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Entrepreneurship is the creation or extraction of
economic value In economics, economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured through units of currency, and the interpretation is therefore "what is the maximum amount of money a speci ...
. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values than simply economic ones. An entrepreneur is an individual who creates and/or invests in one or more businesses, bearing most of the risks and enjoying most of the rewards.The process of setting up a business is known as entrepreneurship. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures. More narrow definitions have described entrepreneurship as the process of designing, launching and running a new business, which is often similar to a small business, or as the "capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit." The people who create these businesses are often referred to as entrepreneurs. While definitions of entrepreneurship typically focus on the launching and running of businesses, due to the high risks involved in launching a start-up, a significant proportion of start-up businesses have to close due to "lack of funding, bad business decisions, government policies, an economic crisis, lack of market demand, or a combination of all of these." In the field of
economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...
, the term entrepreneur is used for an entity which has the ability to translate inventions or
technologies Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, science, ...
into products and services. In this sense, entrepreneurship describes activities on the part of both established firms and new businesses.


Perspectives on entrepreneurship

As an academic field, entrepreneurship accommodates different schools of thought. It has been studied within disciplines such as management, economics, sociology and economic history. Some view entrepreneurship as allocated to ''the entrepreneur''. These scholars tend to focus on what the entrepreneur does and what traits that an entrepreneur has (see for example the text under the headings Elements below). This is sometimes referred to as the functionalistic approach to entrepreneurship. Others deviate from the individualistic perspective to turn the spotlight on ''the entrepreneurial process'' and immerse in the interplay between agency and context. This approach is sometimes referred to as the processual approach, or the contextual turn/approach to entrepreneurship.


Elements

Entrepreneurship is an act of being an
entrepreneur Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...
, or "the owner or manager of a business enterprise who, by risk and initiative, attempts to make profits". Entrepreneurs act as managers and oversee the launch and growth of an enterprise. Entrepreneurship is the process by which either an individual or a team identifies a business opportunity and acquires and deploys the necessary resources required for its exploitation. Early-19th-century French economist Jean-Baptiste Say provided a broad definition of entrepreneurship, saying that it "shifts economic resources out of an area of lower and into an area of higher productivity and greater yield". Entrepreneurs create something new and unique—they change or transmute value. Regardless of the firm size, big or small, it can take part in entrepreneurship opportunities. There are four criteria to becoming an entrepreneur. First, there must be opportunities or situations to recombine resources to generate profit. Second, entrepreneurship requires differences between people, such as preferential access to certain individuals or the ability to recognize information about opportunities. Third, taking on a level of risk is a necessity. Fourth, the entrepreneurial process requires the organization of people and resources.Shane, S. A. (2003). ''A general theory of entrepreneurship: the individual-opportunity nexus''. Northampton, Massachusetts: E. Elgar. An entrepreneur uses their time, energy, and resources to create value for others. They are rewarded for this effort monetarily and therefore both the consumer of the value created and the entrepreneur benefit. The entrepreneur is a factor in and the study of entrepreneurship reaches back to the work of Richard Cantillon and Adam Smith in the late 17th and early 18th centuries. However, entrepreneurship was largely ignored theoretically until the late 19th and early 20th centuries and empirically until a profound resurgence in business and economics since the late 1970s. In the 20th century, the understanding of entrepreneurship owes much to the work of economist
Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the United States to become a professor at H ...
in the 1930s and other Austrian economists such as Carl Menger,
Ludwig von Mises Ludwig Heinrich Edler von Mises (; 29 September 1881 – 10 October 1973) was an Austrian School economist, historian, logician, and Sociology, sociologist. Mises wrote and lectured extensively on the societal contributions of classical liberali ...
and
Friedrich von Hayek Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Hayek ...
. According to Schumpeter, an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful
innovation Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed entit ...
. Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior innovations across markets and industries, simultaneously creating new products, including new business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is debated in academic economics. An alternative description posited by
Israel Kirzner Israel Meir Kirzner (also Yisroel Mayer Kirzner ; born February 13, 1930) is a British-born American economist closely identified with the Austrian School. Early life and education The son of a well-known rabbi and Talmudist, Kirzner was born i ...
suggests that the majority of innovations may be much more incremental improvements such as the replacement of paper with plastic in the making of drinking straws. The exploitation of entrepreneurial opportunities may include: * Developing a
business plan A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on ...
* Hiring
human resources Human resources (HR) is the set of people who make up the workforce of an organization, business sector, industry, or economy. A narrower concept is human capital, the knowledge and skills which the individuals command. Similar terms include ...
* Acquiring financial and material resources * Providing
leadership Leadership, both as a research area and as a practical skill, encompasses the ability of an individual, group or organization to "lead", influence or guide other individuals, teams, or entire organizations. The word "leadership" often gets vi ...
* Being responsible for both the venture's success or failure *
Risk aversion In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more c ...
Economist
Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the United States to become a professor at H ...
(1883–1950) saw the role of the entrepreneur in the economy as "
creative destruction Creative destruction (German: ''schöpferische Zerstörung'') is a concept in economics which since the 1950s is the most readily identified with the Austrian-born economist Joseph Schumpeter who derived it from the work of Karl Marx and pop ...
"—launching innovations that simultaneously destroy old industries while ushering in new industries and approaches. For Schumpeter, the changes and "dynamic disequilibrium brought on by the innovating entrepreneur erethe norm of a healthy
economy An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...
". While entrepreneurship is often associated with new, small, for-profit start-ups, entrepreneurial behavior can be seen in small-, medium- and large-sized firms, new and established firms and in for-profit and not-for-profit organizations, including voluntary-sector groups,
charitable organization A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being (e.g. educational, religious or other activities serving the public interest or common good). The legal definition of a ...
s and
government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is ...
. Entrepreneurship may operate within an
entrepreneurship ecosystem An entrepreneurial ecosystems or entrepreneurship ecosystems are peculiar systems of interdependent actors and relations directly or indirectly supporting the creation and growth of new ventures. The ecosystem metaphor "Ecosystem" refers to the el ...
which often includes: * Government programs and services that promote entrepreneurship and support entrepreneurs and start-ups * Non-governmental organizations such as small-business associations and organizations that offer advice and mentoring to entrepreneurs (e.g. through entrepreneurship centers or websites) * Small-business
advocacy organization Advocacy groups, also known as interest groups, special interest groups, lobbying groups or pressure groups use various forms of advocacy in order to influence public opinion and ultimately policy. They play an important role in the developm ...
s that lobby governments for increased support for entrepreneurship programs and more small business-friendly laws and regulations * Entrepreneurship resources and facilities (e.g.
business incubator Business incubator is an organization that helps startup companies and individual entrepreneurs to develop their businesses by providing a fullscale range of services starting with management training and office space and ending with venture c ...
s and
seed accelerator Startup accelerators, also known as seed accelerators, are fixed-term, cohort-based programs, that include mentorship and educational components and culminate in a public pitch event or demo day. While traditional business incubators are often g ...
s) * Entrepreneurship education and training programs offered by schools, colleges and universities * Financing (e.g. bank loans,
venture capital financing Venture capital financing is a type of funding by venture capital. It is private equity capital that can be provided at various stages or funding rounds. Common funding rounds include early-stage seed funding in high-potential, growth companies ...
,
angel investing An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an individual who provides capital for a business or businesses start-up, usually in exchange for convertible debt or owner ...
and government and private foundation grants) In the 2000s, usage of the term "entrepreneurship" expanded to include how and why some individuals (or teams) identify opportunities, evaluate them as viable, and then decide to exploit them. The term has also been used to discuss how people might use these opportunities to develop new products or services, launch new firms or industries, and create
wealth Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an I ...
. The entrepreneurial process is uncertain because opportunities can only be identified after they have been exploited. Entrepreneurs exhibit positive
biases Bias is a disproportionate weight ''in favor of'' or ''against'' an idea or thing, usually in a way that is closed-minded, prejudicial, or unfair. Biases can be innate or learned. People may develop biases for or against an individual, a group, ...
towards finding new possibilities and seeing unmet market needs, and a tendency towards risk-taking that makes them more likely to exploit business opportunities.


