What is Entrepreneurship?
This Chapter considers the process of entrepreneurship (i.e. identifying and setting up a business to leverage an opportunity, which involves either product or process innovation) as well as the characteristics of entrepreneurs - those willing to accept the associated risks. Entrepreneurship can be seen as the pursuit of opportunity without regard to current/existing resources currently controlled with entrepreneurs displaying the motivation to act upon their ideas.
Theories of entrepreneurship are explored, focussing on economic considerations (classical, neo-classical approaches as well as the Austrian market theory), sociological aspects (such as the importance of social networks, life experiences and ethnic identification) and anthropological perspectives (the impact of culture, community, values and beliefs). This framework supports a further examination of how entrepreneurs respond to (and exploit) opportunities and the importance of being able to access the resources required to support and encourage innovation.
The Chapter also discusses the economic significance of entrepreneurship, highlighting the direct and indirect benefits that can accrue. Given the returns seen to be delivered by entrepreneurs, the traits and characteristics displayed by these individuals deserve particular attention. These are therefore explored in depth in order to consider if common factors can be identified. Entrepreneurs are seen to possess an internal control orientation (believing that their life is shaped by their own actions and decisions), demonstrating higher levels of self-belief. There appears to be an inherent need to be successful that this is a significant motivator for entrepreneurs, supporting a greater willingness to take risks and tolerate ambiguity.
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In discussing the concept of ‘nature and nurture’, the Chapter also considers if entrepreneurs are ‘born’ or ‘made’. Nature may provide a basic personality foundation but this is then shaped and developed as a result external environmental influences, intimating that successful entrepreneurs demonstrate an ability to both apply personal skills and adapt/develop them to reflect the business environment being faced.
Practical advice is offered around a range of issues including the requirement to conduct extensive research in order to establish the nature and viability of the opportunity being considered by the entrepreneur. The significance and outline content requirements of business plans are also discussed, illustrating how such plans provide an essential framework for entrepreneurs to critically review their ideas whilst also establishing clear goals. This important documentation also assists in raising business capital, demonstrating the viability of the concept to potential investors/lenders.
The various legal forms of business are also outlined in the Chapter, considering entities such as sole proprietorships, limited companies, partnerships and limited liability partnerships. This supports a subsequent examination of business funding sources that entrepreneurs need to consider. Bootstrapping (the entrepreneur using their own resources to support the development of their business) is noted, whilst the importance of using a sound business plan to attract external investment (or even support from established hedge funds) is reinforced. The beneficial impact of more basic business practices (such as establishing a line of credit) is discussed, whilst the apparent flexibility of more modern innovative approaches such as internet-based crowdfunding is also highlighted.
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