Understanding What Entrepreneurship Entails - Essay Example

Understanding What Entrepreneurship Entails Name Institution Course Date Understanding What Entrepreneurship Entails Introduction Entrepreneurship has become a hot topic in the recent times. In the past, people used to attend colleges and universities with the hope of getting employment in large organizations and public sector. However, with the declining job opportunities available in large organizations and public sectors, the focus has shifted sharply towards entrepreneurship (Steyaert and Hjorth 2008, p. 34). Currently, governments in all parts of the world are encouraging young people to embrace the spirit of entrepreneurship. In most countries, entrepreneurship is increasingly being introduced as a mandatory subject of study in schools as a way of preparing college and university students to become great entrepreneurs and job creators once they leave schools rather than becoming job seekers (Erkkilä 2000, p. 4). The Australian government, for example, has embarked on the promotion of entrepreneurship campaigns and education to help create great entrepreneurs of the future. In the United States, many Americans currently prefer being entrepreneurs rather than seeking employment. The Intelligent Office (2012) study found that about 65% of American workers prefer being entrepreneurs or independent employees instead of work in an office setup. However, even as entrepreneurship is being encouraged among young people, the concept of entrepreneurship is not still well understood. The aim of this paper is to explain why the concept of entrepreneurship is still not well understood using theory. The Concept of Entrepreneurship Entrepreneurship is a concept that has been used in the business field for many years. However, the terms remain difficult to precisely define (Fayolle 2014, p. 2). For instance, whereas the dictionary defines the entrepreneurship in terms of operating and organizing a business, the concept is defined in original French in terms of adventure and risk taking (Kuratko 2016, p. 3). According the Oxford Dictionary, entrepreneurship refers to concept that involves coming up with an innovative idea, risk taking and managing a new business venture. Stevenson of the Harvard Business School, however, defines the term entrepreneurship as the pursuit of opportunity beyond the control of resources. Fayolle (2014, p. 2) defines an entrepreneur as an individual who begins and/or operate a business and assumes all the financial risks, depends on creativity and personal motivation to achieve the business objectives. Gottlieb of Hustle Branding states that an entrepreneur is a person who has the capacity to take any idea, be it a service or a product, posses the skills and the will, and do all it takes by assuming all the risks involved to make the concept a reality by making the concept viable (Eisenmann, 2013). As such, it becomes clear that the concept of entrepreneurship has no single agreeable definition, which the concept having many issues that makes it difficult to understand. Contemporary Entrepreneurship Issues As They Relate To the Problem of Defining Entrepreneurship The term entrepreneurship is complex and difficult to understand. The difficulty as revealed in the above definitions is made by the fact that there are many issues that are involved in the definition of the concept of entrepreneurship. The first contemporary issue that relates to the definition of entrepreneurship pertains to idea creation/innovation. Entrepreneurship has associated with a person coming up with a new idea and turning the concept into a viable product or service. According to Anastakis (‎2007, p. 2), a person cannot be considered an entrepreneur if he/she cannot come up with an idea and turn the idea into a realistic and successful business. This implies that, for a person to be considered a great entrepreneur, then the person must be creative and be able to conceive and idea and turn the idea into a viable and successful business. The late Steve Jobs of Apple has been cited as a good example of an entrepreneur with great ideas. Steve Jobs managed to come up with an innovative idea with his colleagues which they developed to become a great product that resulted in the birth of Apple, which has become one of the most successful technology companies in the world (James 2013, p. 13). The second issue pertains to the fact that an entrepreneur is defined in terms of a person who starts or operates a business. In this respect, most people are confused as to whether entrepreneurship has to do only with starting a business or operating a business that has been started successfully. In most cases, people take entrepreneurship as something to do with coming up with an original idea and starting a business (Kuratko 2016, p. 42). However, some entrepreneurship gurus have argued that entrepreneurship has nothing to do with only starting a business; rather an entrepreneur can