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Entrepreneurship is the creation or extraction of 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 than simply economic ones. An entrepreneur is an individual who creates a new business, 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 Small businesses are privately owned corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and pu ...
, or as the "capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a
profit Profit may refer to: Business and law * Profit (accounting) Profit, in accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic en ...
." 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 a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interact ...

economics
, the term entrepreneur is used for an entity which has the ability to translate inventions or technologies 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 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 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 than simply ...
, 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 Jean-Baptiste Say (; 5 January 1767 – 15 November 1832) was a liberal French economist and businessman who argued in favor of competition Competition arises whenever two or more parties strive for a common goal A goal is an idea of t ...

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, something different—they change or transmute values. Regardless of the firm size, big or small, they can partake in entrepreneurship opportunities. The opportunity to become an entrepreneur requires four criteria. 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 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 into creating value for others. They are rewarded for this effort monetarily and therefore both the consumer of the value created and the entrepreneur are benefitted. The entrepreneur is a factor in and the study of entrepreneurship reaches back to the work of
Richard Cantillon Richard Cantillon (; 1680s – ) was an Irish-French economist and author of ''Essai Sur La Nature Du Commerce En Général'' (''Essay on the Nature of Trade in General''), a book considered by William Stanley Jevons to be the "cradle of pol ...
and
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right 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 political economist. He was born in Moravia Moravia ( , also , ; cs, Morava ; german: link=no, Mähren ; pl, Morawy ; szl, Morawijo; la, Moravia) is a h ...
in the 1930s and other Austrian economists such as
Carl Menger Carl Menger (; ; 28 February 1840 – 26 February 1921) was an Austrian economist and the founder of the Austrian School of economics. Menger contributed to the development of the theory of marginalism (marginal utility), which rejected the co ...
,
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 liberal ...

Ludwig von Mises
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, and philosopher who is best known for his defence of classical liberalism. Hayek shared the 1974 Nobe ...
. 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 A mental representation (or cognitive representation), in philosophy of mind Philosophy of mind is a branch of philosophy that studies the ontology and nature of the mind and its relation ...

innovation
. 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 hotly 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 An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develo ...

Israel Kirzner
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 Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such as goods and services). Simpl ...

business plan
* Hiring
human resources Human resources is the set of people who make up the workforce of an organization An organization, or organisation (English in the Commonwealth of Nations, Commonwealth English; American and British English spelling differences#-ise, - ...

human resources
* 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 An organization, or organisation (English in the Commonwealth of Nations, Commonwealth English; American and B ...

leadership
* Being responsible for both the venture's success or failure *
Risk aversion In economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societies ...

Risk aversion
Economist
Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian political economist. He was born in Moravia Moravia ( , also , ; cs, Morava ; german: link=no, Mähren ; pl, Morawy ; szl, Morawijo; la, Moravia) is a h ...
(1883–1950) saw the role of the entrepreneur in the economy as "
creative destruction Creative destruction (German: ''schöpferische Zerstörung''), sometimes known as Schumpeter's gale, is a concept in economics Economics () is the social science that studies how people interact with value; in particular, the Production ( ...
" – 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
ere Ere or ERE may refer to: * ''Environmental and Resource Economics ''Environmental and Resource Economics'' (''ERE'') is a peer-reviewed academic journal covering environmental economics published monthly in three volumes per year. It is the offici ...

ere
the norm of a healthy
economy An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products ...

economy
". 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 Philanthropy consists of "private initiatives, for the public good, focusing on quality of life Quality of life (QOL) is defined by the Wor ...
s and
government A government is the system or group of people governing an organized community, generally a state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Departmen ...
. 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 special interest groups, use various forms of advocacy Advocacy is an activity by an individual or group that aims to influence decisions within political, economic, and social institutions. Advocacy include ...
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 incubators and
seed acceleratorStartup accelerators, also known as seed accelerators, are fixed-term, Cohort (educational group), cohort-based programs, that include mentorship and educational components and culminate in a public sales pitch, pitch event or demo day. While traditi ...
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 Venture capital (VC) is a form of private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructu ...
,
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 start-up, usually in exchange for convertible debt or ownership equity ...
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 asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as deposit (finance), bank deposits, bond (finance), bonds, and participations in companies' sh ...