History


Historical usage

"Entrepreneur" (, ) is a
loanword A loanword (also loan word or loan-word) is a word at least partly assimilated from one language (the donor language) into another language. This is in contrast to cognates, which are words in two or more languages that are similar because t ...
from French. The word first appeared in the French dictionary entitled ''Dictionnaire Universel de Commerce'' compiled by Jacques des Bruslons and published in 1723. Especially in Britain, the term "adventurerer" was often used to denote the same meaning. The study of entrepreneurship reaches back to the work in the late 17th and early 18th centuries of Irish-French economist Richard Cantillon, which was foundational to classical economics. Cantillon defined the term first in his ''Essai sur la Nature du Commerce en Général'', or ''Essay on the Nature of Trade in General'', a book
William Stanley Jevons William Stanley Jevons (; 1 September 183513 August 1882) was an English economist and logician. Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method in ec ...
considered the "cradle of political economy". Cantillon defined the term as a person who pays a certain price for a product and resells it at an uncertain price, "making decisions about obtaining and using the resources while consequently admitting the risk of enterprise". Cantillon considered the entrepreneur to be a risk taker who deliberately allocates resources to exploit opportunities to maximize the financial return. Cantillon emphasized the willingness of the entrepreneur to assume the risk and to deal with uncertainty, thus he drew attention to the function of the entrepreneur and distinguished between the function of the entrepreneur and the owner who provided the money.• Landström, H. & SpringerLink 2005, Pioneers in entrepreneurship and small business research, Springer Science+Business Media, New York, N.Y. Jean-Baptiste Say also identified entrepreneurs as a driver for economic development, emphasizing their role as one of the collecting factors of production allocating resources from less to fields that are more productive. Both Say and Cantillon belonged to French school of thought and known as the physiocrats. Dating back to the time of the medieval guilds in Germany, a craftsperson required special permission to operate as an entrepreneur, the small proof of competence (''Kleiner Befähigungsnachweis''), which restricted training of apprentices to craftspeople who held a Meister certificate. This institution was introduced in 1908 after a period of so-called freedom of trade (''Gewerbefreiheit'', introduced in 1871) in the
German Reich German ''Reich'' (lit. German Realm, German Empire, from german: Deutsches Reich, ) was the constitutional name for the German nation state that existed from 1871 to 1945. The ''Reich'' became understood as deriving its authority and sovereignty ...
. However, proof of competence was not required to start a business. In 1935 and in 1953, greater proof of competence was reintroduced (''Großer Befähigungsnachweis Kuhlenbeck''), which required craftspeople to obtain a Meister apprentice-training certificate before being permitted to set up a new business. In the
Ashanti Empire The Asante Empire (Asante Twi: ), today commonly called the Ashanti Empire, was an Akan state that lasted between 1701 to 1901, in what is now modern-day Ghana. It expanded from the Ashanti Region to include most of Ghana as well as parts of Iv ...
, successful entrepreneurs who accumulated large wealth and men as well as distinguished themselves through heroic deeds were awarded social and political recognition by being called "Abirempon" which means big men. By the eighteenth and nineteenth centuries AD, the appellation "Abirempon" had formalized and politicized to embrace those who conducted trade from which the whole state benefited. The state rewarded entrepreneurs who attained such accomplishments with Mena(elephant tail) which was the "heraldic badge"


20th century

In the 20th century, entrepreneurship was studied by
Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the United States to become a professor at H ...
in the 1930s and by other
Austrian economists The Austrian School is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result exclusively from the motivations and actions of individuals. Austrian school ...
such as Carl Menger (1840-1921),
Ludwig von Mises Ludwig Heinrich Edler von Mises (; 29 September 1881 – 10 October 1973) was an Austrian School economist, historian, logician, and Sociology, sociologist. Mises wrote and lectured extensively on the societal contributions of classical liberali ...
(1881-1973) and
Friedrich von Hayek Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Hayek ...
(1899-1992). While the loan from French of the English-language word "entrepreneur" dates to 1762, the word "entrepreneurism" dates from 1902 and the term "entrepreneurship" also first appeared in 1902. According to Schumpeter, an entrepreneur is willing and able to convert a new idea or invention into a successful
innovation Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed entit ...
. Entrepreneurship employs what Schumpeter called the "gale of
creative destruction Creative destruction (German: ''schöpferische Zerstörung'') is a concept in economics which since the 1950s is the most readily identified with the Austrian-born economist Joseph Schumpeter who derived it from the work of Karl Marx and pop ...
" to replace in whole or in part inferior offerings across markets and industries, simultaneously creating new products and new
business model A business model describes how an organization creates, delivers, and captures value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-published, 2010 in economic, soci ...
s, thus creative destruction is largely responsible for long-term economic growth. The idea that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such continues to be debated in academic economics. An alternative description by
Israel Kirzner Israel Meir Kirzner (also Yisroel Mayer Kirzner ; born February 13, 1930) is a British-born American economist closely identified with the Austrian School. Early life and education The son of a well-known rabbi and Talmudist, Kirzner was born i ...
(1930- ) suggests that the majority of innovations may be incremental improvements - such as the replacement of paper with plastic in the construction of a drinking straw - that require no special qualities. For Schumpeter, entrepreneurship resulted in new industries and in new combinations of currently existing inputs. Schumpeter's initial example of this was the combination of a steam engine and then current wagon-making technologies to produce the
horseless carriage Horseless carriage is an early name for the motor car or automobile. Prior to the invention of the motor car, carriages were usually pulled by animals, typically horses. The term can be compared to other transitional terms, such as wireless pho ...
. In this case, the innovation (i.e. the car) was transformational but did not require the development of dramatic new technology. It did not immediately replace the horse-drawn carriage, but in time incremental improvements reduced the cost and improved the technology, leading to the modern
auto industry The automotive industry comprises a wide range of companies and organizations involved in the design, development, manufacturing, marketing, and selling of motor vehicles. It is one of the world's largest industries by revenue (from 16 % such ...
. Despite Schumpeter's early 20th-century contributions, traditional microeconomic theory did not formally consider the entrepreneur in its theoretical frameworks (instead of assuming that resources would find each other through a price system). In this treatment, the entrepreneur was an implied but unspecified actor, consistent with the concept of the entrepreneur being the agent of x-efficiency. For Schumpeter, the entrepreneur did not bear
risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environm ...
: the capitalist did. Schumpeter believed that the equilibrium was imperfect. Schumpeter (1934) demonstrated that the changing environment continuously provides new information about the optimum allocation of resources to enhance profitability. Some individuals acquire the new information before others and recombine the resources to gain an entrepreneurial profit. Schumpeter was of the opinion that entrepreneurs shift the production-possibility curve to a higher level using innovations. Initially, economists made the first attempt to study the entrepreneurship concept in depth. Alfred Marshall viewed the entrepreneur as a multi-tasking capitalist and observed that in the equilibrium of a completely competitive market there was no spot for "entrepreneurs" as economic-activity creators. Changes in politics and society in Russia and China the late-20th century saw a flowering of entrepreneurial activity, producing
Russian oligarch Russian oligarchs ( Russian: олигархи, romanized: ''oligarkhi'') are business oligarchs of the former Soviet republics who rapidly accumulated wealth in the 1990s via the Russian privatisation that followed the dissolution of the Sovi ...
s and Chinese millionaires.


