business for good.

The Drawbacks of
Entrepreneurship #4

6.Complete Responsibility: Entrepreneurs have full


responsibility on making decision that are unfavorable.
As such, tremendous pressure to perform as the
entrepreneur is too deeply engaged in the business
7. Discouragement: During running their businesses
entrepreneurs face many difficulties, discouragement
and disillusionment and so must work hard, remain all
the time confidence and full of optimisms.

ENTRPRENEURSHIP AND SOCIOECONOMIC DEVELOPMENT#1


Economic

development

structural

transformation

towards

technologically

modern

is

the
of

an

economy,

advanced

and

process

of

economy
that

is

based

on

services and manufacturing, not agriculture.


Economic transformation involves both qualitative
changes to the nature of an economy (modern
economy) and quantitative changes in terms of the
productivity and output (the return) per person.

ENTRPRENEURSHIP AND SOCIOECONOMIC DEVELOPMENT#2


The socio-economic development process
is largely a result of innovative
behaviour
of
risk-taking
entrepreneurs. Given its innovative
nature,
entrepreneurship
is
thus
important for economic development
because it can influence economic
development in both the qualitative
(nature) and quantitative (output)
dimensions of economic development.

ENTRPRENEURSHIP AND SOCIOECONOMIC DEVELOPMENT#3

Entrepreneurship is a phenomenon
that takes several forms and it
appears in

(i) Small and large firms, (ii)

in new firms and established firms, (iii) in


the formal and informal economy, (iv) in
legal and illegal activities, (v) in high-risk
and low risk undertakings, and (vi) in all

ENTRPRENEURSHIP AND SOCIOECONOMIC DEVELOPMENT#3


Generally, entrepreneurship affects the economy both
directly and indirectly, and at various levels, through
creativity

and

restructuring

of

innovation,
the

economy

competition

and

(modernizing the

economy).
Entrepreneurship

can

contribute

to

socio-

economic development or it can undermine it


depending on whether entrepreneurial ability is
directed

either

productive

towards

activities

ends/purpose).

productive

(destructive

or

or

non-

evasive

POSITIVE ROLE OF
ENTRPRENEURSHIP IN SOCIOECONOMIC DEVELOPMENT#2
3. Entrepreneurs are essential actors of
change, and they can act to accelerate the
creation, diffusion and application of new
ideas. In doing so, they not only ensure the
efficient use of resources but also take
initiatives to exploit business opportunities.
4. It creates competitiveness in the economy
that is necessary for economic development.

POSITIVE ROLE OF
ENTRPRENEURSHIP IN SOCIOECONOMIC DEVELOPMENT#1
The creation of new firms that can benefit
economic development. This can be achieved
through job creation (directly and indirectly),
wealth creation both at personal and national
level.
By triggering a take-off from stagnation, as it
can ease financial burden (it can generate income
necessary for take off).
By
stimulating
structural
economic
transformation
from
a
predominantly
traditional/agricultural
economy
to
a
modern/industrial economy.

POSITIVE ROLE OF
ENTRPRENEURSHIP IN SOCIOECONOMIC DEVELOPMENT#3
5. Risk-taking entrepreneurship is seen as the basis for
innovation which is a key factors for high economic
performance in a competitive economy because;
They can introduce new goods and services in the
market (products and services innovation).
They can open new markets (market innovation) source of income that is necessary for development.
Conquer (secure, acquire, obtain) new sources of
supply of raw materials (they can innovate new
sources of raw material).
Carry out new organization of an enterprise
(organizational innovation).

NEGATIVE ROLE OF
ENTRPRENEURSHIP IN SOCIOECONOMIC DEVELOPMENT#1
There are ways in which entrepreneurship
undermines
socio-economic
development,
hence not all types of entrepreneurship are good
for economic development. The most significant
adverse
effects
of
entrepreneurship
on
development can be due to either of the following:
1. Entrepreneurial activities which are personally
profitable
but
socially
destructive
or
unproductive. For example drug abuse and other
forms of illegal business that can contribute to
personal wealth but disastrous to the society.
2. Low quality entrepreneurship that may have

NEGATIVE ROLE OF
ENTRPRENEURSHIP IN SOCIOECONOMIC DEVELOPMENT#2
3.
Entrepreneurial
activities
that
evade
government regulations thus leading to
activities such as illegal fishing, illegal poaching
and other activities that destroy the environment.
4. Entrepreneurial activities that evade the
government taxes. This cause personal gain as it
contributes to personal wealth while undermining
the national development.

ENTREPRENEURSHIP
DEVELOPMENT #1
In order for entrepreneurship and entrepreneurs to
thrive in a nation and contribute significantly on socioeconomic development, the government and other
stakeholders

must

creating

entrepreneurial

environment to enable for the emergence, growth,


stability and success of entrepreneurs.

ENTREPRENEURSHIP
DEVELOPMENT #2
Entrepreneurial environment refers to a combination
of socio-economic and political factors that play a
role in the development (growth) of entrepreneurship.
It refers to the overall economic, socio-cultural, and
political factors that influence people's willingness
and ability to undertake entrepreneurial activities.
It also refers to the availability of assistance and
support services that facilitate the start-up process.