wealth
. 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 Open-mindedness is receptiveness to new ideas. Open-mindedness relates to the way in which people approach the views and kn ...
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 In linguistics, a word of a spoken language can be defined as the smallest sequence of phonemes that can be uttered in isolation with semantic, objective or pragmatics, practical meaning ...
from . 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 "adventurer" 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 Richard Cantillon (; 1680s – ) was an Irish-French economist and author of ''Essai Sur La Nature Du Commerce En Général'' (''Essay on the Nature of Trade in General''), a book considered by William Stanley Jevons to be the "cradle of pol ...
, which was foundational to
classical economics Classical economics or classical political economy is a school of thought A school of thought, or intellectual tradition, is the perspective of a group of people who share common characteristics of opinion or outlook of a philosophy ...
. 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 FRS (; 1 September 183513 August 1882) was an English economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories ...

William Stanley Jevons
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 A guild is an association of s and s who oversee the practice of their craft/trade in a particular area. The earliest types of guild formed as organizations of tradesmen, belonging to: a , a , a , and/or a . They sometimes depended on grants ...
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 ''Meister'' means 'master' in German German(s) may refer to: Common uses * of or related to Germany * Germans, Germanic ethnic group, citizens of Germany or people of German ancestry * For citizens of Germany, see also German nationality la ...

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'' (german: Deutsches Reich, ) was the constitutional name for the German nation state A nation state is a state in which a great majority shares the same culture Culture () is an umbrella term which encompasses the social b ...
. 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 Asante, also known as Ashanti, Ashante, or Asante Twi Twi (), also known as Akan kasa, or Akan-speak, is a dialect of the spoken in southern and central by several million people, mainly of the , the large ...
, 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 political economist. He was born in Moravia Moravia ( , also , ; cs, Morava ; german: link=no, Mähren ; pl, Morawy ; szl, Morawijo; la, Moravia) is a h ...
in the 1930s and by other
Austrian economists The Austrian School is a heterodox In religion, heterodoxy (from Ancient Greek Ancient Greek includes the forms of the Greek language used in ancient Greece and the classical antiquity, ancient world from around 1500 BC to 300 BC. It ...
such as
Carl Menger Carl Menger (; ; 28 February 1840 – 26 February 1921) was an Austrian economist and the founder of the Austrian School of economics. Menger contributed to the development of the theory of marginalism (marginal utility), which rejected the co ...
(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 liberal ...

Ludwig von Mises
(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, and philosopher who is best known for his defence of classical liberalism. Hayek shared the 1974 Nobe ...
(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 An invention is a unique or novelty (patent), novel machine, device, method, composition or process. The invention process is a process within an overall engineering and product development process. It may be an improvement upon a machine or p ...

invention
into a successful
innovation Innovation is the practical implementation of ideas A mental representation (or cognitive representation), in philosophy of mind Philosophy of mind is a branch of philosophy that studies the ontology and nature of the mind and its relation ...

innovation
. Entrepreneurship employs what Schumpeter called the "gale of
creative destruction Creative destruction (German: ''schöpferische Zerstörung''), sometimes known as Schumpeter's gale, is a concept in economics Economics () is the social science that studies how people interact with value; in particular, the Production ( ...
" to replace in whole or in part inferior offerings across markets and industries, simultaneously creating new products and new s, thus creative destruction is largely responsible for long-term
economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economics, economy over time. Statisticians conventionally measure such growth as the percent rate of i ...

economic growth
. The idea that entrepreneurship leads to economic growth is an interpretation of the residual in
endogenous growth theory Endogenous growth theory holds that economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economics, economy over time. Statisticians conv ...
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 An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develo ...

