Discuss about the Entrepreneurship Difficulties in Business World.
Entrepreneurship is today not a new word in the business world. With its roots in late 1700s, the modernisation of economic scenarios have given this term a large gamut of interpretations. Like according to the definition given by learned economists, the entrepreneur is somebody who undertakes the organization, managing and assuming the risk of any business. The entrepreneurship is the procedure of learning new methods of relating resources so that the set goals for the business endeavour are met. The success of entrepreneurship is determined when the market value produced by this new arrangement of resources is larger than the individual market value of these resources or the market value they can create in some other arrangement (Sobel, 2001).
There are several concepts, theories and impacts of entrepreneurship on the economy and society at large. Here we would attempt to discuss some relevant concepts to understand how the entrepreneurs are driving the changes in both social and economic scenarios, some basic theories related to entrepreneurship, difference between enterprise, innovation and invention and we would discuss and evaluate the role of innovation, invention and intervention in entrepreneurship. We would also delve into the evaluation of the complexity and importance of entrepreneurship in economy and society.
The history of concepts of entrepreneurship and their relevance today
Historically the concept of entrepreneurship was first recognized in 1700s and since then it has evolved to a great extent. In a lay man’s term, it could simply means starting one’s own business, however, there are numerous aspects and concepts of entrepreneurship. The word itself has origin in French (Sobel, 2001). In 1723, the word entrepreneur was used to suggest abilities of initiative, leadership and innovation in any original endeavour enterprise. Robert Reich a renowned Economist gave necessary characteristics of entrepreneur as leadership, team-building and management skills (Crainer and Dearlove, 2000). The study done by Richard Cantillon and Adam Smith somewhere in late 17th and early 18th centuries lays foundation of the formal theories of entrepreneurship.
The wind of changes brought in by the drive of an entrepreneurs for greater improvement and innovation was studied by Joseph Schumpeter (1883-1950), an economist. According to him entrepreneurship was a “creative destruction” force as the entrepreneur brings on vision “new combinations,” in this manner aiding reduction of the old industries to absolutely out-of-date. In a way, the conventional methods of undertaking business are demolished by the conception of fresh and enhanced methods. As per Peter Drucker (1909-2005) an expert on business the entrepreneur is a person who constantly and essentially quests for change in the established traditional business ways, responds to it when he finds them and further exploits these change as an opportunity to ensure success of his venture (Doh-Victor, 2015).
Some of the elementary characteristics and concepts of entrepreneurship are essentially related to the emergent an idea of whatever an enterprise must be like and then implementing that idea by transforming it into actual phases and taking it to the finish line. The involvement of entrepreneurs in constructing and modelling their businesses is absolute, however, the success of the endeavour is also influenced by accepting the personal limits so that they can be surpassed by evolving systems and strategies. Along with zeal of innovation, quest for making a unique mark for themselves in the society and love for autonomy and freedom, some of the important traits for entrepreneurship includes way of thinking and behaving. They are risk takers, however they prefer to take deliberate and measured risks. Entrepreneurs tend to stake personal reputations, money and time to manifest their visions. They also possess ability to take fiscal responsibility, have a concrete intelligence of how to promote and manage funds. They are generally creativity people as opening a business is a creative endeavour. What begins with only theorizing of a product or service is creatively build up by entrepreneur into an actual and applied infrastructure with ability to withstand and supply that product or service. Also, they possess sound management skills, with vision and modesty to outline their own part in business processes and right interpersonal skills to effectively delegate other jobs to the people (Gartenstein, no date).
