Definitions and Myths of Entrepreneurship

Definitions and Myths of Entrepreneurship

 Before we look at entrepreneurship in detail in this subject, we need to identify what we are going to talk about. For example, what are the key aspects that distinguish entrepreneurship from management in a big organisation? That is, our core question is: What is entrepreneurship?

Key terms and concepts

• Entrepreneur
• Opportunity
• Risk and uncertainty
• Managerial competence and networks
• Entrepreneurs are born and made
• Schools of thought in research about entrepreneurship
• Definition of entrepreneurship
• Individual, environment, organisation and process

Examine the historical development of the term entrepreneur – what do they do?

Let us review the history of thinking about what an entrepreneur is. The word ‘entrepreneur’ is derived from the French verb ‘entreprendre’ meaning ‘to undertake’, and was translated from the German verb ‘unternehmen’ which also means ‘to undertake’. As early as the sixteenth century, French entrepreneurs undertook to lead military expeditions and build roads, bridges and harbours for military activities. However, Cantillon is credited with the introduction of the word ‘entrepreneur’ in his essay ‘Essaisur la Nature du Commerce en

General’ in 1755. Cantillon described the entrepreneur as a rational decision maker who assumed the risk and provided management for the firm. This risk-bearing was especially evident during the Industrial Revolution when entrepreneurs assumed the risk of many ventures.

Later, Smith assumed that entrepreneurs were the capitalist who provided the capital for these risky ventures. More recently, the term entrepreneur does not mean a capitalist but someone who secures and allocates resources, such as capital for example. Say also used the term ‘entrepreneur’ around 1800 in his discussions of the person who shifts economic resources out of an area of lower productivity and into an area of higher productivity and higher yield. In 1931, the Harvard economist supported Say by emphasising that a dynamic disequilibrium with new firms and industries being created and old one destroyed driven was the norm of a healthy economy and was driven by entrepreneurs. More recently, Drucker (1992) claimed that the greatest achievements in business come from ideas of entrepreneurs so that they are the sources of wealth and prosperity in an economy. For example, although the modern chemical industry should have arisen in England with the Englishman Perkin’s discovery of aniline dyes in 1856, more entrepreneurial German business people took leadership in the new industry.

 Based on these and other thinkers, modern thinking emphasises that an entrepreneur:

• Creates and/or recognises opportunities for something new.
• Handles the uncertainty and risk of that new venture (which is not restricted to stand alone business ventures).
• Has the managerial competence to gather required resources from the environment (like capital) without necessarily owning these resources. This includes possessing the ability to plan, to lead a team and to network outside the

In other words, ‘at the heart of the entrepreneurial process is the creation and/or  recognition of opportunities, followed by the will and initiative to seize these opportunities … and a willingness to take risks - both personal and financial - but in a calculated fashion to constantly shift the odds of success.

 Note that our use of the term venture above is not restricted to new business ventures. Most of our thinking about entrepreneurs does emphasise business ventures, but the new venture could be a part of a big business (as we will see in a later topic's coverage on of intrapreneurship or corporate entrepreneurship) or be part of a public service organisation. Our emphasis is on newness and risk, and these are not restricted to business ventures.

Avoiding folklore: the myths of entrepreneurship

Now that an entrepreneur has been defined, consider some of the things that they are not. There is much folklore about entrepreneurship and we should not believe the folklore because many myths have been debunked through years of research about entrepreneurship. These myths are myths because they are too black or white - they do not show that the issues involved are grey. For example, one myth is that entrepreneurs are born, not made. However, entrepreneurs are likely to have role models, about 8 to 10 years of experience in the industry, and be reasonably well educated. They are likely to have experience in product/marketing and across several functional areas. Most entrepreneurs start in their 30s or 40s, and only one quarter do so before they are 25 (Timmons and  Spinelli 2004). So experience is a necessary element of entrepreneurship and people are obviously not born with experience. Moreover, even the personality characteristics of entrepreneurs can be honed through experience, as Topic 2's notes will show. In other words, although entrepreneurs require some intelligence and energy, they also require relevant skills, experience and network contacts. That is, entrepreneurs are both born and made - 'like all disciplines, entrepreneurship has models, processes and case studies that allow the topic to be studied and the knowledge to be acquired.' (Kuratko 2014, p. 6).

In other words, all these myths capture only a part of entrepreneurship. Your textbook identifies ten of these myths:

• Entrepreneurs are doers, not thinkers
• Entrepreneurs are born, not made
• Entrepreneurs are always inventors
• Entrepreneurs are academic and social misfits
• Entrepreneurs must fit the profile
• All entrepreneurs need is money
• All entrepreneurs need is luck
• Entrepreneurship is unstructured and chaotic
• Most entrepreneurial initiatives fail
• Entrepreneurs are extreme risk takers

Define entrepreneurship

 Now we are in a position to define entrepreneurship. First, what an entrepreneur does was identified and some myths of entrepreneurship were debunked. Then some schools of entrepreneurship were categorised. Now a comprehensive definition of entrepreneurship can be developed that focuses on what an entrepreneur does and incorporates the many schools of entrepreneurship research.

 Entrepreneurship is a dynamic process of vision, change and creation that requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. This process of innovation and new-venture creation is accomplished through four major dimensions - individual, organisational, environmental, process - and is aided by collaborative networks in government, education and institutions …while recognising and seizing opportunities that can be converted into marketable ideas capable of competing for implementation in today's economy.

 In other words, entrepreneurship is a dynamic, interactive process involving the four dimensions of:

•  An individual with experiences and traits, like need for achievement and internal locus of
•  Working within an environment that has resources like capital and suppliers
• A venture organisation that has a team and competitive strategies
• A process of locating an opportunity, accumulating resources, producing and marketing a product, building an organisation, and responding to government and society.