Israel Kirzner
(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 Image:Autobus amedee-bollee.jpg, 240px, ''L'Obéissante'' Horseless carriage is an early name for the car, motor car or automobile. Prior to the invention of the motor car, carriages were usually pulled by animals, typically horses. The term can be ...

horseless carriage
. In this case, the innovation (i.e. the
car A car (or automobile) is a wheeled motor vehicle Electric bicycles parked in Yangzhou's main street, Wenchang Lu. They are a very common way of transport in this city, in some areas almost outnumbering regular bicycles A motor vehicle, also k ...

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 company, companies and organizations involved in the design, Business development, development, manufacturing, marketing, and selling of motor vehicles. It is one of the world's largest industry ( ...
. Despite Schumpeter's early 20th-century contributions, traditional
microeconomic Microeconomics is a branch of mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also ...
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 X-inefficiency is the divergence of a firm’s observed behavior in practice, influenced by a lack of competitive pressure, from efficient behavior assumed or implied by economic theory Economics () is the social science that studies how ...
. For Schumpeter, the entrepreneur did not bear
risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty Uncertainty refers to Epistemology, epistemic situations involving imperfect or unknown information. It applies to predictions of future events, to ...

risk
: 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 Profit may refer to: Business and law * Profit (accounting) Profit, in accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic en ...
. 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 are business oligarch A business oligarch is generally a business magnate A business magnate is someone who has achieved great success and enormous wealth through the ownership of multiple lines of enterprise. The term cha ...
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 entrepreneurThe term political entrepreneur may refer to any of the following: * someone (usually active in the fields of either politics Politics (from , ) is the set of activities that are associated with making decisions in groups, or other forms of ...
. Entrepreneurship within an existing firm or large organization has been referred to as
intrapreneurship Intrapreneurship is the act of behaving like an entrepreneur while working within a large organization. Intrapreneurship is known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the ...
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 In decision theory Decision theory (or the theory of choice not to be confused with choice theory) is the study of an agent's choices. Decision theory can be broken into two branches: normative Normative generally means relating to an evaluat ...
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 entrepreneurThe term political entrepreneur may refer to any of the following: * someone (usually active in the fields of either politics Politics (from , ) is the set of activities that are associated with making decisions in groups, or other forms of ...
ship or knowledge entrepreneurship. According to Paul Reynolds, founder of the Global Entrepreneurship Monitor, "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 Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economics, economy over time. Statisticians conventionally measure such growth as the percent rate of i ...

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 (VC) is a form of private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded. Private equity is a ty ...
or angel funding (
seed money Seed money, sometimes known as seed funding or seed capital, is a form of securities offering A securities offering (or funding round or investment round) is a discrete round of investment To invest is to allocate money Image:National-De ...
) to raise
capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscule'') and smaller lowercase (or more formally ''minusc ...
for building and expanding the business. Many organizations exist to support would-be entrepreneurs, including specialized government agencies, business incubators (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 growth ...

science park
s and
non-governmental organization A non-governmental organization, or simply an NGO, is an organization An organization, or organisation (Commonwealth English The use of the English language English is a of the , originally spoken by the inhabitants of ...
s, which include a range of organizations including not-for-profits, charities, foundations and business advocacy groups (e.g. ). Beginning in 2008, an annual "
Global Entrepreneurship Week Global Entrepreneurship Week (GEW) is an international initiative that introduces entrepreneurship to young people in six continents. GEW emerged in 2008 as a result of Enterprise Week UK and Entrepreneurship Week USA 2007. Since its creation, more ...
" 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 Small businesses are privately owned corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and pu ...
" 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 (VC) is a form of private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded. Private equity is a ty ...
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 Startup company, start-up, usually in exchange for convertible debt or owne ...
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 weakness.


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 A business magnate is someone who has achieved great success and enormous wealth through the ownership of multiple lines of enterprise. The term characteristicall ...

Henry Ford
, followed by
Bill Gates William Henry Gates III (born October 28, 1955) is an American business magnate A business magnate is someone who has achieved great success and enormous wealth through the ownership of multiple lines of enterprise. The term character ...
;
John D. Rockefeller John Davison Rockefeller Sr. (July 8, 1839May 23, 1937) was an American American(s) may refer to: * American, something of, from, or related to the United States of America, commonly known as the United States The United States of Am ...

