ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT

An entrepreneur in a developing economy is one who starts an industry, undertakes risk,

bears uncertainties and also performs the managerial functions of decision-making and
coordination.

In actual practice the term “entrepreneur” is attributed to all small industrialists, small
businessmen, and traders. All people who are gainfully engaged in work of manufacturing,
distribution or service and other sectors are called entrepreneurs.

Entrepreneur – Meaning and Definition

An entrepreneur is one who innovates, raises money, assembles inputs, chooses managers
and sets the organisation going with his ability to identify them.

An entrepreneur performs one or more of the following:

(i) Perceives opportunities for profitable investments,

(ii) Explores the prospects of starting a manufacturing enterprise,
(iii) Obtains necessary industrial licenses,
(iv) Arranges initial capital,
(v) Provides personal guarantees to the financial institution,
(vi) Promises to meet the shortfalls in the capital, and
(vii) Supplies technical know-how.

These changes are necessary in the organisation to stress on productivity, quality, speed,
innovation, customer orientation and empowerment. For this purpose an entrepreneur is ex-
pected to play a pivotal role in developing among the employees requisite knowledge, skills
and suitable attitudes, and improve their performance.

Entrepreneur is an organizer and speculator of a business enterprise. Entrepreneur lifts

economic resources out of an area of lower to an area of higher productivity and greater yield.

Entrepreneur is often associated with a person who starts his own new small business.
Entrepreneur – Concept

To trace the genesis of the word entrepreneur it would be prudent to look at word
‘entrepredre’ in French which literally means “between-taker” or “go- between.” The
theoretical growth of the concept of entrepreneurship has taken place side by side with
growth of term itself.

Entrepreneur refers to individuals who were ‘undertakers’, meaning those who “undertook”
the risk of new enterprise. In several literature reviews, it has been observed that as early as
in the sixteenth century the Frenchmen who use to organize and lead military expeditions
were referred to as entrepreneurs.

In the early 18th century French economist Richard Cantillon used the term entrepreneur to
business. Entrepreneur was a dealer who purchases the means of production for combining
them into marketable products. Since then the word entrepreneur refers to one who takes
the risk of starting a new organization or introducing a new idea, product or service.

Entrepreneur is the most important factor in the process of economic development. He

occupies the central place in the growth process because he initiates development in a society
and carries it forward. As a change agent, the entrepreneur is the first and foremost a catalyst
for change.

The function that is specific to entrepreneur is the ability to take the factors of production—
land, labour and capital and use them to produce new goods or services. The entrepreneur
perceives opportunities. He works as an originator of a new business venture and also tries
to improve an organisation unit by initiating productive changes.

The word entrepreneur is derived from the French word ‘enterprendre’ and its literal meaning
is “to undertake.” It was applied to leaders of military expeditions in the early 16th century.
However, around 1790 A.D., it was used in the context of other types of adventures like
architects and contractors of public works.

The Oxford English Dictionary in 1887 states that “entrepreneur simply is the director or
manager of a public musical institution; one who puts up entertainments, especially musical
performance.” A further revision has appeared in it in 1933 and the word entrepreneur had
a place in business and would mean “one who undertakes an enterprise especially a
contractor acting as intermediary between capital and labour.”
In this way, undertaking of an enterprise is regarded as entrepreneurship and one who
undertakes it—one who coordinates capital and labour for the purpose of production is an
entrepreneur. Actually, this emerging class is generally treated as the entrepreneurial class.

Entrepreneur – Nature
The entrepreneur is expected to identify the environmental change as an opportunity and
uses the factors of production to produce new goods and services.

He is motivated to:

(i) The desire to find a private commercial kingdom,

(ii) The will to conquer and prove his superiority and,
(iii) The joy of creating, getting things done or simply of exercising one’s energy and ingenuity.

In this process, entrepreneur is expected to possess certain attitudes and values in order to
perform the expected entrepreneurial behaviour. The expectations regarding
entrepreneurial values and attributes were termed as entrepreneurial orientation.
Entrepreneurial orientation is prerequisite condition for an entrepreneur.

Entrepreneurial orientation consists of,

(i) risk bearing propensity,
(ii) change process,
(iii) ambition,
(iv) long-term profit perspective,
(v) positive attitudes towards management and workers.

