ENTREPRENUERSHIP

ENT 211: MODULE 1

COURSE OUTLINE

1. Concept of Entrepreneurship; Entrepreneurship, Intrapreneurship/Corporate

entrepreneurship
2. Theories of Entrepreneurship
3. Schumpetarian and other perspectives, risk taking, necessity and opportunity based
entrepreneurship and creative destruction.
4. Relevance and rationale for entrepreneurship
THE CONCEPT OF ENTREPRENEURSHIP
Entrepreneurship has no universal definition like other disciplines as many authors and scholars
have defined it differently according to their own perspective. The word “entrepreneur” has been
brought into English from the French word “entreprende”, meaning a person who voluntarily
heads a military expedition However, Schumpeter in the 1940s brought the word into common
usage, which indicates an act in which the individual attempt, try, adventure or undertake an act
of some sort
Entrepreneurs identify and act on what they believe is an opportunity. For example, by acting
entrepreneurially through the discovery of new product or services, entering new markets and/ or
adopts innovative new technologies.
Entrepreneurship is the process of creating something new with value by devoting the necessary
time and effort, financial, psychic, and social risks and receiving the resulting rewards of
monetary and personal satisfaction and independence. We take some brief foundational
discussion under the following concepts:
a. Entrepreneur or Entrepreneurial person
b. Opportunity Creation
c. Entrepreneurial Action, and
d. Entrepreneurial spirit or behavior.

Entrepreneurial person
It is seen as identifying an opportunity related to satisfaction of needs and converting it to
something of value (either as a product or service). Starting up a new product or service is very
much an individual decision.
The characteristics of a successful entrepreneur are the ability to take risks, innovativeness, and
knowledge of how the market functions, manufacturing know‐how, marketing skills, business
management skills, and the ability to co‐operate.
Opportunity Creation
The word ‘opportunity’ has become the central organizing concept in the study of
entrepreneurship. It refers to the discovery and exploitation of opportunities or to the creation of
the enterprise. Under this, the risk-taking entrepreneur that occupies a position of uncertainty.
Entrepreneurial Action
Entrepreneurs consciously formulate projects to achieve their goals and deliberate over what
actions to take to attain them. Therefore, the entrepreneur is seen as one with initiative and
imagination who creates his own opportunities. Reference to entrepreneurial initiative underlies
the reasons for correctly anticipating market imperfections or the capacity to innovate in order to
create a ‘'new combination.
Entrepreneurial spirit or behaviour
Entrepreneurial behaviour is central to our understanding of the concept of entrepreneurship..
The entrepreneurial spirit emphasizes exploration, search and innovation. There is also the
business process approach which includes the identification and assessment of opportunities, the
decision to exploit or sell those, efforts to obtain resources and the development of the strategy
and organization of the new business project
DEFINITION OF ENTREPRENEURSHIP
 Entrepreneurship is an attitude, and a way of thinking and learning. It is a state of mind, an
artifact, insightful and innovative mentality rather than administration of business. It is a way of
perceiving and exploring opportunity wherever it may be found.

Entrepreneurship as the dynamic process of creating incremental wealth. The wealth is created
by individuals who assume the major risks in terms of equity, time and/or career commitment or
provide value for some product or service. The product or service may or may not be new or
unique but value must somehow be infused by the entrepreneur by receiving and allocating the
necessary skills and resources

According to Joseph Schumepeter, An entrepreneur in an advanced economy is an individual

who introduces something new in the economy, a method of production not yet tested by
experience in the branch of manufacture concerned, a product with which consumers are not yet
familiar, a new source of raw material or of new market and the like.

According to Cantillon, An entrepreneur is the agent who buys factors of production at certain
prices in order to combine them into a product with a view to selling it at uncertain prices in
future. An entrepreneur is the person who bears risk, unites various factors of production; to
exploit the perceived opportunities in order to evoke demand, create wealth and employment.

Pinson (2010) visualized the entrepreneur as a person who starts a business to follow a vision, to
make money, to be the master of his/her own soul (both financially and spiritually) and is an
"educated" risk taker. Pickle and Abrahamson (1990) sees an entrepreneur as someone who
organizes and manages a business, undertakes and assumes the risks for the sake of profit
making. Murphy (2010) conceives an entrepreneur as a person who is dynamic and continues to
seek opportunities and/or different methods of operation and will do whatever it takes to be
successful in business.