John D. Rockefeller
;
Andrew Carnegie Andrew Carnegie ( , November 25, 1835August 11, 1919) was a Scottish-American Scottish Americans or Scots Americans (Scottish Gaelic language, Scottish Gaelic: ''Ameireaganaich Albannach''; sco, Scots-American) are Americans whose ancestry ...

Andrew Carnegie
, 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 Electricity generation is the process of generating electric power from s ...

Thomas Edison
. They were followed by
Sam Walton Samuel Moore Walton (March 29, 1918 – April 5, 1992) was an American businessman and entrepreneur best known for founding the retailers Walmart Walmart Inc. (; formerly Wal-Mart Stores, Inc.) is an American multinational retail corpo ...
;
J. P. Morgan John Pierpont Morgan (April 17, 1837 – March 31, 1913) was an American financier An investor is a person that allocates capital with the expectation of a future financial return (profit) or to gain an advantage (interest). Through this ...
; Alfred P. Sloan;
Walt Disney Walter Elias Disney (; December 5, 1901December 15, 1966) was an American entrepreneur, animator, writer, voice actor, and film producer. A pioneer of the American animation industry, he introduced several developments in the production of ...
;
Ray Kroc Raymond Albert Kroc (October 5, 1902 – January 14, 1984) was an American businessman. He joined the California company McDonald's in 1954, after the Richard and Maurice McDonald, McDonald brothers had franchised nine locations out from thei ...
;
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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 Culture () is an umbrella term which encompasses the social behavior Social behavior is behavior Behavior (American English) or behaviour (British English; American and British English spelling differences#-our, -or, see spelling diff ...

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-employedSelf-employment is the state of working for oneself rather than an employer. Generally, tax authorities will view a person as self-employed if the person chooses to be recognised as such, or is generating income such that the person is required to fi ...
business owners who belong to racial or
ethnic minority A minority group, by its original definition, refers to a group of people whose practices, race, religion, ethnicity, or other characteristics are fewer in numbers than the main groups of those classifications. However, in present-day sociology, a ...
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
Chinatown A Chinatown () is an ethnic enclave File:India Square JC jeh.JPG, India Square in Jersey City, New Jersey#Demographics, Jersey City, New Jersey, one of 24 Indian American, Indian ethnic enclaves in the New York City Metropolitan Area. In ...

Chinatown
s 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.


Feminist

A
feminist Feminism is a range of social movements and ideology, ideologies that aim to define and establish the political, economic, personal, and social gender equality, equality of the sexes. Feminism incorporates the position that societies priori ...

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 An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, deve ...

Edith Penrose
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 gradu ...
(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 Millennials, also known as Generation Y or Gen Y, are the demographic Demography (from prefix ''demo-'' from Ancient Greek Ancient Greek includes the forms of the Greek language used in ancient Greece and the classical antiquity, ...
(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 demography, demographic Cohort (statistics), cohort following the Silent Generation and preceding Generation X. The generation is generally defined as people born from 1946 to 1964, during the pos ...
and early , this
generation A generation is "all of the people born and living Living or The Living may refer to: Common meanings *Life, a condition that distinguishes organisms from inorganic objects and dead organisms ** extant taxon, Living species, one that is not ex ...

generation
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 Mark Elliot Zuckerberg (; born ) is an American media magnate, internet entrepreneur, and philanthropist Philanthropy consists of "private initiatives, for the public good, focusing on quality of life Quality of life (QOL) is defined ...
, who created
Facebook Facebook is an American online social media and social networking service owned by Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, an ...

