Business 2 - Lesson 7 Entrepreneurship Page !1 Source: https://en.wikipedia.org/wiki/Entrepreneurship Entrepreneurship is the process of starting a business, typically a startup company offering an innovative product, process or service.[1] The entrepreneur perceives an opportunity and often exhibits biases in taking the decision to exploit the opportunity. The exploitation of entrepreneurial opportunities includes design actions to develop a business plan, acquire the human, financial and other required resources, and to be responsible for its success or failure.[2] Entrepreneurship may operate within an entrepreneurship ecosystem which includes government programs and services that support entrepreneurs, entrepreneurship resources (e.g., business incubators and seed accelerators), entrepreneurship education and training and financing (e.g., loans, venture capital financing, and grants). Etymology and historical usage Entrepreneur is a loanword from French.[9] First used in 1723, today the term entrepreneur implies qualities of leadership, initiative and innovation in new venture design. Economist Robert Reich has called team-building, leadership, and management ability essential qualities for the entrepreneur.[10] [11] Historically the study of entrepreneurship reaches back to the work in the late 17th and early 18th centuries of Richard Cantillon and Adam Smith, which was foundational to classical economics, and contemporarily, entrepreneurship is studied in the discipline of management. Joseph Schumpeter In the 20th century, entrepreneurship was studied by Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. The term "entrepreneurship" was coined around the 1920s, while the loan from French of the word entrepreneur dates to the 1850s. According to Schumpeter, an entrepreneur is willing and able to convert a new idea or invention into a successful innovation.[12] Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior offerings across markets and industries, simultaneously creating new products and new business models. Thus, creative destruction is largely responsible for long-term economic growth. The idea that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory[clarification needed] and as such continues to be debated in academic economics. An alternate description by Israel Kirzner 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. In this case the innovation, the car, was transformational, but did not require the development of dramatic new technology. It did not immediately replace the horse-drawn carriage, but in time, incremental improvements reduced the cost and improved the technology, leading to the modern auto industry. Despite Schumpeter's early 20th-century contributions, traditional microeconomic theory did not formally consider the entrepreneur in its theoretical frameworks (instead 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. Business 2 - Lesson 7 Entrepreneurship Page !2 For Schumpeter, the entrepreneur did not bear risk: the capitalist did. Schumpeter believed that the equilibrium ideal was imperfect Schumpeter (1934) demonstrated that changing environment continuously provides new information about the optimum allocation of resources to enhance profitability some individuals acquire the new information before others, recombine the resources to gain an entrepreneurial profit. Schumpeter was of the opinion that entrepreneurs shift the Production Possibility Curve to a higher level using innovations.[13] Initially, economists made the first attempt to study the entrepreneurship concept in depth[14] Richard Cantillon (1680-1734) considered the entrepreneur to be a risk taker who deliberately allocates resources to exploit opportunities in order to maximize the financial return.[15][16] Cantillon emphasized the willingness of the entrepreneur to assume risk and to deal with uncertainty. Thus, he draws attention to the function of the entrepreneur, and distinguishes clearly between the function of the entrepreneur and the owner who provides the money.[15][17] Alfred Marshall viewed the entrepreneur as a multi-tasking capitalist. He observed that in the equilibrium of a completely competitive market, there was no spot for "entrepreneurs" as an economic activity creator.[18] Definition Entrepreneur is defined as an individual who organizes or operates a business or businesses. Credit for coining the term entrepreneur generally goes to the French economist Jean-Baptiste Say, but in fact the Irish-French economist Richard Cantillon defined it first[20] in his Essai sur la Nature du Commerce en Général, or Essay on theNature of Trade in General, a book William Stanley Jevons considered the "cradle of political economy"[21] Cantillon used the term differently. Biographer Anthony Breer noted that Cantillon saw the entrepreneur as a risk-taker while Say considered the entrepreneur a "planner". 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." The word first appeared in the French dictionary entitled "Dictionnaire Universel de Commerce" compiled by Jacques des Bruslons and published in 1723.[22] 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.[23] The term "entrepreneur" is often conflated with the term "small business." 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 and angel investments. Risk-taking Theorists Frank Knight[35] 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. Knight classified three types of uncertainty: Business 2 - Lesson 7 Entrepreneurship Page !3 Risk, which is measurable statistically (such as the probability of drawing a red color ball from a jar containing 5 red balls and 5 white balls). Ambiguity, which is hard to measure statistically (such as the probability of drawing a red ball from a jar containing 5 red balls but with an unknown number of white balls). True uncertainty or Knightian uncertainty, which is impossible to estimate or predict statistically, such as the probability of drawing a red ball from a jar whose number of red balls is unknown as well as the number of other colored balls. Entrepreneurship is often associated with true uncertainty, particularly when it involves something truly novel, such as a market that did not previously exist. Bootstrapping Entrepreneurs may attempt to "bootstrap" a company rather than seeking external investors. 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".[60] Most commonly, entrepreneurs engaging in bootstrapping incur personal credit-card debt, but they may utilize a wide variety of methods. While bootstrapping involves increased risk for entrepreneurs, the absence of any other stakeholder gives the entrepreneur more freedom to develop the company. Many successful companies - including Dell Computer and Facebook - started by bootstrapping. Types of bootstrapping include:[61] • owner financing • sweat equity • minimization of accounts payable • joint utilization • delaying payment • minimizing inventory • subsidy finance • personal debt External financing Many businesses need more capital than can be provided by the owners themselves, and in this case, a range of options is available including: • Angel investors • Venture capital investors. • Crowdfunding • Hedge funds • Alternative Asset Management Some of these sources provide not only funds, but also financial oversight, accountability for carrying out tasks and meeting milestones, and in some cases business contacts and experience – in many cases in return for an equity stake. Entrepreneurs By Century Source: https://en.wikipedia.org/wiki/List_of_entrepreneurs Business 2 - Lesson 7 Entrepreneurship Page !4 A list of entrepreneurs