21st century

In the 2000s, entrepreneurship was extended from its origins in for-profit businesses to include
social entrepreneurship Social entrepreneurship is an approach by individuals, groups, start-up companies or entrepreneurs, in which they develop, fund and implement solutions to social, cultural, or environmental issues. This concept may be applied to a wide range of ...
, in which business goals are sought alongside social, environmental or humanitarian goals and even the concept of the political entrepreneur. Entrepreneurship within an existing firm or large organization has been referred to as intrapreneurship and may include corporate ventures where large entities "spin-off" subsidiary organizations. Entrepreneurs are leaders willing to take risk and exercise initiative, taking advantage of market opportunities by planning, organizing and deploying resources, often by innovating to create new or improving existing products or services. In the 2000s, the term "entrepreneurship" has been extended to include a specific
mindset Mindset is an "established set of attitudes, esp. regarded as typical of a particular group's social or cultural values; the outlook, philosophy, or values of a person; (now also more generally) frame of mind, attitude, ecte: anddisposition." ...
resulting in entrepreneurial initiatives, e.g. in the form of
social entrepreneurship Social entrepreneurship is an approach by individuals, groups, start-up companies or entrepreneurs, in which they develop, fund and implement solutions to social, cultural, or environmental issues. This concept may be applied to a wide range of ...
, political entrepreneurship or knowledge entrepreneurship. According to Paul Reynolds, founder of the
Global Entrepreneurship Monitor The Global Entrepreneurship Monitor (GEM) research project is an annual assessment of the national level of entrepreneurial activity in multiple, diverse countries. Today the study counts the participation of 115 countries and with longitudinal d ...
, "by the time they reach their retirement years, half of all working men in the United States probably have a period of self-employment of one or more years; one in four may have engaged in self-employment for six or more years. Participating in a new business creation is a common activity among U.S. workers over the course of their careers". In recent years, entrepreneurship has been claimed as a major driver of economic growth in both the United States and Western Europe. Entrepreneurial activities differ substantially depending on the type of organization and creativity involved. Entrepreneurship ranges in scale from solo, part-time projects to large-scale undertakings that involve a team and which may create many jobs. Many "high value" entrepreneurial ventures seek
venture capital Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...
or angel funding (
seed money Seed money, sometimes known as seed funding or seed capital, is a form of securities offering in which an investor invests capital in a startup company in exchange for an equity stake or convertible note stake in the company. The term ''seed'' ...
) to raise capital for building and expanding the business. Many organizations exist to support would-be entrepreneurs, including specialized government agencies,
business incubator Business incubator is an organization that helps startup companies and individual entrepreneurs to develop their businesses by providing a fullscale range of services starting with management training and office space and ending with venture c ...
s (which may be for-profit, non-profit, or operated by a college or university),
science park A science park (also called a "university research park", "technology park”, "technopark", “technopole", or a "science and technology park" (STP)) is defined as being a property-based development that accommodates and fosters the growt ...
s and
non-governmental organization A non-governmental organization (NGO) or non-governmental organisation (see American and British English spelling differences#-ise, -ize (-isation, -ization), spelling differences) is an organization that generally is formed independent from g ...
s, which include a range of organizations including not-for-profits, charities, foundations and business advocacy groups (e.g.
Chambers of commerce A chamber of commerce, or board of trade, is a form of business network. For example, a local organization of businesses whose goal is to further the interests of businesses. Business owners in towns and cities form these local societies to a ...
). Beginning in 2008, an annual " Global Entrepreneurship Week" event aimed at "exposing people to the benefits of entrepreneurship" and getting them to "participate in entrepreneurial-related activities" was launched.


Relationship between small business and entrepreneurship

The term "entrepreneur" is often conflated with the term " small business" or used interchangeably with this term. While most entrepreneurial ventures start out as a small business, not all small businesses are entrepreneurial in the strict sense of the term. Many small businesses are sole proprietor operations consisting solely of the owner—or they have a small number of employees—and many of these small businesses offer an existing product, process or service and they do not aim at growth. In contrast, entrepreneurial ventures offer an innovative product, process or service and the entrepreneur typically aims to scale up the company by adding employees, seeking international sales and so on, a process which is financed by
venture capital Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...
and
angel investment An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an individual who provides capital for a business or businesses start-up, usually in exchange for convertible debt or owners ...
s. In this way, the term "entrepreneur" may be more closely associated with the term " startup". Successful entrepreneurs have the ability to lead a business in a positive direction by proper planning, to adapt to changing environments and understand their own strengths and weaknesses.


Historians' ranking

A 2002 survey of 58 business history professors gave the top spots in American business history to
Henry Ford Henry Ford (July 30, 1863 – April 7, 1947) was an American industrialist, business magnate, founder of the Ford Motor Company, and chief developer of the assembly line technique of mass production. By creating the first automobile that ...
, followed by
Bill Gates William Henry Gates III (born October 28, 1955) is an American business magnate and philanthropist. He is a co-founder of Microsoft, along with his late childhood friend Paul Allen. During his career at Microsoft, Gates held the positions ...
;
John D. Rockefeller John Davison Rockefeller Sr. (July 8, 1839 – May 23, 1937) was an American business magnate and philanthropist. He has been widely considered the wealthiest American of all time and the richest person in modern history. Rockefeller was ...
;
Andrew Carnegie Andrew Carnegie (, ; November 25, 1835August 11, 1919) was a Scottish-American industrialist and philanthropist. Carnegie led the expansion of the American steel industry in the late 19th century and became one of the richest Americans i ...
, and
Thomas Edison Thomas Alva Edison (February 11, 1847October 18, 1931) was an American inventor and businessman. He developed many devices in fields such as electric power generation, mass communication, sound recording, and motion pictures. These inventi ...
. They were followed by
Sam Walton Samuel Moore Walton (March 29, 1918 – April 5, 1992) was an American business magnate best known for founding the retailers Walmart and Sam's Club, which he started in 1962 and 1983 respectively. Wal-Mart Stores Inc. grew to be the world's ...
;
J. P. Morgan John Pierpont Morgan Sr. (April 17, 1837 – March 31, 1913) was an American financier and investment banker who dominated corporate finance on Wall Street throughout the Gilded Age. As the head of the banking firm that ultimately became known ...
; Alfred P. Sloan;
Walt Disney Walter Elias Disney (; December 5, 1901December 15, 1966) was an American animator, film producer and entrepreneur. A pioneer of the American animation industry, he introduced several developments in the production of cartoons. As a film p ...
;
Ray Kroc Raymond Albert Kroc (October 5, 1902 – January 14, 1984) was an American businessman. He purchased the fast food company McDonald's in 1961 and was its CEO from 1967 to 1973. Kroc is credited with the global expansion of McDonald's, turnin ...
; Thomas J. Watson; Alexander Graham Bell; Eli Whitney; James J. Hill;
Jack Welch John Francis Welch Jr. (November 19, 1935 – March 1, 2020) was an American business executive, chemical engineer, and writer. He was Chairman and CEO of General Electric (GE) between 1981 and 2001. When Welch retired from GE, he receive ...
;
Cyrus McCormick Cyrus Hall McCormick (February 15, 1809 – May 13, 1884) was an American inventor and businessman who founded the McCormick Harvesting Machine Company, which later became part of the International Harvester Company in 1902. Originally from the ...
;
David Packard David Packard ( ; September 7, 1912 – March 26, 1996) was an American electrical engineer and co-founder, with Bill Hewlett, of Hewlett-Packard (1939), serving as president (1947–64), CEO (1964–68), and chairman of the board (1964–68 ...
;
Bill Hewlett William Redington Hewlett ( ; May 20, 1913 – January 12, 2001) was an American engineer and the co-founder, with David Packard, of the Hewlett-Packard Company (HP). Early life and education Hewlett was born in Ann Arbor, Michigan, where his ...
;
Cornelius Vanderbilt Cornelius Vanderbilt (May 27, 1794 – January 4, 1877), nicknamed "the Commodore", was an American business magnate who built his wealth in railroads and shipping. After working with his father's business, Vanderbilt worked his way into lead ...
; and
George Westinghouse George Westinghouse Jr. (October 6, 1846 – March 12, 1914) was an American entrepreneur and engineer based in Pennsylvania who created the railway air brake and was a pioneer of the electrical industry, receiving his first patent at the age ...
. A 1977 survey of management scholars reported the top five pioneers in management ideas were:
Frederick Winslow Taylor Frederick Winslow Taylor (March 20, 1856 – March 21, 1915) was an American mechanical engineer. He was widely known for his methods to improve industrial efficiency. He was one of the first management consultants. In 1909, Taylor summed up ...
;
Chester Barnard Chester Irving Barnard (November 7, 1886 – June 7, 1961) was an American business executive, public administrator, and the author of pioneering work in management theory and organizational studies. His landmark 1938 book, ''The Functions of the ...
; Frank Bunker Gilbreth Sr.;
Elton Mayo George Elton Mayo (26 December 1880 – 7 September 1949) was an Australian born psychologist, industrial researcher, and organizational theorist.Cullen, David O'Donald. ''A new way of statecraft: The career of Elton Mayo and the development ...
; and
Lillian Moller Gilbreth Lillian Evelyn Gilbreth (; May 24, 1878 – January 2, 1972) was an American psychologist, industrial engineer, consultant, and educator who was an early pioneer in applying psychology to time-and-motion studies. She was described in the 1940s ...
.