also be someone who is able to run a business successfully. For instance, whereas some may not consider Lee Iacocca, the former CEO of Chrysler as an entrepreneur on the basis that he was not the founder of the American automaker, some scholars have considered him an entrepreneur on the grounds that Iacocca was able to turn around Chrysler between 1979 at a time the company was at the verge of collapse. Using his management skills, Iacocca pleaded with the Congress that provided Chrysler with a loan amounting to $1.5 billion (Anastakis ‎2007, p. 3). Iacocca used the funds to restructure the management of the company, negotiated concessions from suppliers, unions and creditors downsized the firm and introduced minivan and K-car (Anastakis ‎2007, p. 9). These efforts managed to turn around the automaker from a loss making company to one of the most profitable automakers and were able to pay back all the loans in just a matter of three years. Because of this, Iacocca is considered by some an entrepreneur despite not being the founder of Chrysler. As such, there is still confusion in the definition of the term entrepreneurship as there is no clear distinction as to whether the term should be used for people who start a new business on their or people who run companies successfully or both. The other contemporary issue in the definition of entrepreneurship has to do with whether entrepreneurship is about any small business or venture capital-backed startups. In this regards, there are many instances where the term entrepreneurship has been used to refer to starting and operating a small business. For instance, Mariotti and Glackin (2013) have defined entrepreneurship as the process of starting and operating a small business. In this respect, the term entrepreneurship has been defined in terms of the size to imply that the business must be started small for it to constitute entrepreneurship. However, the confusion of the term entrepreneurship sets in where the same term is defined in terms of venture capital-backed startups. Venture capital backed startups are small businesses that are financed by venture capital (Anastakis, D ‎2007, p. 4). In most cases, the businesses are financed at their early stages because they are deemed to be promising and show a huge potential for growth and success if supported. Therefore, there is confusion in the definition of the term entrepreneurship as most people are not sure whether the term should be used to imply starting a small business or in terms of a venture capital backed startups. The other contemporary issue in the definition of entrepreneurship has to do with risk taking. In a number of instances, the term entrepreneurship has been used to show that an entrepreneur must be someone who does all that it takes by taking all the risks involved in starting and running a business. According to Volkmann, Tokarski, and Grünhagen (2010, p. 24), for a person to become a successful entrepreneur, the person must be a risk taker. However, defining the term entrepreneurship in terms of risk taking is creating confusion as this implies that people who are risk averse cannot become entrepreneurs. This is notwithstanding the fact that there are many successful entrepreneurs in the world who are risk averse and would not be willing to take up certain risks even if the risk can result in positive results in the event of its success. Moreover, the term entrepreneurship has remained unclear because there are some people who define it in terms of opportunity. For instance, Professor Howard Stevenson of Harvard Business School defined entrepreneurship in terms of pursuit of opportunity. According to the professor, an entrepreneur is that person who looks for every little opportunity and turns the opportunity into a successful business venture (Eisenmann, 2013). Stevenson notes that entrepreneurs are people who are able to see an opportunity where ordinary business people and managers cannot. However, there is an issue with this definition as it raises the question as to whether all successful entrepreneurs must be opportunity seekers. Analysis Of Contemporary Issues In Terms Of Entrepreneurship Theories And Concepts As They Help Explain A Chosen Definition(S) Although the concept of entrepreneurship has gained a lot of interest in the last few years, entrepreneurship as a concept is an old term. Because of this, there are many theories that have been devised that attempts to explain who an entrepreneur is and what differentiate them from managers and employees. The theories include Joseph Schumpeter’s Innovation Theory, Israel Kirtzner’s Theory of Entrepreneurship, Peter Drucker’s Theory of Entrepreneurship, and Richard Cantillon’s risk economic theory of entrepreneurship. As indicated previous, the first major contemporary issue with the definition of the term entrepreneurship has to do with whether innovation is a necessity for a person to be considered an entrepreneur. In most cases, the term