Reiss (2010), views the entrepreneur as the person that recognizes and pursues opportunities
without regard to the resources he/she is currently controlling, with confidence that he/she can
succeed, with the flexibility to change course as necessary, and with the will to rebound from
setbacks. Envick and Langford (2000) define an entrepreneur as someone who owns and
operates his/her own business. Bagby(1998) sees an entrepreneur as a person that utilizes the
opportunity of instability, turbulence and lack to produce something new or modifies an existing
one for profit motive.

CONCEPT OF INTRAPRENEUESRHIP/ CORPORATE ENTREPRENEURSHIP.

Intrapreneurship is a concept that is closely related to entrepreneurship, which is equally an

entrepreneurial process. The importance of recruiting, spotting and using people with
entrepreneurial talent, who are motivated to use their abilities and initiatives and do something
on their own, but who may not want to start their own business. These internal entrepreneurs
have been called intrapreneurs. Intrapreneurship is the term given to the establishment and
fostering of entrepreneurial activity in large organizations which results in incremental
improvements to existing products and services. It is the practice of developing new ventures
within the structure of an existing large organization.

Intrapreneurship is a corporate form of entrepreneurship whereby an organization seeks to

expand by exploring new opportunities through a new combination of its existing resources. So,
intrapreneurship takes place within an already existing organization and starts from where
management stops.

Benefits:

• Increased Innovation

• New Revenue Streams

• Improved Growth

• Enhanced Employee Engagement

Examples:

• 3M's 15% Rule: Employees are allowed to spend 15% of their time on personal projects,
which has led to many successful innovations. Google- which paves way for gmail and google
maps, because employees were allowed to spend time on personal projects

• Intrapreneurship Programs: Companies may establish internal programs to identify and

support entrepreneurial ideas. Apple-they continuously reinvents its products.

• Corporate Venturing: Organizations may invest in or incubate new ventures internally.

Unilever- invests on sustainability focused start -ups to diversify its portfolio, Also, Intel that
invest in start -ups through Intel capital to drive innovations.

THEORIES OF ENTREPRENEURSHIP

1. ECONOMIC THEORY OF ENTREPRENEURSHIP

The economic theory of entrepreneurship considers the relationship between economic

conditions and incentives to arrive at a risk-reward equation that informs a determination on
whether or not to pursue a potential venture. This theory assumes that the entrepreneurs is the
one responsible for pulling resources, labour, materials and other assets together in order to make
their value greater than before, and also introduce changes, innovations, creativity and a new
order.

Features of Economic Theory of Entrepreneurship

 Entrepreneurship and economic growth take place when the economic conditions are
favorable.

 Economic incentives are the main motivations for entrepreneurial activities (Profit)

 Economic incentives include taxation policy, industrial policy, sources of finance and raw
material, infrastructure availability, investment and marketing opportunities, access to
information about market conditions, technology etc.

Economic theories of entrepreneurship tend to understand business ventures in terms of an

innovator purchasing several factors of a product at a bulk rate, combining them for resale at a
higher rate but in the face of unknown market conditions.

The economic theory of entrepreneurship is sub-divided into three namely; Classical theory,
Neo-classical and Austrian Market Process

2. PSYCHOLOGICAL THEORIES

Psychological theory of entrepreneurship identifies traits, motives and personalities as the major
factors that infuse the entrepreneurial spirit in an individual. The theory emphasizes personal
characteristics that define entrepreneurship. Personality traits, need for achievement and locus of
control are found to be associated with entrepreneurial inclination. The psychological theory
which focuses on personality factors, believes that entrepreneurs have unique values and attitude
towards work and life. Psychological attributes differentiate entrepreneurs from non-
entrepreneurs, and successful entrepreneurs from unsuccessful ones. The psychological theories
are;

i. Personality trait

ii. Need for achievement

iii. Locus of control

iv. Psychodynamic model

v. Risk taking propensity.

Personality Trait

According to the personality trait theory (2004), Personality trait is defined as stable qualities
that a person shows in most situations. Personality traits are the enduring inborn qualities or
potentials of the individual that naturally make him/her an entrepreneur. Some of the traits which
entrepreneur exhibits include vision, enthusiastic, optimistic, flexible, open mindedness, and
versatility amongst others.

Need for achievement model

The need for achievement theory was propounded by McClelland (1961). The theory explained
that human beings have a need to succeed, accomplish, excel or achieve. Entrepreneurs are
usually driven by this need to achieve and excel. This theory states that people desire to achieve
something for their inner feeling of accomplishment.