Types of entrepreneurship


Cultural

According to Christopher Rea and Nicolai Volland, cultural entrepreneurship is "practices of individual and collective agency characterized by mobility between cultural professions and modes of cultural production", which refers to creative industry activities and sectors. In their book
The Business of Culture
' (2015), Rea and Volland identify three types of cultural entrepreneur: "cultural personalities", defined as "individuals who buil their own personal brand of creativity as a cultural authority and leverage it to create and sustain various cultural enterprises"; "tycoons", defined as "entrepreneurs who buil substantial clout in the cultural sphere by forging synergies between their industrial, cultural, political, and philanthropic interests"; and "collective enterprises", organizations which may engage in cultural production for profit or not-for-profit purposes. In the 2000s, story-telling has emerged as a field of study in cultural entrepreneurship. Some have argued that entrepreneurs should be considered “skilled cultural operators” that use stories to build legitimacy, and seize market opportunities and new capital. Others have concluded that we need to speak of a ‘narrative turn’ in cultural entrepreneurship research.


Ethnic

The term "ethnic entrepreneurship" refers to
self-employed Self-employment is the state of working for oneself rather than an employer. Tax authorities will generally view a person as self-employed if the person chooses to be recognised as such or if the person is generating income for which a tax return n ...
business owners who belong to racial or ethnic minority groups in the United States and Europe. A long tradition of academic research explores the experiences and strategies of ethnic entrepreneurs as they strive to integrate economically into mainstream U.S. or European society. Classic cases include Jewish merchants and tradespeople in large U.S. cities in the 19th and early 20th centuries as well as Chinese and Japanese small business owners (restaurants, farmers, shop owners) on the West Coast. In the 2010s, ethnic entrepreneurship has been studied in the case of Cuban business owners in Miami, Indian motel owners of the U.S. and Chinese business owners in Chinatowns across the United States. While entrepreneurship offers these groups many opportunities for economic advancement, self-employment and business ownership in the United States remain unevenly distributed along racial/ethnic lines. Despite numerous success stories of Asian entrepreneurs, a recent statistical analysis of U.S. census data shows that whites are more likely than Asians, African-Americans and Latinos to be self-employed in high prestige, lucrative industries.


Religious

Religious entrepreneurship refers to both the use of entrepreneurship to pursue religious ends as well as how religion impacts entrepreneurial pursuits. While religion is a central topic in society, it is largely overlooked in entrepreneurship research. The inclusion of religion may transform entrepreneurship including a focus on opportunities other than profit as well as practices, processes and purpose of entrepreneurship. Gümüsay suggests a three pillars model to explain religious entrepreneurship: The pillars are the entrepreneurial, socio-economic/ethical, and religio-spiritual in the pursuit of value, values, and the metaphysical.


Feminist

A feminist entrepreneur is an individual who applies feminist values and approaches through entrepreneurship, with the goal of improving the quality of life and well-being of girls and women. Many are doing so by creating "for women, by women" enterprises. Feminist entrepreneurs are motivated to enter commercial markets by desire to create wealth and social change, based on the ethics of cooperation, equality and mutual respect. These endeavours can have the effect of both empowerment and emancipation.


Institutional

The American-born British economist
Edith Penrose Edith Elura Tilton Penrose (November 15, 1914 – October 11, 1996) was an American-born British economist whose best known work is ''The Theory of the Growth of the Firm'', which describes the ways which firms grow and how fast they do. Wr ...
has highlighted the collective nature of entrepreneurship. She mentions that in modern organizations, human resources need to be combined to better capture and create business opportunities. The sociologist
Paul DiMaggio Paul Joseph DiMaggio (born January 10, 1951 in Philadelphia, Pennsylvania) is an American educator, and professor of sociology at New York University since 2015. Previously, he was a professor of sociology at Princeton University. Biography A grad ...
(1988:14) has expanded this view to say that "new institutions arise when organized actors with sufficient resources nstitutional entrepreneurssee in them an opportunity to realize interests that they value highly". The notion has been widely applied.


Millennial

The term "millennial entrepreneur" refers to a business owner who is affiliated with millennials (also known as Generation Y), those people born from approximately 1981 to 1996. The offspring of
baby boomers Baby boomers, often shortened to boomers, are the Western demographic cohort following the Silent Generation and preceding Generation X. The generation is often defined as people born from 1946 to 1964, during the mid-20th century baby boom. ...
and early Gen Xers, this
generation A generation refers to all of the people born and living at about the same time, regarded collectively. It can also be described as, "the average period, generally considered to be about 20–⁠30 years, during which children are born and gr ...
was brought up using digital technology and mass media. Millennial business owners are well-equipped with knowledge of new technology and new business models and have a strong grasp of its business applications. There have been many breakthrough businesses that have come from millennial entrepreneurs such as Mark Zuckerberg, who created
Facebook Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin Mosk ...
. Despite the expectation of millennial success, there have been recent studies that have proven this to not be the case. The comparison between millennials who are self-employed and those who are not self-employed shows that the latter is higher. The reason for this is because they have grown up in a different generation and attitude than their elders. Some of the barriers to entry for entrepreneurs are the economy, debt from schooling, and the challenges of regulatory compliance.


Nascent

A nascent
entrepreneur Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...
is someone in the process of establishing a business venture. In this observation, the nascent entrepreneur can be seen as pursuing an
opportunity Opportunity may refer to: Places * Opportunity, Montana, an unincorporated community, United States * Opportunity, Nebraska, an unincorporated community, United States * Opportunity, Washington, a former census-designated place, United States * ...
, i.e. a possibility to introduce new services or products, serve new markets, or develop more efficient production methods in a profitable manner. But before such a venture is actually established, the opportunity is just a venture idea. In other words, the pursued opportunity is perceptual in nature, propped by the nascent entrepreneur's personal beliefs about the feasibility of the venturing outcomes the nascent entrepreneur seeks to achieve. Its prescience and value cannot be confirmed ex ante but only gradually, in the context of the actions that the nascent entrepreneur undertakes towards establishing the venture, Ultimately, these actions can lead to a path that the nascent entrepreneur deems no longer attractive or feasible, or result in the emergence of a (viable) business. In this sense, over time, the nascent venture can move towards being discontinued or towards emerging successfully as an operating entity. The distinction between the novice, serial and portfolio entrepreneurs is an example of behavior-based categorization. Other examples are the (related) studies by, on start-up event sequences. Nascent entrepreneurship that emphasizes the series of activities involved in new venture emergence, rather than the solitary act of exploiting an opportunity. Such research will help separate entrepreneurial action into its basic sub-activities and elucidate the inter-relationships between activities, between an activity (or sequence of activities) and an individual's motivation to form an opportunity belief, and between an activity (or sequence of activities) and the knowledge needed to form an opportunity belief. With this research, scholars will be able to begin constructing a theory of the micro-foundations of entrepreneurial action. Scholars interested in nascent entrepreneurship tend to focus less on the single act of opportunity exploitation and more on the series of actions in new venture emergence, Indeed, nascent entrepreneurs undertake numerous entrepreneurial activities, including actions that make their businesses more concrete to themselves and others. For instance, nascent entrepreneurs often look for and purchase facilities and equipment; seek and obtain financial backing, form
legal entities In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for ...
, organize teams; and dedicate all their time and energy to their business


