CHAPTER ONE
The entrepreneur is a combination of the thinker and the
Entrepreneurs and Entrepreneurship
doer. The entrepreneur sees an opportunity for a new
1.1. Definition
product or service, anew approach anew policy, or a new
1.1.1 What is Entrepreneur?
way of solving a historic problem. But, the entrepreneur
Concerning entrepreneurship there a dozens of
also does something about what is seen. The entrepreneur
definitions. Such definitions include:
seeks to have an impact on the system with his/her idea,
Entrepreneurs are action-oriented, highly motivated
product, or service. Entrepreneurs take the risks necessary
individuals who take risks to achieve goals.
in producing goods and services. In this way they act as the
Entrepreneurs are people who have the ability to see energizers of the business system. Entrepreneurs are
and evaluate business opportunities; the ability to instruments of change.
gather the necessary resources to take advantage of
them; and the ability to initiate appropriate action to 1.1.2 What is Entrepreneurship?
ensure success. Entrepreneurship as defined by Ronstadt is the dynamic
Economists may view entrepreneurs as those who process of creating incremental wealth created by
bring resources together in unusual combinations to individuals who assume the major risks in terms of equity,
generate profits. time and/or career commitments of providing value for
Psychologists tend to view entrepreneurs in some product or service. The product or service itself may
behavioral terms as those achievement-oriented or may not be new or unique but value must somehow be
individuals driven to seek challenges and new infused by the entrepreneur by securing and allocating the
accomplishments. necessary skills and resources.
Corporate managers too often view entrepreneurs as
small businesspersons lacking the potential needed Entrepreneurship is the process of creating and building
for corporate management. something of value from practically nothing. That is,
Drucker states "Entrepreneur is someone who always entrepreneurship is the process of creating or seizing an
searches for change, responds to it, and exploits it as opportunity and pursuing it regardless of the resources
an opportunity.” currently controlled. Entrepreneurship involves the
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definition, creation, and distribution of value and benefits to Entrepreneurs are individuals who are supposed to have the
individuals, groups, organizations, and society. following traits.
Entrepreneurship is very rarely a get-rich-quick proposition; Need for achievement- their social backgrounds may give
rather, it is one of building long–term value and durable them an overriding need to achieve. This can come from
cash flow streams. childhood deprivations, or competitive urges born of self-
confidence.
Fundamentally, entrepreneurship is a human creative act. It Self- Determination- they probably have great faith in their
involves finding personal energy by initiating and building ability to control their personal environment, rejecting too
an enterprise or organization, rather than by just watching, high an influence of chance or fate.
analyzing, or describing one. Entrepreneurship usually Desire for Independence- they wish for autonomy
requires a vision and the passion, commitment, and believing that independence of action is the only sure way
motivation to transmit this vision to other stakeholders, such to get what they need.
as partners, customers, suppliers, employees and financial Innovation- they constantly assess market demands. Seek
backers. It also requires a willingness to take calculated opportunities to be innovative in meeting market demand.
risks-both personal and financial and then doing everything
possible to influence the odds. 1.3. Factors pushing/pulling Starting a Business
Some of the reasons for the difficulties in classifying those
Entrepreneurship involves building a team of people with involved in small business management is the wide variety
complementary skills and talents; of sensing an opportunity of motives for their involvement in small firms. The reason
where others see chaos, contradiction, and confusion; and of for small firm formation can be divided between “pull” and
finding, marshaling, and controlling resources (often owned “push” influences.
by others) to pursue the opportunity. Entrepreneurship Some individuals are attracted towards small business
involves making sure the venture doesn’t run out of money ownership by positive motives such as a specific idea which
when it needs money most. they are convinced will work. “Pull” motives include:
1.2. Entrepreneurial Traits and Characteristics - 1. Desire for Independence
Entrepreneurial Competences This features prominently in several research studies as the
key motivator. Many reports shows that the need to gain
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and keep independence as a distinguishing feature of small The rewards of starting a business can be high, and are well
business owner-managers. publicized by those selling ‘how to’ information to would-
be entrepreneurs. The promise of long term financial
2. Desire to Exploit an Opportunity independence can clearly be a motive in starting a new firm,
The identification of a perceived gap in the market place although it is usually not quoted as frequently as other
through personal observation or experience is also a factors.
common reason for starting a business.
Entrepreneurs may seek to exploit this opportunity through Many people are pushed into founding a new enterprise by a
special knowledge, product development or they may hire variety of factors including:
the appropriate technology and skills.
5. Redundancy (Joblessness)
3. Turning a Hobby or Previous Work Experience into a This has proved a considerable push into entrepreneurship
Business. particularly when accompanied by a generous handshake in
Many new entrepreneurs seek fulfillment by spending more a locality where other employment possibilities are low.
time involved in a cherished hobby, or part of their work
that they particularly enjoy. Although research confirms 6. Unemployment (or threat of)
that founders tend to establish business in activities of Job insecurity and unemployment varies in significance by
which they have direct prior experience, this is often region, and by prevailing economic climate. A study
precipitated by a ‘push’ motive, such as redundancy, rather reported that 25% of business founders in the late 1970s
than part of a considered decision process. were pushed in this way, whilst later research showed a
figure of 50% when unemployment nationally was much
4. Financial Incentive higher.
7. Disagreement With Previous Employer:
Uncomfortable relations at work have also pushed new
entrants into small business. The dividing line between
those ‘pulled’ and those ‘pushed’ is often blurred. Many
people considering an opportunity or having a desire for
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independence still need some form of push to help them to raise capital by both individuals and government to
make their decision. establish big businesses cannot be surpassed.
It is obvious that Ethiopia has planned to be one of the
1.4. Importance of Entrepreneurship middle income countries in the world in the coming fifteen
One of the yardsticks of a country’s economic development years. Towards achieving this plan our government has
and technological advancement is its progress in business. If designed various strategies as ways out to reach there.
we glance around us, we can see how important business is When we directly refer the current five years growth and
in everyday lives. transformation plan which is part of the twenty years
strategic objective of our country, we find entrepreneurial
The trains and lorries carrying goods, the various shops on development as one of the major direction/strategies.
every street in our towns with their display of goods and
Increasing number of entrepreneurs in a given nation
offers of services and the business transactions that are
implies: self-employment is increasing and employment
carried out in the traditional markets and business areas
opportunity is created hence unemployment situation is
demonstrates this validity of business.
decreased as well as government’s income from income
tax is increased; import substitution and/or exportable
Accounting to Rachman (1985:100), though the vast
products might be produced hence the nation’s trade
majority of the jobs they create are low-paying service
balance be positively impacted as well as hard currency
positions like sales clerk, waiter, or waitress; these
need be decreased; better and variety of products are
nevertheless are jobs that help put bread on people’s tables.
supplied to the market hence life would be easy and
Other important way small businesses contribute to
comfortable.
economic growth by fostering innovation.
These mentioned entrepreneurship importance to a growing
Moreover, many small businesses in any society exist
nation like Ethiopia can be secured when the nation has as
because they meet customers need for specialized personal
many entrepreneurs as possible. So as to create as many
services. From all these discussions it can be said that small
entrepreneurs as possible one of the mechanisms is to train
businesses are very important to the national economies.
prospective graduates on entrepreneurial concepts. For a
Their importance in countries like ours where it is difficult
long time it was thought that entrepreneurs were special,
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that they were just born with the ability and desire to go
their own way, on their own. Latter it is discovered that
entrepreneurs learn to do what they do that they also learn,
to a large extent, to be who they are.
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