The term ‘entrepreneur’ may be used in connection with those who incubate new
ideas, start enterprises based on those ideas and provide added value to society based
on their independent initiative.

Thus, there are typical characteristics of a person who takes up entrepreneurial career in
preference to other opportunities. He prefers to take a risk and start his enterprise rather
than take up a job. In terms of motivation, he has a need for achievement, need for power
and need for affiliation.

Moreover, it is the profit that induces the prospective entrepreneur to get into the business
and start new activities or expand the existing activities. Profit, therefore, is a factor which
induces the entrepreneur to organise and utilise the factors of production for development.
It does not necessarily mean that entrepreneur is concerned only in the pecuniary profits.

He is an innovator to bring change with certain achievement motive and that achievement
motive may also mean something more than money. “For such entrepreneurs to function
effectively we need an appropriate social climate.” Social climate plays a very important role
in the industrialisation of any region.

Entrepreneur – Views on Entrepreneurs

The word ‘entrepreneur’ has been taken from the French language, and it originally means
an organiser of musical or other entertainments. In the early 16th century, it was applied to
those who were engaged in military expeditions. It was extended to cover civil engineering
activities such as construction in the 17th century.

It was only in the beginning of the 18th century that the word was used to refer to economic
aspects. In this way, the evolution of the concept of entrepreneur is considered over more
than four centuries old. The term ‘entrepreneur’ is used in various ways and views.

Broadly the three main views are:

1. Entrepreneur as a Risk Bearer:

‘Richard Cantillon’ (Irish) was the first person who introduced the term ‘entrepreneur’
and his unique risk-bearing function in economics in the early 18th century. He
defined entrepreneur as an 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. Thus, it is a risk bearing activity.

2. Entrepreneur as an Organiser:
Jean-Baptiste say, developed the concept of entrepreneur by associating it with the
functions of co-ordination, organization and supervision. According to him an
entrepreneur is one who combines the land of one, the labour of another and capital
of yet another and thus produces a product.
 By selling the product in the market, he pays interest on capital, rent on land and
wages to labourers and what remains is his/her profit. Thus an entrepreneur is an
organiser.

3. Entrepreneur as an Innovator:
“Joseph A. Schumpeter” in 1934, assigned a crucial role of ‘innovation’ to the
entrepreneur. He considered economic development as a dynamic change brought by
entrepreneur by instituting new combinations of factors of production, i.e.,
innovations.

The introduction of new combination of, according to him, may occur in any of the following
forms:

(a) Introduction of new product in the market.

(b) Use of a new production technology.
(c) Opening of a new market.
(d) Discovery of a new source of supply of raw materials.

Definition:
Thus an Entrepreneur can be defined as a person who tries to create something new,
organises production and undertakes risks and handles economic uncertainty involved in
enterprise, e.g., Ambani, Tata, Birla, Modi, Dalmia etc.

Entrepreneur – Types

Entrepreneurs can be classified as under:

1. According to the type of business:

(i) Business entrepreneurs

(ii) Trading entrepreneurs
(iii) Industrial entrepreneurs
(a) Large
(b) Medium
(c) Small
(d) Tiny.
(iv) Agricultural entrepreneurs
 (a) Plantation
(b) Horticulture
(c) Dairy
(d) Forestry
(v) Retail entrepreneurs
(vi) Service entrepreneurs.

2. According to the use of Technology:

(i) Technical entrepreneurs.

(ii) Non-technical entrepreneurs.
(iii) Professional entrepreneurs.
(iv) High-tech entrepreneurs.
(v) Low-tech entrepreneurs.

3. According to the scale of operation:

(i) Small scale entrepreneurs.

(i) Medium scale entrepreneurs.
(ii) Large scale entrepreneurs.

4. According to the stages of development:

(i) First generation entrepreneurs.

(ii) Modern entrepreneurs.
(iii) Classical entrepreneurs.

5. According to the Area:

(i) Urban entrepreneurs.

(ii) Rural entrepreneurs.

6. Other types or unclassified types:

(i) Traditional entrepreneurs.

(ii) Skilled entrepreneurs.
(iii) Non-skilled entrepreneurs.
(iv) Inherited entrepreneurs.
(v) Bureaucratic entrepreneurs.
(vi) Immigrant entrepreneurs.
Role of Entrepreneurs

An entrepreneur identifies a commercial need in their community, crafts a business idea

and. If a business idea doesn't involve creating a product that was insufficient in the market,
it typically involves using technological innovations to make a product or service more easily
accessible.