Project-based

Project entrepreneurs are individuals who are engaged in the repeated assembly or creation of temporary organizations. These are organizations that have limited lifespans which are devoted to producing a singular objective or goal and get disbanded rapidly when the project ends. Industries where project-based enterprises are widespread include:
sound recording Sound recording and reproduction is the electrical, mechanical, electronic, or digital inscription and re-creation of sound waves, such as spoken voice, singing, instrumental music, or sound effects. The two main classes of sound recording ...
, film production, software development, television production,
new media New media describes communication technologies that enable or enhance interaction between users as well as interaction between users and content. In the middle of the 1990s, the phrase "new media" became widely used as part of a sales pitch for ...
and construction. What makes project-entrepreneurs distinctive from a theoretical standpoint is that they have to "rewire" these temporary ventures and modify them to suit the needs of new project opportunities that emerge. A project entrepreneur who used a certain approach and team for one project may have to modify the business model or team for a subsequent project. Project entrepreneurs are exposed repeatedly to problems and tasks typical of the entrepreneurial process. Indeed, project-based entrepreneurs face two critical challenges that invariably characterize the creation of a new venture: locating the right opportunity to launch the project venture and assembling the most appropriate team to exploit that opportunity. Resolving the first challenge requires project-entrepreneurs to access an extensive range of information needed to seize new investment opportunities. Resolving the second challenge requires assembling a collaborative team that has to fit well with the particular challenges of the project and has to function almost immediately to reduce the risk that performance might be adversely affected. Another type of project entrepreneurship involves entrepreneurs working with business students to get analytical work done on their ideas.


Social

Social entrepreneurship is the use of the by start up companies and other
entrepreneur Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...
s to develop, fund and implement solutions to social, cultural, or environmental issues. This concept may be applied to a variety of organizations with different sizes, aims, and beliefs. For-profit entrepreneurs typically measure performance using business metrics like profit,
revenues In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive revenu ...
and increases in stock prices, but social entrepreneurs are either
non-profits A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
or blend for-profit goals with generating a positive "return to society" and therefore must use different metrics. Social entrepreneurship typically attempts to further broad social, cultural, and environmental goals often associated with the
voluntary sector The voluntary sector, independent sector, or civic sector is the realm of social activity undertaken by organizations that are non-governmental nonprofit organizations. This sector is also called the third sector, community sector, and nonprofit ...
in areas such as poverty alleviation, health care and
community development The United Nations defines community development as "a process where community members come together to take collective action and generate solutions to common problems." It is a broad concept, applied to the practices of civic leaders, activists ...
. At times, profit-making
social enterprise A social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being. This may include maximizing social impact alongside profits for co-owners. Social enterprises ca ...
s may be established to support the social or cultural goals of the organization but not as an end in itself. For example, an organization that aims to provide housing and employment to the homeless may operate a restaurant, both to raise money and to provide employment for the homeless people.


Biosphere

Biosphere The biosphere (from Greek βίος ''bíos'' "life" and σφαῖρα ''sphaira'' "sphere"), also known as the ecosphere (from Greek οἶκος ''oîkos'' "environment" and σφαῖρα), is the worldwide sum of all ecosystems. It can also ...
entrepreneurship is "entrepreneurial activity that generates value for the biosphere and
ecosystem services Ecosystem services are the many and varied benefits to humans provided by the natural environment and healthy ecosystems. Such ecosystems include, for example, agroecosystems, forest ecosystem, grassland ecosystems, and aquatic ecosystems. ...
." It is part of a larger trend of business schools seeking to incorporate environmental topics more actively into their curricula.


Entrepreneurial behaviours

The entrepreneur is commonly seen as an innovator—a designer of new ideas and business processes. Management skills and strong team building abilities are often perceived as essential leadership attributes for successful entrepreneurs. Political economist
Robert Reich Robert Bernard Reich (; born June 24, 1946) is an American professor, author, lawyer, and political commentator. He worked in the administrations of Presidents Gerald Ford and Jimmy Carter, and served as Secretary of Labor from 1993 to 1997 in ...
considers leadership, management ability and
team-building Team building is a collective term for various types of activities used to enhance social relations and define roles within teams, often involving collaborative tasks. It is distinct from team training, which is designed by a combine of business ...
to be essential qualities of an entrepreneur.


Uncertainty perception and risk-taking

Theorists
Frank Knight Frank Hyneman Knight (November 7, 1885 – April 15, 1972) was an American economist who spent most of his career at the University of Chicago, where he became one of the founders of the Chicago School. Nobel laureates Milton Friedman, George ...
and
Peter Drucker Peter Ferdinand Drucker (; ; November 19, 1909 – November 11, 2005) was an Austrian-American management consultant, educator, and author, whose writings contributed to the philosophical and practical foundations of the modern business co ...
defined entrepreneurship in terms of risk-taking. The entrepreneur is willing to put his or her career and financial security on the line and take risks in the name of an idea, spending time as well as capital on an uncertain venture. However, entrepreneurs often do not believe that they have taken an enormous amount of risks because they do not perceive the level of uncertainty to be as high as other people do. Knight classified three types of uncertainty: *
Risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environm ...
, which is measurable statistically (such as the probability of drawing a red color ball from a jar containing five red balls and five white balls) * Ambiguity, which is hard to measure statistically (such as the probability of drawing a red ball from a jar containing five red balls but an unknown number of white balls) * True uncertainty or Knightian uncertainty, which is impossible to estimate or predict statistically (such as the probability of drawing a red ball from a jar whose contents, in terms of numbers of coloured balls, are entirely unknown) Entrepreneurship is often associated with true uncertainty, particularly when it involves the creation of a novel good or service, for a market that did not previously exist, rather than when a venture creates an incremental improvement to an existing product or service. A 2014 study at ETH Zürich found that compared with typical managers, entrepreneurs showed higher decision-making efficiency and a stronger activation in regions of frontopolar cortex (FPC) previously associated with explorative choice.


"Coachability" and advice taking

The ability of entrepreneurs to work closely with and take advice from early investors and other partners (i.e. their coachability) has long been considered a critical factor in entrepreneurial success. At the same time, economists have argued that entrepreneurs should not simply act on all advice given to them, even when that advice comes from well-informed sources, because entrepreneurs possess far deeper and richer local knowledge about their own firm than any outsider. Indeed, measures of coachability are not actually predictive of entrepreneurial success (e.g. measured as success in subsequent funding rounds, acquisitions, pivots and firm survival). This research also shows that older and larger founding teams, presumably those with more subject expertise, are less coachable than younger and smaller founding teams.


Strategies

Strategies that entrepreneurs may use include: *
Innovation Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed entit ...
of new products, services or processes * Listen to customer feedback and adapt * Continuous process improvement (CPI) * Exploration of new business models * Finding solutions for problems * Use of technology * Use of
business intelligence Business intelligence (BI) comprises the strategies and technologies used by enterprises for the data analysis and management of business information. Common functions of business intelligence technologies include reporting, online analytical p ...
* Use of economical strategies * Development of future products and services * Optimized talent management * Entrepreneurial marketing strategies for interactive and innovative networking


Designing individual/opportunity nexus

According to Shane and Venkataraman, entrepreneurship comprises both "enterprising individuals" and "entrepreneurial opportunities", so researchers should study the nature of the individuals who identify opportunities when others do not, the opportunities themselves and the nexus between individuals and opportunities. On the other hand, Reynolds et al. argue that individuals are motivated to engage in entrepreneurial endeavours driven mainly by necessity or opportunity, that is individuals pursue entrepreneurship primarily owing to survival needs, or because they identify business opportunities that satisfy their need for achievement. For example, higher
economic inequality There are wide varieties of economic inequality, most notably income inequality measured using the distribution of income (the amount of money people are paid) and wealth inequality measured using the distribution of wealth (the amount of ...
tends to increase necessity-based entrepreneurship rates at the individual level.