Facebook
. 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 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 than simply ...

entrepreneur
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 * 393 ...
, 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 Entrepreneurship is the creation or extraction of 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 than simply e ...
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 Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its b ...
, 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, film production, software development, television production, new media 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 Startup company, start up companies and other
entrepreneur Entrepreneurship is the creation or extraction of 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 than simply ...

entrepreneur
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 Profit may refer to: Business and law * Profit (accounting) Profit, in accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic en ...
, revenues and increases in stock prices, but social entrepreneurs are either non-profit organization, non-profits 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 in areas such as poverty alleviation, health care and community development. At times, profit-making social enterprises 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 homelessness, homeless may operate a restaurant, both to raise money and to provide employment for the homeless people.


Biosphere

Biosphere entrepreneurship is "entrepreneurial activity that generates value for the biosphere and ecosystem services." It is part of a larger trend of business schools seeking to incorporate environmental topics more actively into their curricula.


Entrepreneurial behaviors

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 considers leadership, management ability and team-building to be essential qualities of an entrepreneur.


Uncertainty perception and risk-taking

Theorists Frank Knight and Peter Drucker 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, 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) * Uncertainty, 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 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 * Use of economical strategics * 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 endeavors 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 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 Spiral of silence#Quasi-statistical sense, quasi-statistical sense to gauge public opinion. 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 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: Charles Darwin, Darwinians, Communitarianism, communitarians and Missionary, 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 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 leaders, so they can communicate a vision statement, vision effectively to their team and help to team building, 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 (sociological concept), face". 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. 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, and Yona Rubinstein, a professor at the London School of Economics 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. 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 startup founder when he or she founded it is 45. They consistently found chances of entrepreneurial success rises with age. Stanford University economist Edward Lazear found in a 2005 study that variety in education and in work experience was the most important trait that distinguished entrepreneurs from non-entrepreneurs A 2013 study by Uschi Backes-Gellner of the University of Zurich and Petra Moog of the University of Siegen 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 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 calls flow (psychology), "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'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-modeling, 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/Strategic leadership, leadership 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, 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 Party, Nazi leader Adolf Hitler (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 Mark Elliot Zuckerberg (; born ) is an American media magnate, internet entrepreneur, and philanthropist Philanthropy consists of "private initiatives, for the public good, focusing on quality of life Quality of life (QOL) is defined ...
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 Opportunity cost, time that needs to be spent on it.21 Century one young entrepreneur name Danish Maniyar he becomes famous while pushing His Bachelor of pharmacy he becomes famous young Indian Entrepreneur and few are college drop like
Mark Zuckerberg Mark Elliot Zuckerberg (; born ) is an American media magnate, internet entrepreneur, and philanthropist Philanthropy consists of "private initiatives, for the public good, focusing on quality of life Quality of life (QOL) is defined ...
but Danish Maniyar said while studying also we can become entrepreneur just have innovative ideas and thinking. 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 that has economic value 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, intellectual property including both copyrights, trademarks and patents.


Bootstrapping


Contextual background

At least early on, entrepreneurs often "bootstrap-finance" their start-up rather than seeking external investors 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 (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 (corporate), 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 management that minimizes accounts receivable * Joint utilization, such as reducing Overhead (business), overhead by coworking or using independent contractors * Increasing accounts payable by delaying payment, or leasing rather than buying equipment * Lean manufacturing strategies such as minimizing inventory and lean startup to reduce product development costs * Government subsidy, 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 equity, private and public equity, debt and Grant (money), grants. Private equity options include: * Startup accelerators * Angel investors * Venture capital investors * Equity crowdfunding * Hedge funds Debt options open to entrepreneurs include: * Loans from banks, financial technology companies and economic development organizations * Line of credit also from banks and financial technology companies * Microcredit also known as microloans * Merchant cash advance * Revenue-based financing 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 (finance), credit 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 tend to have lower entrepreneurship rates when using a tax-based measure. However, another study found that states with a more Progressive taxation, 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 advantages * Ensuring good organizational design, sound governance 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 networks ; Company * Written
business plan A business plan is a formal written document containing the goals of a business Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such as goods and services). Simpl ...

business plan
* 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 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. (magazine), 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

* * * {{Authority control Entrepreneurship, Business occupations Business models Business terms Management occupations Small business