entrepreneur has been defined in terms of the ability of an individual to come up with a new and innovative idea, and turn the idea into a viable and profitable venture. Although defining entrepreneurship in terms of innovation has been controversial, the definition has been supported by Innovation Theory. Innovation theory of entrepreneurship was proposed in 1949 by Joseph Schumpeter where Schumpeter stated that an entrepreneur is a person having three fundamental features namely innovation, creativity and foresight (Fayolle 2014, p. 8). According to the theory, entrepreneurship occurs when an entrepreneur develops a new product, comes up with a new way of making a product, finds a new market for a product, discovers a new raw material source and develops new ways of doing things in a firm. Schumpeter innovation theory of entrepreneurship though has been criticized by others on the grounds that it fails to consider the risk-taking feature of an entrepreneur and skills, Fayolle (2014, p. 12) argues that the world’s most successful entrepreneurs support the definition and theory. The late Steve Jobs has been cited as one of the greatest entrepreneurs that the world has ever produced. Jobs’ success as an entrepreneur was driven by the fact that he believed in innovation. At just 20 years, Jobs and his colleague Steve Wozniak Apple Inc. a company that has been one of the most successful in the technology industry to date. Jobs believed that, to take Apple to greater heights, the company had to be innovative (James 2013, p. 19). As such, Jobs introduced innovative ideas that catapulted the company to growth and success. Schumpeter’s innovation theory was partly supported by the management guru Peter Drucker, who in his theory of entrepreneurship argued that innovation, resources and entrepreneurial traits hold keys to entrepreneurship (Drucker 2014, p. 11). In this respect, Drucker (2014, p. 11) believed that, for a person to excel as an entrepreneur, he/she had to be innovative by developing new values. However, Drucker took it further by suggesting that resources and entrepreneurial behavior are also a necessity for a person to become a great entrepreneur. The other issue in the definition of the concept of entrepreneurship has to do with risk taking. As stated earlier, there are many instances where the concept has been defined in terms of risk taking. For instance, an entrepreneur has been defined as someone who assumes all the financial risks involved in starting and operating a business venture. This definition through remains controversial has been supported by a number of entrepreneurship theories. Richard Cantillon’s economic entrepreneurship theory is one such theory that defines the concept in terms of risk taking contending that an entrepreneur is that because businesses involved risks, a person must be a risk taker. Entrepreneurship has also been explained by risk taking propensity theory of entrepreneurship that maintains that entrepreneurship has to do with the willingness to take risk. According to risk taking propensity theory of entrepreneurship, persons who are more willing to take risk and chances have a higher chance of becoming self-employed than those who are not (Cuervo, Ribeiro and Roig 2007, p. 71). Although the risk taking propensity theory of entrepreneurship has been criticized by a section of entrepreneurship theorists who say that the theory does not provide a good explanation of what constitute entrepreneurship on the grounds that most entrepreneurs take profit but pass risk elsewhere and that those who take risks only accept calculated risks, but not gamble and that successful risk takers are only those who are willing to take moderate risks, the risk taking propensity theory appears to provide a good explanation of the concept of entrepreneurship. For instance, Richard Branson of the Virgin Group is one of the most successful British entrepreneurs. His success as an entrepreneur is largely attributed to the fact that he took risks in many areas with even some of his businesses failing, but this did not get discouraged (Branson 2010, p. 16). Today, Branson runs one of Britain’s largest and successful airline company Virgin Atlantic and many other business segments that makes up the Virgin Group. There is no doubt that, if Branson was not willing to accept risk, he would not have succeeded considering the risky nature of the industries in which his businesses operate (Branson 2010, p. 16). Additionally, some scholars have defined entrepreneurs as opportunity seekers, though this definition remains controversial. For instance, Professor Howard Stevenson of Harvard Business School defined entrepreneurship in terms of pursuit of opportunity (Eisenmann, 2013). Despite the criticism of this form of definition, the professor and many other scholars that have defined the concept of entrepreneurship in terms of opportunity seekers have been supported by Leibenstein’s theory of entrepreneurship and