Opportunity perception and biases

One study has found that certain genes affecting personality may influence the income of self-employed people. Some people may be able to use "an innate ability" or quasi-statistical sense to gauge
public opinion Public opinion is the collective opinion on a specific topic or voting intention relevant to a society. It is the people's views on matters affecting them. Etymology The term "public opinion" was derived from the French ', which was first use ...
. and market demand for new products or services. Entrepreneurs tend to have the ability to see unmet market needs and underserved markets. While some entrepreneurs assume they can sense and figure out what others are thinking, the
mass media Mass media refers to a diverse array of media technologies that reach a large audience via mass communication. The technologies through which this communication takes place include a variety of outlets. Broadcast media transmit informati ...
plays a crucial role in shaping views and demand. Ramoglou argues that entrepreneurs are not that distinctive and that it is essentially poor conceptualizations of "non-entrepreneurs" that maintain laudatory portraits of "entrepreneurs" as exceptional innovators or leaders Entrepreneurs are often overconfident, exhibit illusion of control, when they are opening/expanding business or new products/services.


Styles

Differences in entrepreneurial organizations often partially reflect their founders' heterogenous identities. Fauchart and Gruber have classified entrepreneurs into three main types: Darwinians, communitarians and missionaries. These types of entrepreneurs diverge in fundamental ways in their self-views, social motivations and patterns of new firm creation.


Communication

Entrepreneurs must practice effective
communication Communication (from la, communicare, meaning "to share" or "to be in relation with") is usually defined as the transmission of information. The term may also refer to the message communicated through such transmissions or the field of inqui ...
both within their firm and with external partners and investors to launch and grow a venture and enable it to survive. An entrepreneur needs a communication system that links the staff of her firm and connects the firm to outside firms and clients. Entrepreneurs should be
charismatic leader Charismatic authority is a concept of leadership developed by the German sociologist Max Weber. It involves a type of organization or a type of leadership in which authority derives from the charisma of the leader. This stands in contrast to two o ...
s, so they can communicate a
vision Vision, Visions, or The Vision may refer to: Perception Optical perception * Visual perception, the sense of sight * Visual system, the physical mechanism of eyesight * Computer vision, a field dealing with how computers can be made to gain und ...
effectively to their team and help to create a strong team. Communicating a vision to followers may be the most important act of the transformational leader. Compelling visions provide employees with a sense of purpose and encourage commitment. According to Baum et al. and Kouzes and Posner, the vision must be communicated through written statements and through in-person communication. Entrepreneurial leaders must speak and listen to articulate their vision to others. Communication is pivotal in the role of entrepreneurship because it enables leaders to convince potential investors, partners and employees about the feasibility of a venture. Entrepreneurs need to communicate effectively to shareholders. Nonverbal elements in speech such as the tone of voice, the look in the sender's eyes, body language, hand gestures and state of emotions are also important communication tools. The Communication Accommodation Theory posits that throughout communication people will attempt to accommodate or adjust their method of speaking to others. Face Negotiation Theory describes how people from different cultures manage conflict negotiation to maintain "
face The face is the front of an animal's head that features the eyes, nose and mouth, and through which animals express many of their emotions. The face is crucial for human identity, and damage such as scarring or developmental deformities may aff ...
". Hugh Rank's "intensify and downplay" communications model can be used by entrepreneurs who are developing a new product or service. Rank argues that entrepreneurs need to be able to intensify the advantages of their new product or service and downplay the disadvantages to persuade others to support their venture.


Links to sea piracy

Research from 2014 found links between entrepreneurship and historical sea
piracy Piracy is an act of robbery or criminal violence by ship or boat-borne attackers upon another ship or a coastal area, typically with the goal of stealing cargo and other valuable goods. Those who conduct acts of piracy are called pirates, v ...
. In this context, the claim is made for a non-moral approach to looking at the history of piracy as a source of inspiration for entrepreneurship education as well as for research in entrepreneurship and business model generation.


Psychological makeup

Ross Levine, an economist at the
University of California, Berkeley The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California) is a public land-grant research university in Berkeley, California. Established in 1868 as the University of California, it is the state's first land-grant u ...
, and Yona Rubinstein, a professor at the
London School of Economics The London School of Economics and Political Science (LSE) is a public university, public research university located in London, England and a constituent college of the federal University of London. Founded in 1895 by Fabian Society members Sidn ...
released a study which suggests entrepreneurs are disproportionately white, male, from wealthy and highly educated backgrounds, and prone to "aggressive, illicit, risk-taking activities" as teenagers and young adults. Entrepreneurs also performed above average on aptitude tests. This masculine image is also found when studying how male entrepreneurs are represented in media. A supporting but invisible family are one of the success factors when being portrayed as a male entrepreneur in media. A study conducted by the Census Bureau and two MIT professors, after compiling a list of 2.7 million company founders who hired at least one employee between 2007 and 2014, found the average age of a successful start-up founder when he or she founded it is 45. They consistently found chances of entrepreneurial success rises with age. Stanford University economist
Edward Lazear Edward Paul Lazear (, ; August 17, 1948November 23, 2020) was an American economist, the Morris Arnold and Nona Jean Cox Senior Fellow at the Hoover Institution at Stanford University and the Davies Family Professor of Economics at Stanford Grad ...
found in a 2005 study that variety in
education Education is a purposeful activity directed at achieving certain aims, such as transmitting knowledge or fostering skills and character traits. These aims may include the development of understanding, rationality, kindness, and honesty ...
and in
work experience Work may refer to: * Work (human activity), intentional activity people perform to support themselves, others, or the community ** Manual labour, physical work done by humans ** House work, housework, or homemaking ** Working animal, an animal tr ...
was the most important trait that distinguished entrepreneurs from non-entrepreneurs A 2013 study by Uschi Backes-Gellner of the
University of Zurich The University of Zürich (UZH, german: Universität Zürich) is a public research university located in the city of Zürich, Switzerland. It is the largest university in Switzerland, with its 28,000 enrolled students. It was founded in 1833 f ...
and Petra Moog of the
University of Siegen The University of Siegen (german: Universität Siegen) is a public research university located in Siegen, North Rhine-Westphalia and is part of the Deutsche Forschungsgemeinschaft, a society of Germany's leading research universities. The Univers ...
in Germany found that a diverse social network was also an important characteristic of students that would go on to become entrepreneurs. Studies show that the psychological propensities for male and female entrepreneurs are more similar than different.
Empirical studies Empirical research is research using empirical evidence. It is also a way of gaining knowledge by means of direct and indirect observation or experience. Empiricism values some research more than other kinds. Empirical evidence (the record of one ...
suggest that female entrepreneurs possess strong negotiating skills and consensus-forming abilities. Åsa Hansson, who looked at empirical evidence from Sweden, found that the probability of becoming self-employed decreases with age for women, but increases with age for men. She also found that marriage increased the probability of a person's becoming an entrepreneur. Jesper Sørensen wrote in 2010 that significant influences on the decision to become an entrepreneur include workplace peers and social composition. Sørensen discovered a correlation between working with former entrepreneurs and how often these individuals become entrepreneurs themselves, compared to those who did not work with entrepreneurs. Social composition can influence entrepreneurialism in peers by demonstrating the possibility for success, stimulating a "He can do it, why can't I?" attitude. As Sørensen stated: "When you meet others who have gone out on their own, it doesn't seem that crazy." Entrepreneurs may also be driven to entrepreneurship by past experiences. If someone has faced multiple work stoppages or has been unemployed in the past, the probability of becoming an entrepreneur increases Per Cattell's personality framework, both personality traits and attitudes are thoroughly investigated by psychologists. However, in case of entrepreneurship research these notions are employed by academics too, but vaguely. Cattell states that personality is a system that is related to the environment and further adds that the system seeks explanation to the complex transactions conducted by both—traits and attitudes. This is because both of them bring about change and growth in a person. Personality is that which informs what an individual will do when faced with a given situation. A person's response is triggered by his/her personality and the situation that is faced. Innovative entrepreneurs may be more likely to experience what psychologist
Mihaly Csikszentmihalyi Mihaly Robert Csikszentmihalyi (, hu, Csíkszentmihályi Mihály Róbert, ; 29 September 1934 – 20 October 2021) was a Hungarian-American psychologist. He recognized and named the psychological concept of "flow", a highly focused mental ...
calls "flow". "Flow" occurs when an individual forgets about the outside world due to being thoroughly engaged in a process or activity. Csikszentmihalyi suggested that breakthrough innovations tend to occur at the hands of individuals in that state. Other research has concluded that a strong internal motivation is a vital ingredient for breakthrough innovation. Flow can be compared to
Maria Montessori Maria Tecla Artemisia Montessori ( , ; August 31, 1870 – May 6, 1952) was an Italian physician and educator best known for the philosophy of education that bears her name, and her writing on scientific pedagogy. At an early age, Montessori e ...
's concept of normalization, a state that includes a child's capacity for joyful and lengthy periods of intense concentration. Csikszentmihalyi acknowledged that Montessori's prepared environment offers children opportunities to achieve flow. Thus quality and type of early education may influence entrepreneurial capability. Research on high-risk settings such as oil platforms, investment banking, medical surgery, aircraft piloting and nuclear-power plants has related distrust to failure avoidance. When non-routine strategies are needed, distrusting persons perform better, while when routine strategies are needed trusting persons perform better. Gudmundsson and Lechner extended this research to entrepreneurial firms. They argued that in entrepreneurial firms the threat of failure is ever-present, resembling non-routine situations in high-risk settings. They found that the firms of distrusting entrepreneurs were more likely to survive than the firms of optimistic or overconfident entrepreneurs. The reasons were that distrusting entrepreneurs would emphasize failure-avoidance through sensible task selection and more analysis. Kets de Vries has pointed out that distrusting entrepreneurs are more alert about their external environment. He concluded that distrusting entrepreneurs are less likely to discount negative events and are more likely to engage control mechanisms. Similarly, Gudmundsson and Lechner found that distrust leads to higher precaution and therefore increases chances of entrepreneurial-firm survival. Researchers Schoon and Duckworth completed a study in 2012 that could potentially help identify who may become an entrepreneur at an early age. They determined that the best measures to identify a young entrepreneur are family and social status, parental role-modelling, entrepreneurial competencies at age 10, academic attainment at age 10, generalized self-efficacy, social skills, entrepreneurial intention and experience of unemployment.