Entrepreneurial environment
Entrepreneurial environment can be grouped
into two broad groups:
General

environmental

conditions

for

entrepreneurship
(ii)

Specific

public

policy

and

legal

frameworks for promoting and supporting


entrepreneurial activities and initiatives.

General environmental conditions


for entrepreneurship include:Legal and institutional frameworks for efficient
functioning of private enterprises,
Presence of experienced entrepreneurs,
Presence of skilled labor force,
Accessibility of suppliers,
Accessibility of customers or new markets,
High degree of competition among firms,
Favorable government policies,
Provision of training and support services,
Supportive physical and social infrastructure

General environment
conditions
Knowledgeable,

Skilled

and

motivated

people

play

important roles in new venture creation (Manning, Birley,


& Norburn, 1989).
Countries that keep rules and regulations at a minimum,
offer tax and other incentives, and provide training and
counseling services to start-up entrepreneurs increase
the likelihood of new venture start-ups and their
development (Dana, 1987, 1990).

General environment
conditions
Availability of financial resources, large size urban areas,
and presence of universities to offer quality trainings and
research services contribute to increasing the rate of
new venture creation and their development (Pennings,
1982).
Lack of financial assistance, lack of information on
various aspects of business, excessive taxation, and high
rate of inflation obstruct entrepreneurship development
(Young & Welsch, 1993).

Specific public policy and legal


frameworks
Specific and purposely designed and implemented
public policy and legal frameworks can contribute to
promoting and supporting entrepreneurs and/or
entrepreneurial activities and initiatives (Goodman,
Meany, & Pate, 1992; Westhead, 1990; El-Namaki,
1988; Mokry, 1988; Vesper, 1983;)

Specific public policy and legal


frameworks #2
These policy and legal options may cover:Provision of venture capital funds
Tax-based incentives
Government procurement programs
Protection of proprietary ideas and innovations
Investment in education and research
Explicit recognition of, and support for,
entrepreneurship by government agencies
Fostering of entrepreneurship by educational
institutions
Minimization of entry barriers

FACTORS ENHANCING
ENTRPRENEURSHIP
DEVELOPMENT

Factors that influence the


development

of

entrepreneurship

can

be

grouped into (i) Economic


factors,

(ii)

Cultural

Economic factors
Market
Capital
Raw materials
Technology
Transport and communication
Labour

Cultural factors
Entrepreneurship and entrepreneurs prospers (do
well, flourish, thrive) in a society that cherish and
support them, and develop societal systems to
encourage it through instilling good virtues and
values such as honest, trust, hard work,
frugality (prudence, carefulness) and good
work ethic.

Social systems that place high value on the


formation of new ventures tend to promote
entrepreneurship and more individuals
will choose to be entrepreneurs.
Generally culture of a given society can either
promote
or
hinder
entrepreneurship
tendencies of the individuals.

Political factors
Political and administrative
decisions on provision of
entrepreneurial trainings
and supports, business
and trade incentives, etc.

Initiatives to promote and support


entrepreneurship in Tanzania #1
Since early 1986, The Government of Tanzania launched
a comprehensive economic reforms and stabilization
programme to create favourable domestic environment
for entrepreneurship and the operation of SMEs. The
economic reforms resulted to establishment of the
liberalized

market

where

the

market

forces

determine the prices of goods, the private sector


is

enhanced

to

drive

the

economy,

competition is cherished and encouraged.

and

fair

Initiatives to promote and support


entrepreneurship in Tanzania #2

1.

Improved Legal and Regulatory Business

Environment

for

starting,

registering

and

operating an entrepreneurial activity well-raid


regulations and procedures to guide registration,
licensing and operations of business. E.g.. Trade
policy;
Business

registration

and

Registration

and

licensing

regulations.

Licensing

Authority

(BRELA) does the registration and licensing of


businesses.

Initiatives to promote and support


entrepreneurship in Tanzania #3
2. Training and support services for actual and
potential entrepreneurs --- colleges, universities,
NGOs and private companies throughout Tanzania
are authorized to offer such entrepreneur trainings
and supports.

Initiatives to promote and support


entrepreneurship in Tanzania #4
3. Ensuring fair competition and settling of
business-related disputes

Fair competition

policy and laws, Fair Competition Commission and


Tribunals, Procurement policy and acts and tribunal;
Commercial Court, and other judicial systems are
established to guide these.

4.

Ensuring production of quality goods ---

Government agencies such as TBS, TFDA, etc.


follow established rules and procedures to guide
this.
5. Protection of latent and property rights
there are rules and regulations, agencies (e.g. RITA)
to uphold, guide and protect these rights

6. Capital generation and credit facilitation --- rules


and policies guide this while government agencies and
private companies and NGOs provide services --- SELF, BANKS,
etc.
7. Empowerment of entrepreneurs and combating of
discriminations
8.

Establishment

of

physical

infrastructure

transportation and communication.


9. Science and technology to foster innovation

(COSTECH)

and Science and technology policy and related laws to guide


e.g. technological transfer