Entrepreneurs fulfil the following three dominant roles −

 Economic Change
 Social Change
 Technological Change

These are referred to as behavioural roles. All entrepreneurs have these common
characteristics and decide to become an entrepreneur due to the factors or circumstances in
their lives which made them think the way they do.

To do their work effectively and operate a successful business, these entrepreneurs should
perform certain roles. These roles are the same as the basic managerial roles. All such roles
are listed out in detail as follows –

Figure Head Role

The entrepreneur needs to be the Head in the organization and participate in ceremonial
duties, such as representing the organization in formal and informal events or even being the
public spokesperson whenever there is a press release, etc.

Leader Role
The entrepreneur should also act as a leader because an entrepreneur may need to bring
people with dissenting views and approaches to work together as a team. So, he needs to be
good with his people management and leadership skills. He has to lead the people by hiring,
firing, training and motivating his resources as and when necessary.

Liaison Role
The entrepreneur should also be the liaison officer for his organization. He should be the
source of link with the outside world and business houses, always trying to find an
opportunity of working together with other big organizations.

Monitor Role
The entrepreneur acts as a regulatory body too; he monitors both the internal and the
external environment of the business constantly.
Information Provider and Receiver Role
The entrepreneur should also act as the organizational representative and transmit
information internally and externally the organization.

Spokesman Role
The manager should also act as the spokesman of the business and transmit information
internally and externally the organization. He needs to be the source of knowledge about his
company to potential investors and collaborators.

Entrepreneurial Role
This is the basic role of the entrepreneur; he/she declares new ideas for the organizations,
brainstorms it with the employees and friends and then bears the risk of any unsuccessful
implementation.

Disturbance Handler
The entrepreneur needs to act as the mediator and bring people with dissenting thoughts to
the table and get them motivated to work together. He needs to handle all conflicts and get
the team to focus constantly on the goal.

Resource Allocator
The entrepreneur needs to find out how the available resources can be allocated between
different departments of the organization to suit their demands and necessities. This helps
them achieve the organizational goals and the objectives.

Negotiator Role
The entrepreneur must negotiate on behalf of the organization both internally with the staff
as well as with the external investors or collaborators. At such opportunities, the
entrepreneurs need to be more focused on their role of being a ‘win-win” deal breaker.

Added Roles of an Entrepreneur

Apart from the above-mentioned roles, there are some specific entrepreneurial roles that a
person is supposed to fill up in his duties of an entrepreneur. These are divided into three
categories, which are as follows −
 Social Roles,
 Economic Roles, and
 Technological Roles.

Social Roles of Entrepreneur

 Creating opportunities for entrepreneurship.
 Creating job or employment opportunities in the society.
  Engaging in social welfare services of redistributing income and wealth.
 Transforming a standard working procedure into a more modern approach.

Economic Roles of Entrepreneur

 Bearing the risk of failing in business.
 Mobilizing the revenue of the organization properly.
 Utilizing human resources in a cost-efficient manner.
 Providing channels of further economic growth in the organization.

Technological Roles of Entrepreneur

 Changing traditional technology to modern system.
 Adapting improved technology to business environment.
 Utilization of available technology in the production process.
 Developing efficiency and competence in the workforce through technology

Entrepreneurs in the arts: types and specificities

 Culturepreneur is a broader term than artpreneur and refers to entrepreneurs in the

cultural sector who operate alone or in organisational settings in a broad range of
branches in the arts and culture field.
 Artpreneur is an artist who practice arts, but also do all related functions for placing it on
the market, such as: fundraising, contacting clients, promotion, financial management
and others.
 Creative entrepreneur: refers to entrepreneurs who work in the creative industries
branches. These entrepreneurs start and manage business enterprises with creative
elements, nonprofit organisations or social enterprises.
 Business entrepreneurs in the arts: founders and owners of business organisations.
 Social entrepreneurs contribute to a social problem and achieve impact on the society by
empowering people, groups and communities.
 Community entrepreneur: one who stimulate economic activities within a community
and contribute to solving problems in a region or a city by providing employment
opportunities at a grass root level.
 Digital entrepreneur in the arts: the one who use the power of the new technologies and
online tools to find and exploit an international opportunity, to create a new business, to
disseminate information, to sell goods and services online and/or to collaborate with
clients and partners.
 CREATIVITY

Creativity is one of the things that every leader and entrepreneur need.
In fact, people rarely laud entrepreneurs for their creativity in problem-solving
processes. Creativity is often seen as the forte of those in both the writing and design domain.