The main features of economic and non-economic theories of the role and function of the entrepreneur
There are several available theories in the economic and non-economic categories related to the roles played by entrepreneurs in economy as well as society. One of the famous theory is the theory given by Casson (2005), who suggests that though there is no conventional economic theory of the entrepreneur as the traditional economic theory makes numerous assumptions. In order to explain the phenomenon concerning the success or failure of an enterprise a formal theory of the entrepreneur is required. This explains the process of creation and growth of business, growth and development of economy and distribution of income. It is also important to note the role played by the entrepreneurs is noteworthy as generally they bring about changes in the entire industry. The economic theory of the entrepreneur successfully takes into account the rationale of failure as well as success of the endeavour. In the field of theoretical economic dynamics, trade cycles and competitive procedures the theory of the purpose of the entrepreneur proves to be of utmost importance. Casson (2005) elaborated two modernizations of economic theory. Firstly, that the entrepreneur follows the foundation of the exclusive information accessible to him regarding the different people have varied choices and access to information and secondly, the entrepreneur time and again have to generate market associations as organising markets have their own intrinsic difficulties or transaction costs. Economic theory of entrepreneurship basically congregates functional and symbolic characterizations of the entrepreneur.
Also the economic theory of entrepreneurship depicts an entrepreneur as a person with expertise in taking critical resolutions about the management of limited resources. The significant notion for economic theory is management also better understood as dynamic complement of distribution using the instruments of contract and conjecture. Negotiating need to meet to the symmetry, thus the valuation of entrepreneur of current scenarios is vital toward prompting when, where, and how the coordination has to take place. With the help of greater coordination, the uncertainty faced by entrepreneur is somehow reduced by assurance and conjecture. The entrepreneurial coordination is at all times limited as it occupies merely a minor segment of the economy. Though this limited coordination is constant but the total reliability cannot be assured.
The economic theory of the entrepreneur is associated to the theory of the market creation enterprise, which is generated by entrepreneur himself. The market internalisation is sorted to reduce the transaction costs which incur in the activities like market-making. The entrepreneur can adopt the utilization of profitable information upon which his greater decisions are founded. The financial prudence of central control, which can be deputized can be accredited to the internalization of the market. Due to their faith in higher knowledge about the market the entrepreneurs assume hard-line bargaining strategies thus affecting the market economy of the product or services they are producing. They often take assistance of their family and friends for labour, capital and information and create new enterprise by successfully recognising the present opportunities. They also trust that self-employment is best way to utilize the given opportunities. Even the market assigns verdict conclusions for the entrepreneurs and act exclusively (Casson, 2005). There are several other economic theories of entrepreneurship are given by Leibenstein, Hayek and Kirzner, Knight, Schumpeter, and Andrews and Penrose.
Some of the non-economic theories of entrepreneurship includes the resource-based theories whose emphasis is on the method adopted by entrepreneurs to control diverse kinds of resources to get their commercial labours to succeed. The limited capital makes it difficult for the entrepreneurs to begin their venture with scare resources. The use of social connections and human resources are some other kinds of resources that the entrepreneurs control to gain their objectives. Also the use of their education and information accessible to them helps them to start their enterprise. Also the intangible resources like leadership, business expertise and innovation helps the entrepreneurs.
The psychological theories of entrepreneurship emphasis on the people and their mental or emotional features that determine the entrepreneurial efforts they could undertake (Bridge & O'Neill, 2012). A renowned psychologist David McCLelland, a professor at Harvard suggest that the entrepreneurs have a necessity for accomplishment that motivates their action. Another professor at the University of Connecticut Julian Rotter, offered that the people with a strong internal locus of control trust that their work can affect the external world and studies advocates that maximum entrepreneurs have this characteristic.
Another important non-economic theory of entrepreneurship is the sociological or anthropological theory which focus on the numerous social backgrounds that empower the prospects that are used by the entrepreneurs. A George Washington University professor Paul D. Reynolds, suggests four such backgrounds namely the social links, a longing for a significant life, cultural identification and social-political surrounding influences. The anthropological theory attempts to see entrepreneurship in context of culture. It examines the cultural drives like social outlooks which determine the insight of entrepreneurship and the behaviours of entrepreneurs. The opportunity-based theory given by professor, business management author and corporate consultant, Peter Drucker that entrepreneurs outshine at recognising and utilizing the benefit of opportunities formed by technological, social and cultural changes (Dontigney, no date).