Locus of control

Locus of control was first introduced by Julian Rotter in the 1950s. Rotter (1966) refers to Locus
of Control as an individual‘s perception about the underlying main causes of events in his/her
life. Locus of control orientation is a belief about whether the outcomes of our actions are
contingent on what we do, individuals with an internal locus of control believe that they are able
to control life events (internal control orientation) or on events outside our personal control,
individual with an external locus of control believe that life's events are the result of external
factors, such as chance, luck or fate (external control orientation). Entrepreneur‘s success comes
from his/her own abilities and also support from outside. This theory states that there is a degree
to which one believes that he/she is in control of one‘s destiny. This can either be internal or
external locus of control.

Psychodynamic Model

This model was propounded by Kets de Vries. The model is concerned with how people tend to
be self-employed and become successful because of their ―troubled childhood‖. In troubled
childhood, children tend to be abused, with low self-esteem, and lack of confidence. Therefore,
an individual growing in such an environment does have reserved wishes towards those in
control.

Risk Taking Propensity

This theory contends about one‘s willingness to accept risk. People who are more likely to accept
risk and taking chances are more likely of being self-employed than those who do not take risk.

3. SOCIOLOGICAL THEORIES

This theory examines the social context and networks in which entrepreneurs operate,
emphasizing the role of social capital and social influence.

The sociological theory is the third of the major entrepreneurship theories. Sociological
enterprise focuses on the social context. Reynolds (1991) has identified four social contexts that
relates to entrepreneurial opportunity.

i. The social networks: The social network focuses on building social relationships and bonds
that promote trust and not opportunism.
ii. The life course stage: This involves analyzing the life situations and characteristic of
individuals who has decided to become an entrepreneur. The experiences of people influences
their thought and action which motivates them to do something meaningful with their lives.

iii. The ethnic identification. One‘s sociological background is one of the decisive ―push factors
to become an entrepreneur. Example the Igbos IN Nigeria.

iv. The population ecology. Environmental factors play a vital role in the survival of businesses.
The political system, government legislation, customers, employees and competition are some of
the environmental factors that have an effect on the survival of new venture or the success of the
entrepreneur.

The sociological theory of entrepreneurship embraces social culture as a driving force of

entrepreneurship. The entrepreneur becomes a role player in agreement with the role
expectations of the society, and such role expectations are based on religious beliefs, taboos, and
customs. Sociological models that have received significant empirical support are the inter-
generation inheritance of enterprise culture, social marginality and ethnicity.

Social marginality model

This theory suggests that individuals who are marginalized can be pushed to become
entrepreneurs. Marginal men are referred as individuals who are less included or integrated in
their society. Marginal men are usually not completely part of the society of their adoption as
such; they are free of the restrictions imposed by the value system governing the society. At the
same time, having left their own society, they are no longer constrained by its dominant values.
This situation brings about the development of unconventional patterns of behavior, which
increases their propensity to become entrepreneurs.

Ethnicity

An ethnic origin of a person is said to influence the choice between paid employment and self-
employment as well as performance in self-employment. Evidence of over-representation of
certain ethnic groups in business carriers abounds throughout the world. The ethnic groups often
quoted in the literature as being overrepresented in entrepreneurship include Igbos in Nigeria,
Kikuyus in Kenya and Chagga in Tanzania. Therefore it is observed that their culture must have
influence them to be entrepreneurs.

Inter-Generational Inheritance of Enterprise Culture

This theory asserts that entrepreneurial practice is largely inherited. Consequently, offspring‘s of
entrepreneurial parents are more likely to become entrepreneurs and more successful as
compared to others. An individual who grows up around a family that runs and own a business is
likely to benefit from the skills, accumulated experiences and networks of existing firm. Such an
individual will have better access to advice, credit, established markets and sources of inputs.
4. INNOVATION THEORY

The innovation theory was first advocated by Joseph Schumpeter. For, Schumpeter
entrepreneurship is more than entrepreneurship of simply up setting businesses and running them
successfully The source of Schumpeter’s theory is his classic text’ The Theory of Economic
Development that heralded a new era of economic development through entrepreneurship’.

Schumpeter introduced the concept of innovation as key factor in entrepreneurship in addition to

assuming risks and organising factors of production. Schumpeter defined entrepreneurship as ―a
creative activity. An innovator who brings new products or services into economy is given the
status of an entrepreneur. He regards innovation as a tool of an entrepreneur. The entrepreneur is
also viewed as the ‗engine of growth‘ who sees the opportunity for introducing new products,
new markets, new sources of supply, new forms of industrial organization or for the development
of newly discovered resources. Thus, the sequence of economic development is entrepreneurship
innovations business and economic development. Innovate or perish is ‘Schumpeter’s ideology.
The reward for entrepreneurship is profit and public acclaim.