Israel Kirtzner’s theory of entrepreneurship and Peter Drucker’s opportunity-based theory of entrepreneurship. Leibenstein’s theory of entrepreneurship sees entrepreneurs as gap-fillers. According to this theory, an entrepreneur has three main characteristics that include recognizing the market trends, come up with a new product or process that is in demand and identify profitable activities (Casson, 2003, p. 215). This implies that an entrepreneur is that person who has special skills to identify gaps/opportunities in a market and make up for the deficiencies and failures. Israel Kirtzner’s (1978, p. 5) theory of entrepreneurship also supports defining entrepreneurship in terms of opportunity. According to Kirtzner, an entrepreneur is that person who is capable of correcting ignorance and errors of customers. Kirtzner continue to state that an entrepreneur is an individual who looks for opportunity to earn money. Drucker (2012, p. 23) also supported the definition of entrepreneurship in terms of opportunity stating that an entrepreneur is that individual that succeeds at identifying and exploiting opportunities created by social, cultural and technological changes. This implies that an entrepreneur is one who sees opportunity, where others only see death or risks. Conclusion Entrepreneurship has indeed become the driver of social and economic change. Today, as large firms and public sectors experience decline, young people are increasingly being encouraged to become entrepreneurs so that they become job creators rather than job seekers. However, as illustrated, even as the concept of entrepreneurship becomes popular, there is still no clear and precise definition of the terms as there are many issues that arise from the definition of this concept that makes it confusing for many people. The difficulty in defining the concept of entrepreneurship arises especially from the fact that both the literature and the example provided for who entrepreneurs are make definition very difficult. For instance, entrepreneurs are synonymous with features, such as “risk bearing,” “starting a business” and “innovation.” All these terms emphasizes on certain aspects of entrepreneurship. Nevertheless, if a person has to be the founder/starter of a business to be an entrepreneur, then this will mean that people, such as Lee Iacocca, of Chrysler, Rey Kroc of McDonald's and Thomas Watson of IBM all would not qualify as entrepreneurs, yet many people would consider these individuals as some of the greatest entrepreneurs the world has ever had. Besides, as much as risk taking is a critical feature of an entrepreneurial behavior, there are many cases where entrepreneurs have succeeded by avoiding risks and trying to transfer risk to others. Additionally, although creativity is cited as a necessity for entrepreneurship, there are many entrepreneurs that have succeeded by copying others. All these confusions in literature and examples make the concept of entrepreneurship undoubtedly difficult, if not impossible. References Anastakis, D ‎2007, “The Last Automotive Entrepreneur? Lee Iacocca Saves Chrysler, 1978-1986,” Business and Economic History, 5, 1-15. Branson, R 2010, Business stripped bare: adventures of a global entrepreneur. Virgin Books, London. Casson, M 2003, The entrepreneur: An economic theory. Edward Elgar Publishing, London. Cuervo, A., Ribeiro, D., & Roig, S 2007, Entrepreneurship: Concepts, theory and perspective. Springer Science & Business Media, New York. Drucker, P 2012, Innovation and entrepreneurship. Routledge, Mason. Drucker, P 2014, Innovation and entrepreneurship. Routledge, Mason. Eisenmann, T. R 2013, Entrepreneurship: A working definition. Harvard Business Review, viewed 11 August 2016 https://hbr.org/2013/01/what-is-entrepreneurship Erkkilä, K 2000, Entrepreneurial education: mapping the debates in the United States, the United Kingdom and Finland. Taylor & Francis, Thousands Oak. Fayolle, A 2014, Handbook of research on entrepreneurship: what we know and what we need to know. Edward Elgar Publishing, Boston. Intelligence Office 2012, 'CEO' now a less desirable title than 'entrepreneur', viewed 11 August 2016 https://www.intelligentoffice.com/company/news/ James, R2013, Steve Jobs. The innovative entrepreneur. GRIN Verlag, Berlin. Kirzner, I. M. 1978, Competition and entrepreneurship. University of Chicago Press, Chicago. Kuratko, D. F 2016, Entrepreneurship: Theory, process, and practice. Cengage Learning, Mason. Mariotti, S., & Glackin, C 2013, Entrepreneurship: Starting and operating a small business. Pearson/Prentice Hall, London. Steyaert, C., & Hjorth, D 2008, Entrepreneurship as social change: a third new movements in entrepreneurship book. Edward Elgar Publishing, Sidney. Volkmann, C. K., Tokarski, K. O., & Grünhagen, M 2010, Entrepreneurship in a European perspective: Concepts for the creation and growth of new ventures. Cambridge: Springer Science & Business Media. Top of Form Bottom of Form Read More