The complexity and importance of entrepreneurship in economy and society
The researches in the economic aspects of the entrepreneurship gives a precise connection between views of entrepreneurship, economic growth and production undertakings (Baumol, 1990). This importance is primarily because of the assumption that the entrepreneurs are major job creators and contributor to the economic growth. Since this opinion is common among various politicians, economists and substantial fragment of society, that is the reason many countries on national level are encouraging the development of entrepreneurial movements (Wiklund et al., 2011). The researchers also suggest that the establishing of the prominence of formation, improvement and employment of public strategies can encourage the level of entrepreneurial movement in a particular region or country. With regards to the OECD countries (OECD, 1998), which have developing economies and are affected by low production, joblessness and social inequality complications deliberated to use the concepts of entrepreneurship to minimize these issues. Historically as well as in the modern world of today, the influence made by various entrepreneurs is remarkable. They have affected not only industry trends and economies but the societies as well. With the prime aim at heart to create a flourishing and wealthy business entrepreneur have created various success stories to be admired like those of Bill Gates, Henry Ford, Mark Zuckerberg, etc. They not only managed to make public wealth and personal fortune but also aided the entire society to grow and advance with their inventive products. The endeavours of this undertaking effect in bonuses for the entire society, even while these might not be the initial part of entrepreneur’s goals. For example, the entrepreneurial ensure of Mark Zuckerberg, Facebook has not only made him successful but have also created value for the society by bringing people together across the globe. People in general benefit from superior goods and services while the venture capitalists, shareholders, and lenders gains profit by achieving interests and returns on investments by the success of the entrepreneur’s venture. Generation of employment helps society at large by reducing unemployment, helping employees attain means of earning income and achieving personal goals along with the growth and success of the business. This intron increases the purchasing powers among the people and increases potential customer base for the products and services of the business of the entrepreneurs. Since the entrepreneurship has a very dynamic nature, after achieving its initial goals entrepreneurs tends to search for new goals to achieve and improve the society at large (Carraher, 2014). Thus the connection between societal advancement and increase in entrepreneurship are highly correlated. The operations of the entrepreneurial ventures are part of todays’ society and both have a complementary and supportive influence on each other. Therefore, as both perceptions of entrepreneurship and society are dynamic in nature, along with evolving changes in the society the part played by the entrepreneurship also alterations with it (Shahidi, 2008).
While studying about the evolution and various theories about the entrepreneurship, it is very much evident that like every aspect of business, entrepreneurship is also dynamic and progressively changing. There has been significant increase in various initiatives taken by many countries in recent times regarding promoting entrepreneurship in their quest to increase employment, decrease imports, strengthen their economies and create value addition for society at large.
In terms of innovation we could say that it is basically consequence of the combination of an inventive procedure and an entrepreneurial procedure with an aim to make a new economic worth for definite participants. As it is said “Innovation = Invention + Implementation”, it possesses an inherent duality. Innovation is possible when there is actual implementation of the novel ideas. Thus though innovation is a single word but contains two separate procedures. First invention, involving combinations of knowledge and creativity, and second the entrepreneurship, which in turn is a combination of three main activities, namely evaluation of opportunity, psychological commitment and execution organization (Hindle, 2009).
Thus it can be said that entrepreneurship is not an act in isolation but have far more consequences then initially perceived even by the entrepreneur himself. The dynamic nature of this form of business is characterised by its influence on the society, economy as well as the market trends. The entrepreneurship could be difficult to manage because there could be number of stakeholders involved. A true entrepreneur is a true leader who can actually address the expectations of different stakeholders (Bridge & O'Neill, 2012). Therefore, it is important that the entrepreneur should have the vision to achieve the desired goals and objectives. It is also important that this vision should be shared with various important stakeholders.
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