Features of Innovation

The concept of innovation and its corollary development embraces five functions:

i. The introduction of a new product with which consumers are not yet familiar or introduction of
a new quality of an existing product,

ii. The introduction of new method of production that is not yet tested by experience in the
branch of manufacture concerned, which need by no means be founded upon a discovery
scientifically new and can also exist in a new way of handling a commodity commercially,

iii. The opening of new market that is a market, on to which the particular branch of
manufacturer of the country in question has not previously entered, whether or not this market
has existed before,

iv. Conquest of a new source of supply of raw material and

v. The carrying out of the new organisation of any industry.

TYPES OF ENTREPRENEURS INCLUDE:-

OPPORTUNITY-BASED ENTREPRENEURS
The opportunity-based theory was propounded by Peter Drucker and Howard Stevenson. This is
driven by a desire to capitalize on new ventures, often embrace calculated risks to pursue
innovation and growth, understanding that failure can be a valuable learning experience.
Here's a more detailed breakdown of the relationship between risk-taking and opportunity-based
entrepreneurship: Why Risk-Taking is Crucial for Opportunity-Based Entrepreneurs: Seizing
 New Opportunities, Innovation and Growth, Competitive Advantage, Learning from Failure,
Building a Vision,Adaptability
Characteristics of Opportunity-Based Entrepreneurs:
 Visionary
 Resilient
 Creative
 Self-Motivated
 Decisive
 Risk-Tolerant
 Investing in new technologies
 Entering new markets
 Developing disruptive products or services
 Investing in untested ideas
NECESSITY-BASED ENTREPRENEURSHIP

Also known as survival entrepreneurship is defined as entrepreneurship driven by the need to

survive rather than by the pursuit of opportunity. It is common in developing countries like
Nigeria, where high levels of entrepreneurship are observed due to economic challenges. It is
driven by a lack of alternative employment opportunities or income sources. Here individuals
turn to enterpreneurship out of necessity, often due to unemployment, underemployment,
economic hardship, or lack of social safety nets. The primary goal is to generate income for
survival and basic needs.

Characteristics of Necessity-Based Entrepreneurship:

Limited access to capital, resources, and formal business training. Entrepreneurs may rely on
personal savings, informal loans, or microfinance.

Typically operates on a small scale, often as sole proprietorships or micro-enterprises. The

focus is on immediate income generation rather than long-term expansion.

Commonly found in informal sectors, such as street vending, small-scale retail, personal
services, and home-based businesses.

While not always the primary focus, necessity can drive innovation in resourcefulness and
adaptation to limited resources. Entrepreneurs may find creative ways to utilize available
materials and cater to local needs.

Individuals are often willing to take risks due to their limited alternative options. The potential
reward of generating income outweighs the risk of failure.
It is very common to replicate what someone else is doing in this type of entrepreneurship

Examples of Necessity-Based Entrepreneurship:

Street vendors: Selling food, clothing, or other goods in public spaces.

Home-based businesses: Providing services such as tailoring, hairdressing, or childcare from

home.

Artisans and craftspeople: Creating and selling handmade products.

Small-scale farmers: Cultivating small plots of land for subsistence and local sale.

Repair and maintenance services: Offering repairs for household appliances, bicycles, or other
items.

Challenges Faced by Necessity-Based Entrepreneurs

Limited access to finance

Lack of business skills and training

Regulatory barriers

Competition from larger businesses

Unstable income

Importance of Supporting Necessity-Based Entrepreneurship:

Poverty reduction

Job creation

Economic development

Social inclusion

SCHUMPETARIAN PERSPECTIVE OF CREATIVE DESTRUCTION

In entrepreneurship, "creative destruction," coined by Joseph Schumpeter, describes the

process where innovation and new ideas disrupt existing economic structures, industries, and
jobs, ultimately leading to the creation of new ones. Creative destruction is the idea that
innovation and technological advancements inevitably lead to the downfall of old industries
and ways of doing things, while simultaneously creating new opportunities and economic
structures.

Examples of Creative Destruction:

The rise of the automobile industry led to the decline of the horse-drawn carriage industry.

The invention of the internet disrupted the newspaper industry.

The growth of online shopping impacted brick-and-mortar stores.

The emergence of smartphones led to the decline of landlines and payphones.

RELEVANCE AND RATIONALE FOR ENTREPRENEURSHIP

 Economic Growth and Job Creation

 New Businesses
 Innovation
 Economic Diversification
 Increased Productivity
 Addressing Social Problems
 Improved Standards of Living
 Community Development
 Self-Employment and Independence
 Personal Growth and Development
 Financial Rewards