Strategic entrepreneurship

Some scholars have constructed an operational definition of a more specific subcategory called "Strategic Entrepreneurship". Closely tied with principles of strategic management, this form of entrepreneurship is "concerned about growth, creating value for customers and subsequently creating wealth for owners". A 2011 article for the Academy of Management provided a three-step, "Input-Process-Output" model of strategic entrepreneurship. The model's three steps entail the collection of different resources, the process of orchestrating them in the necessary manner and the subsequent creation of competitive advantage, value for customers, wealth and other benefits. Through the proper use of strategic management/
leadership Leadership, both as a research area and as a practical skill, encompasses the ability of an individual, group or organization to "lead", influence or guide other individuals, teams, or entire organizations. The word "leadership" often gets vi ...
techniques and the implementation of risk-bearing entrepreneurial thinking, the strategic entrepreneur is, therefore, able to align resources to create value and wealth.


Leadership

Leadership in entrepreneurship can be defined as "process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task" in "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This refers to not only the act of entrepreneurship as managing or starting a business, but how one manages to do so by these social processes, or leadership skills. (Entrepreneurship in itself can be defined somewhat circularly as "the process by which individuals, teams, or organizations identify and pursue entrepreneurial opportunities without being immediately constrained by the resources they currently control".Hitt, M. A., Ireland, R. D., Hoskisson, R. E.. (2011). ''Strategic Management''. (9th ed.). Mason, Ohio: South-Western Cengage Learning.) An entrepreneur typically has a mindset that seeks out potential opportunities during uncertain times. An entrepreneur must have leadership skills or qualities to see potential opportunities and act upon them. At the core, an entrepreneur is a decision-maker. Such decisions often affect an organization as a whole, which is representative of entrepreneurial leadership within the organization. With the growing global market and increasing technology use throughout all industries, the core of entrepreneurship and the decision-making has become an ongoing process rather than isolated incidents. This becomes
knowledge management Knowledge management (KM) is the collection of methods relating to creating, sharing, using and managing the knowledge and information of an organization. It refers to a multidisciplinary approach to achieve organisational objectives by making ...
, which is "identifying and harnessing intellectual assets" for organizations to "build on past experiences and create new mechanisms for exchanging and creating knowledge". This belief draws upon a leader's past experiences that may prove useful. It is a common mantra for one to learn from their past mistakes, so leaders should take advantage of their failures for their benefit. This is how one may take their experiences as a leader for the use in the core of entrepreneurship decision-making.


Global leadership

The majority of scholarly research done on these topics has taken place in North America. Words like "leadership" and "entrepreneurship" do not always translate well into other cultures and languages. For example, in North America a leader is often thought of as charismatic, but German culture frowns on such charisma due to the charisma of
Nazi Nazism ( ; german: Nazismus), the common name in English for National Socialism (german: Nationalsozialismus, ), is the far-right totalitarian political ideology and practices associated with Adolf Hitler and the Nazi Party (NSDAP) in ...
leader
Adolf Hitler Adolf Hitler (; 20 April 188930 April 1945) was an Austrian-born German politician who was dictator of Nazi Germany, Germany from 1933 until Death of Adolf Hitler, his death in 1945. Adolf Hitler's rise to power, He rose to power as the le ...
(1889-1945). Other cultures, as in some European countries, view the term "leader" negatively, like the French. The participative leadership style that is prevalent in the United States is considered disrespectful in many other parts of the world due to the differences in power distance. Many Asian and Middle Eastern countries do not have "open door" policies for subordinates, who would never informally approach their managers/bosses. For countries like that, an authoritarian approach to management and leadership is more customary. Despite cultural differences, the successes and failures of entrepreneurs can be traced to how leaders adapt to local conditions. Within the increasingly global business environment a successful leader must be able to adapt and have insight into other cultures. To respond to the environment, corporate visions are becoming transnational in nature, to enable the organization to operate in or provide services/goods for other cultures.


Entrepreneurship training and education

Michelacci and Schivardi are a pair of researchers who believe that identifying and comparing the relationships between an entrepreneur's earnings and education level would determine the rate and level of success. Their study focused on two education levels, college degree and post-graduate degree. While Michelacci and Schivardi do not specifically determine characteristics or traits for successful entrepreneurs, they do believe that there is a direct relationship between education and success, noting that having a college knowledge does contribute to advancement in the workforce. Michelacci and Schivardi state there has been a rise in the number of self-employed people with a baccalaureate degree. However, their findings also show that those who are self-employed and possess a graduate degree has remained consistent throughout time at about 33 percent. They briefly mention those famous entrepreneurs like Steve Jobs and Mark Zuckerberg who were college dropouts, but they call these cases all but exceptional as it is a pattern that many entrepreneurs view formal education as costly, mainly because of the time that needs to be spent on it.In the 21st Century, a young Danish entrepreneur, Maniyar, had become famous while perusing his Bachelors of Pharmacy. There are few entrepreneurs that are also college dropouts,
like Mark Zuckerberg In English, the word ''like'' has a very flexible range of uses, ranging from conventional to non-standard. It can be used as a noun, verb, adverb, adjective, preposition, particle, conjunction, hedge, filler, and quotative. Uses Comparisons ' ...
however, Maniyar's ability and volition while studying would allow him to create a functioning business. Michelacci and Schivardi believe that in order for an individual to reach the full success they need to have education beyond high school. Their research shows that the higher the education level the greater the success. The reason is that college gives people additional skills that can be used within their business and to operate on a higher level than someone who only "runs" it.


Resources and financing


Entrepreneurial resources

An entrepreneurial resource is any company-owned
asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can ...
that has
economic value In economics, economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured through units of currency, and the interpretation is therefore "what is the maximum amount of money a speci ...
creating capabilities. Economic value creating both tangible and intangible sources are considered as entrepreneurial resources. Their economic value is generating activities or services through mobilization by entrepreneurs. Entrepreneurial resources can be divided into two fundamental categories: tangible and intangible resources. Tangible resources are material sources such as equipment, building, furniture, land, vehicle, machinery, stock, cash, bond and inventory that has a physical form and can be quantified. On the contrary, intangible resources are nonphysical or more challenging to identify and evaluate, and they possess more value creating capacity such as human resources including skills and experience in a particular field, organizational structure of the company, brand name, reputation, entrepreneurial networks that contribute to promotion and financial support,
know-how Know-how (or knowhow, or procedural knowledge) is a term for practical knowledge on how to accomplish something, as opposed to "know-what" (facts), "know-why" (science), or "know-who" (communication). It is also often referred to as street smar ...
,
intellectual property Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...
including both
copyright A copyright is a type of intellectual property that gives its owner the exclusive right to copy, distribute, adapt, display, and perform a creative work, usually for a limited time. The creative work may be in a literary, artistic, educatio ...
s,
trademark A trademark (also written trade mark or trade-mark) is a type of intellectual property consisting of a recognizable sign, design, or expression that identifies products or services from a particular source and distinguishes them from othe ...
s and
patent A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an enabling disclosure of the invention."A ...
s.


