A broader definition of the term is sometimes used, especially in the field of economics. In this usage, an Entrepreneur is an entity which has the ability to find and act upon opportunities to translate inventions or technologies into products and services: "The entrepreneur is able to recognize the commercial potential of the invention and organize the capital, talent, and other resources that turn an invention into a commercially viable innovation.
Entrepreneurship is the act of being an entrepreneur , or "the owner or manager of a business enterprise who, by risk and initiative, attempts to make profits". Entrepreneurship is the process by which either an individual or a team identifies a business opportunity and acquires and deploys the necessary resources required for its exploitation. Earlyth-century French economist Jean-Baptiste Say provided a broad definition of entrepreneurship, saying that it "shifts economic resources out of an area of lower and into an area of higher productivity and greater yield".
Entrepreneurs create something new, something different—they change or transmute values. The opportunity to become an entrepreneur requires four criteria. First, there must be opportunities or situations to recombine resources to generate profit.
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Second, entrepreneurship requires differences between people, such as preferential access to certain individuals or the ability to recognize information about opportunities. Third, taking on risk is a necessity. Fourth, the entrepreneurial process requires the organization of people and resources. The entrepreneur is a factor in and the study of entrepreneurship reaches back to the work of Richard Cantillon and Adam Smith in the late 17th and early 18th centuries. However, entrepreneurship was largely ignored theoretically until the late 19th and early 20th centuries and empirically until a profound resurgence in business and economics since the late s.
In the 20th century, the understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter in the s and other Austrian economists such as Carl Menger , Ludwig von Mises and Friedrich von Hayek. According to Schumpeter, an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation.
Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior innovations across markets and industries, simultaneously creating new products including new business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is hotly debated in academic economics. An alternative description posited by Israel Kirzner suggests that the majority of innovations may be much more incremental improvements such as the replacement of paper with plastic in the making of drinking straws.
The exploitation of entrepreneurial opportunities may include: . Economist Joseph Schumpeter — saw the role of the entrepreneur in the economy as " creative destruction " — launching innovations that simultaneously destroy old industries while ushering in new industries and approaches. For Schumpeter, the changes and "dynamic disequilibrium brought on by the innovating entrepreneur [were] the norm of a healthy economy ". Entrepreneurship may operate within an entrepreneurship ecosystem which often includes:.
In the s, usage of the term "entrepreneurship" expanded to include how and why some individuals or teams identify opportunities, evaluate them as viable, and then decide to exploit them.
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Entrepreneurs exhibit positive biases towards finding new possibilities and seeing unmet market needs, and a tendency towards risk-taking that makes them more likely to exploit business opportunities. The word first appeared in the French dictionary entitled Dictionnaire Universel de Commerce compiled by Jacques des Bruslons and published in Cantillon considered the entrepreneur to be a risk taker who deliberately allocates resources to exploit opportunities to maximize the financial return.
Jean-Baptiste Say also identified entrepreneurs as a driver for economic development, emphasizing their role as one of the collecting factors of production allocating resources from less to fields that are more productive. Both Say and Cantillon belonged to French school of thought and known as the physiocrats. This institution was introduced in after a period of so-called freedom of trade Gewerbefreiheit , introduced in in the German Reich. However, proof of competence was not required to start a business. In the 20th century, entrepreneurship was studied by Joseph Schumpeter in the s and other Austrian economists such as Carl Menger , Ludwig von Mises and Friedrich von Hayek.
While the loan from French of the word "entrepreneur" dates to the , the term "entrepreneurship" was coined around the s. According to Schumpeter, an entrepreneur is willing and able to convert a new idea or invention into a successful innovation. 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 alternative 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 i. 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.
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Despite Schumpeter's early 20th-century contributions, the traditional microeconomic theory did not formally consider the entrepreneur in its theoretical frameworks instead of 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. For Schumpeter, the entrepreneur did not bear risk: the capitalist did. Schumpeter believed that the equilibrium was imperfect.
Schumpeter demonstrated that the changing environment continuously provides new information about the optimum allocation of resources to enhance profitability. Some individuals acquire the new information before others and 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.
Initially, economists made the first attempt to study the entrepreneurship concept in depth. In the s, entrepreneurship has been extended from its origins in for-profit businesses to include social entrepreneurship , in which business goals are sought alongside social, environmental or humanitarian goals and even the concept of the political entrepreneur. Entrepreneurs are leaders willing to take risk and exercise initiative, taking advantage of market opportunities by planning, organizing and deploying resources,  often by innovating to create new or improving existing products or services.
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According to Paul Reynolds, founder of the Global Entrepreneurship Monitor , "by the time they reach their retirement years, half of all working men in the United States probably have a period of self-employment of one or more years; one in four may have engaged in self-employment for six or more years. Participating in a new business creation is a common activity among U. Entrepreneurial activities differ substantially depending on the type of organization and creativity involved.
Entrepreneurship ranges in scale from solo, part-time projects to large-scale undertakings that involve a team and which may create many jobs. Many "high value" entrepreneurial ventures seek venture capital or angel funding seed money to raise capital for building and expanding the business. Chambers of commerce. Beginning in , an annual " Global Entrepreneurship Week " event aimed at "exposing people to the benefits of entrepreneurship" and getting them to "participate in entrepreneurial-related activities" was launched.
The term "entrepreneur" is often conflated with the term " small business " or used interchangeably with this term. 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.
In this way, the term "entrepreneur" may be more closely associated with the term " startup ". 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. The term "ethnic entrepreneurship" refers to self-employed business owners who belong to racial or ethnic minority groups in the United States and Europe. A long tradition of academic research explores the experiences and strategies of ethnic entrepreneurs as they strive to integrate economically into mainstream U.
Classic cases include Jewish merchants and tradespeople in large U. The American-born British economist Edith Penrose has highlighted the collective nature of entrepreneurship. She mentions that in modern organizations, human resources need to be combined to better capture and create business opportunities. According to Christopher Rea and Nicolai Volland, cultural entrepreneurship is "practices of individual and collective agency characterized by mobility between cultural professions and modes of cultural production", which refers to creative industry activities and sectors.
In their book The Business of Culture , Rea and Volland identify three types of cultural entrepreneur: "cultural personalities", defined as "individuals who buil[d] their own personal brand of creativity as a cultural authority and leverage it to create and sustain various cultural enterprises"; "tycoons", defined as "entrepreneurs who buil[d] substantial clout in the cultural sphere by forging synergies between their industrial, cultural, political, and philanthropic interests"; and "collective enterprises", organizations which may engage in cultural production for profit or not-for-profit purposes.
A feminist entrepreneur is an individual who applies feminist values and approaches through entrepreneurship, with the goal of improving the quality of life and well-being of girls and women. Feminist entrepreneurs are motivated to enter commercial markets by desire to create wealth and social change, based on the ethics of cooperation, equality and mutual respect.
Social entrepreneurship is the use of the by start up companies and other entrepreneurs to develop, fund and implement solutions to social, cultural, or environmental issues. Social entrepreneurship typically attempts to further broad social, cultural, and environmental goals often associated with the voluntary sector  in areas such as poverty alleviation, health care  and community development. At times, profit-making social enterprises may be established to support the social or cultural goals of the organization but not as an end in itself.
For example, an organization that aims to provide housing and employment to the homeless may operate a restaurant , both to raise money and to provide employment for the homeless people. A nascent entrepreneur is someone in the process of establishing a business venture.