The role of creativity in entrepreneurship

Creativity eliminates the limits to the mind set and skill set of an investor.
However, a lot of people associate creativity with lack of restraint and believe it can cause
chaos. Conversely, leadership is all about control and order.
As such, entrepreneurship and creativity form a perfect combination. It no longer takes
number-crunching skills and practicality to run a successful business.
Over time, creativity has become an integral component of good business acumen. Lack of
creativity could easily drag your business into the stagnation mode.

Here is why creativity is critical to entrepreneurs.

High overall success

There is a misconception that people only needs intelligence to achieve everything they need
in life.
However, it takes time for aspiring entrepreneurs to realize that creativity plays an integral
role as well.
Unfortunately, a lot of learning institutions stress more on intelligence than creative thinking.
It could perhaps be because intellectual knowledge is measurable whereas creativity can be
challenging to spot. Nonetheless, dynamics are changing, and entrepreneurs are beginning to
realize the importance of bringing creative people on board. Creative workers can be a game
changer in your company if you harness and shape their skills adequately.

Increase productivity

Creativity allows an entrepreneur to disconnect from the accustomed and move into
uncharted territories with an aim to discern unique and useful solutions.
It has, therefore, become essential for both leaders and employees to develop creative skills.
Entrepreneurs are providing the necessary technological resources such as visual
collaboration, which is often confused with video conferencing to help their workers discover
innovative solutions and ideas.
In fact, this is an extremely cost-effective strategy to increase workplace productivity.
Innovation and creativity bring an entrepreneur to the success path.
Exploit employee potential

You are probably utilizing only half of your employee’s potential by not encouraging
workplace creativity.
Fortunately, entrepreneurs increasingly realize the ocean of creative ideas that remain
untapped and dormant.
Tapping all these opportunities can result in improved financial strategies, increased
profitability, and quick decision making. Creativity also enables an enterprise to stay ahead of
the curve.

Transcend boundaries

Creativity enables entrepreneurs to find some of the path-breaking discoveries.

As such, it’s essential to allow collisions and blur to take place to transcend boundaries set by
disciplines.
That way, it’s easier for an entrepreneur to get new perspectives towards solving a financial
or operational problem.
Creativity lets an entrepreneur connect distinct aspects and extrapolate feasible solutions
from unrelated concepts.

Encourage critical thinking

Creativity is slowly turning out to be one of the best ways to alleviate problems plaguing
today’s enterprises.
Problem-solving works best when coupled with highly disciplined and focused thinking.
Entrepreneurs can think in either divergent or convergent thinking mode.
Convergent thinking involves in-depth analysis and enables an entrepreneur to find the most
feasible solution to a managerial or financial problem.
It allows entrepreneurs to use various data sources such as accounting software and
computer systems.
In contrast, divergent thinking encourages creativity by enabling business owners to explore
possible solutions for the same problem.
While entrepreneurs can combine both thinking modes, divergent thinking ensures an
enterprise gets the best resolution.

Foster innovation

Manufacturers create unique products to not only meet customer expectations but exceed
them as well.
As such, entrepreneurs need to be cautious to ensure their products are relevant and useful
to the users.
While it may be hard to spot this from the beginning, things start to get more evident as your
idea turns into a reality.

In fact, this is the time an entrepreneur begins to realize how innovation and invention differ.
The invention refers to a new, unique concept while innovation is an idea which is as unique
and useful as the original one.

You need to be creative and view an idea differently to be innovative. That way, it’s easier to
turn a concept into a reality

When, Why and How Creativity Arises

The problem with ‘creativity’ is that it is indeterminate. While we generally know when
something is creative, we usually don’t know why. It seems particularly challenging to give a
precise definition on the matter.

‘Imagination is more important than knowledge. To raise new questions, new possibilities,
to regard old problems from a new angle, require creative imagination and marks real
advance in science’.