Bootstrapping


Contextual background

At least early on, entrepreneurs often "bootstrap-finance" their start-up rather than seeking external
investor An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...
s from the start. One of the reasons that some entrepreneurs prefer to "bootstrap" is that obtaining equity financing requires the entrepreneur to provide ownership shares to the investors. If the start-up becomes successful later on, these early equity financing deals could provide a windfall for the investors and a huge loss for the entrepreneur. If investors have a significant stake in the company, they may as well be able to exert influence on company strategy,
chief executive officer A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especial ...
(CEO) choice and other important decisions. This is often problematic since the investor and the founder might have different incentives regarding the long-term goal of the company. An investor will generally aim for a profitable exit and therefore promotes a high-valuation sale of the company or IPO to sell their shares. Whereas the entrepreneur might have philanthropic intentions as their main driving force. Soft values like this might not go well with the short-term pressure on yearly and quarterly profits that publicly traded companies often experience from their owners.


Common definition

One consensus definition of bootstrapping sees it as "a collection of methods used to minimize the amount of outside debt and equity financing needed from banks and investors". The majority of businesses require less than $10,000 to launch, which means that personal savings are most often used to start. In addition, bootstrapping entrepreneurs often incur personal credit-card debt, but they also can utilize a wide variety of methods. While bootstrapping involves increased personal financial risk for entrepreneurs, the absence of any other stakeholder gives the entrepreneur more freedom to develop the company.


Related methodologies

Bootstrapping methods include: * Owner financing, including savings, personal loans and credit card debt *
Working capital Working capital (WC) is a financial metric which represents operating liquidity available to a business, organisation, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is consi ...
management that minimizes
accounts receivable Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. These are generally in the form of invoices raised ...
* Joint utilization, such as reducing overhead by coworking or using
independent contractor Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any oth ...
s * Increasing
accounts payable Accounts payable (AP) is money owed by a business to its suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents. An accounts payabl ...
by delaying payment, or leasing rather than buying equipment * Lean manufacturing strategies such as minimizing inventory and
lean startup Lean startup is a methodology for developing businesses and products that aims to shorten product development cycles and rapidly discover if a proposed business model is viable; this is achieved by adopting a combination of business-hypothesis-dri ...
to reduce product development costs * Subsidy finance


Additional financing

Many businesses need more capital than can be provided by the owners themselves. In this case, a range of options is available including a wide variety of private and public equity,
debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
and grants. Private equity options include: * Start-up accelerators * Angel investors *
Venture capital Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...
investors *
Equity crowdfunding Equity crowdfunding is the online offering of private company securities to a group of people for investment and therefore it is a part of the capital markets. Because equity crowdfunding involves investment into a commercial enterprise, it is ...
*
Hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as s ...
s Debt options open to entrepreneurs include: *
Loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...
s from
bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...
s,
financial technology Fintech, a portmanteau of "financial technology", refers to firms using new technology to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, blockchain, cloud computing, and big data are r ...
companies and
economic development In the economics study of the public sector, economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and ...
organizations *
Line of credit A line of credit is a credit facility extended by a bank or other financial institution to a government, business or individual customer that enables the customer to draw on the facility when the customer needs funds. A line of credit takes s ...
also from banks and financial technology companies * Microcredit also known as microloans *
Merchant cash advance __NOTOC__ A merchant cash advance (MCA) was originally structured as a lump sum payment to a business in exchange for an agreed-upon percentage of future credit card and/or debit card sales. The term is now commonly used to describe a variety of s ...
*
Revenue-based financing Revenue-based financing or royalty-based financing (RBF) is a type of financial capital provided to small or growing businesses in which investors inject capital into a business in return for a fixed percentage of ongoing gross revenues, with paymen ...
Grant options open to entrepreneurs include: * Equity-free accelerators * Business plan/business pitch competitions for college entrepreneurs and others * Small Business Innovation Research grants from the U.S. government


Effect of taxes

Entrepreneurs are faced with liquidity constraints and often lack the necessary
credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt) ...
needed to borrow large amounts of money to finance their venture. Because of this, many studies have been done on the effects of taxes on entrepreneurs. The studies fall into two camps: the first camp finds that taxes help and the second argues that taxes hurt entrepreneurship. Cesaire Assah Meh found that corporate taxes create an incentive to become an entrepreneur to avoid double taxation. Donald Bruce and John Deskins found literature suggesting that a higher corporate tax rate may reduce a state's share of entrepreneurs. They also found that states with an inheritance or
estate tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an es ...
tend to have lower entrepreneurship rates when using a tax-based measure. However, another study found that states with a more progressive personal income tax have a higher percentage of sole proprietors in their workforce. Ultimately, many studies find that the effect of taxes on the probability of becoming an entrepreneur is small. Donald Bruce and Mohammed Mohsin found that it would take a 50 percentage point drop in the top tax rate to produce a one percent change in entrepreneurial activity.


Predictors of success

Factors that may predict entrepreneurial success include the following: ; Methods * Establishing strategies for the firm, including growth and survival strategies * Maintaining the human resources (recruiting and retaining talented employees and executives) * Ensuring the availability of required materials (e.g. raw resources used in manufacturing, computer chips, etc.) * Ensuring that the firm has one or more unique
competitive advantage In business, a competitive advantage is an attribute that allows an organization to outperform its competitors. A competitive advantage may include access to natural resources, such as high-grade ores or a low-cost power source, highly skilled ...
s * Ensuring good organizational design, sound
governance Governance is the process of interactions through the laws, norms, power or language of an organized society over a social system ( family, tribe, formal or informal organization, a territory or across territories). It is done by the gove ...
and organizational coordination * Congruency with the culture of the society ; Market * Business-to-business (B2B) or business-to-consumer (B2C) models can be used * High growth market * Target customers or markets that are untapped or missed by others ; Industry * Growing industry * High technology impact on the industry * High capital intensity * Small average incumbent firm size ; Team * Large, gender-diverse and racially diverse team with a range of talents, rather than an individual entrepreneur * Graduate degrees * Management experience prior to start-up * Work experience in the start-up industry * Employed full-time prior to new venture as opposed to unemployed * Prior entrepreneurial experience * Full-time involvement in the new venture * Motivated by a range of goals, not just profit * Number and diversity of team members' social ties and breadth of their
business network A business network is a complex network of companies, working together to accomplish certain objectives. These objectives, which are strategic and operational, are adopted by business networks based on their role in the market. There are two categ ...
s ; Company * Written
business plan A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on ...
* Focus on a unified, connected product line or service line * Competition based on a dimension other than price (e.g. quality or service) * Early, frequent intense and well-targeted marketing * Tight financial controls * Sufficient start-up and growth capital *
Corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...
model, not sole proprietorship ; Status * Wealth can enable an entrepreneur to cover start-up costs and deal with cash flow challenges * Dominant race, ethnicity or gender in a socially stratified culture


See also


References


Bibliography

* * *


Further reading

* * * * Bruder, Jessica (September 2013)
"The Psychological Price of Entrepreneurship."
'' Inc.'' (Winner 2014 Annual Awards Contest of the Deadline Club) * * * * Folsom Jr., Burton W. ''The Myth of the Robber Barons'' (4th ed. 2003) * * * * * * * * * * * * Whaples, Robert. "Economic history and entrepreneurship." in ''The Routledge Handbook of Modern Economic History'' (Routledge, 2013). 84–94. * *


External links

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