What is entrepreneurship?
Many definitions of entrepreneurship can be found in the literature describing business processes. The earliest definition of entrepreneurship, dating from the eighteenth century, used it as an economic term describing the process of bearing the risk
of buying at certain prices and selling at uncertain prices. Other, later commentators broadened the definition to include the concept of bringing together the factors of production. This definition led others to question whether there was any unique entrepreneurial function or whether it was simply a form of management. Early this century, the concept of innovation was added
to the definition of entrepreneur-ship. This innovation could be process innovation, market innovation, product innovation, factor innovation, and even organisational innovation. Later definitions described entrepreneurship as involving the creation of new enterprises and that the entrepreneur is the founder.
Nowdays there is no standart definition of entrepreneur in economic theory, but are identified by three possible elements of the entrepreneural function:
1) The organisation of production
The organization of production
The entrepreneur is the factor of production which brings together the other factors in the production process. Land and capital are inert objects. Entrepreneur buys land, hires labour and organizes all three factors to produce goods and services for sale, so is seen as the key to production in economy. It could be argued that if there were no entrepreneurs, there would be no production.
Production is a risky process. In many industries, land, labour and capital have to be purchased before there is any certainty that the finished product will be sold. For instance, a car manufacturer is likely to make cars without there being any firm orders for their sale. If it makes too many cars, they will have to be stockpiled for sale at a later date. Too big a stockpile and too few orders could result in the bankruptcy of the firm. So firms face uncertainties and have to take risks. Some risks are quantifiable and can be insured against. A firm can insure itself against the risk of fire damage or theft. However, other risks such as whether a new production technique will lead to a reduction in costs, are unquantifiable and therefore cannot be insured against.
Entrepreneurs are those who take unquantifiable risks and suffer the consequences if they get it wrong.
Entrepreneur is someone who innovates within an organization. New products are being launched all the time but evidence suggest that only a few will be successful. New productin techniques are also being constantly pioneered with varying degrees of success.
Who are entrepreneurs?
a) The most likely classified as entrepreneurs are owner managers of small firms because they combine all these three entrepreneurial functions. He organize production because he is a manager of the company. He takes risks because he has put money into the firm to start it and is producing innovative products which could well fail. This person is likely to have sufficient capital to be able to finance the setting up to the firm, have total control over the organization of production and be exposed to
considerable risk if the enterprise fails.
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