Chapter 1 Entrepreneurship Defined

Learning Outcomes On completion of this chapter you will be able to: Define Entrepreneurship as a concept Explain the nature and development of Entrepreneurship Distinguish between Entrepreneurship and a Small Business Finder Discuss the various theoretical approaches to Entrepreneurship Explain the importance of small firms in the South African Economy Explain the importance of Entrepreneurship Training and Education

Entrepreneurship as a concept The definition of entrepreneurship holds the promise of growth, expansion, and long-term financial gain. This should, however, be a long-term approach and not be regarded as an overnight process. Many mistakes are made by new ventures when they try to fly too high and too fast.

Nature of entrepreneurship Entrepreneurship is seen as a fundamentally important part of modern economic and social life. The term “entrepreneur” and “owner-manager” is often used interchangeably when describing a person that is engaged in the management of a small business. It is necessary to define how entrepreneurs are labelled because of the diversity among those engaged in the managing of small enterprises (Stokes, Wilson, 2010).

Development of entrepreneurship The word entrepreneur derives from the French and it literally means “someone who takes between or goes between”. In the middle ages the entrepreneur was the person who managed large projects on behalf of the church or a landowner, such as the building of a castle or cathedral. By the seventeenth century the theory was expanded to also include some element of risk and profit. 1734 Richard Cantillon introduced economic literature to the world by describing three types of agents in the economy: The Landowner The Entrepreneur The Hirelings

Development of entrepreneurship J. B. Say, defined an entrepreneur 'as someone who consciously moves economic resources from an area of lower, into an area of higher, productivity and greater yield’, (economist in the 1800’s ) Peter Drucker (1986) suggests that we need entrepreneurship and entrepreneurs to help encourage and establish change into our lives, so that new and better goods and services can be created and developed. Drucker defined an entrepreneur as someone who ‘always searches for a change, responds to it an exploits it as an opportunity’

Entrepreneurial companies vs. small business companies Entrepreneurial companies are innovative and wealth creating orientated Small Business companies are management orientated

Approaches to entrepreneurship To know history is to know where you are coming from, and to prepare you for the future ahead. (Kuratko, 2010) What is a theory of entrepreneurship? It is a confirmable and sensibly coherent formulation of relationships, or underlying principles, that either explains entrepreneurship, forecast entrepreneurial activity or provide normative direction.

Approaches to entrepreneurship The “schools of thought” approach which divides entrepreneurship into a detailed view of “Micro” and “Macro” approaches. Macro School of Thought The outside processes that are occasionally beyond the control of the individual entrepreneur as they demonstrate a strong external locus of control point of view. Micro School of Thought It is the ability of the entrepreneur to control or re-direct the outcome of each major influence in this view, and it focuses on looking from the inside outwards.

Process approaches The process approach is another way to look at the activities involved in entrepreneurship. Three factors that are more commonly used: The integrative approach with the first element being the environmental opportunity . Individual entrepreneurial development; this is the person whom takes responsibility and accountability for conceptualizing and implementing a new venture. Financial and nonfinancial resources that is necessary on an ongoing basis.

Our entrepreneurial economy – The environment for entrepreneurship Two perspectives of the environment in which entrepreneurial firms operate: Statistical The trends in entrepreneurial research and education

The importance of Small Firms in the South African economy SME in South Africa provides approximately 60% of total employment available (Beeld, 2011). SMEs are seen as a vehicle to address unemployment in South Africa as formal jobs are scares. Youth unemployment rate is at 50% amongst 14 to 24 year olds. Government initiatives include: The Umsobomvu Youth Fund, established in 2001 The National Youth Policy Framework (2001)

The importance of entrepreneurship, training and education The field of entrepreneurship is evolving dramatically and because of the growth of available courses the challenge to teach entrepreneurship effectively still remains. Drucker said, “The entrepreneurial mystique? It’s not magic, it’s not mysterious, and it has nothing to do with the genes. It’s a discipline. And, like any discipline, it can be learned.” The biggest challenge for the educators of entrepreneurship lies in the designing of effective learning opportunities for entrepreneurial student.

The practice of entrepreneurship Dot-com frenzies (1999) Next generation of entrepreneurs must return to the roots of business formation and development. Entrepreneurial educators must educate the students of today about what a TRUE entrepreneur is. The student of today must be introduced to the entrepreneur of yesterday so that they can learn from them and became the entrepreneur of tomorrow.

Glossary Entrepreneurship Entrepreneur Owner-manager Macro approach Micro approach Process approach Integrative approach Individual entrepreneurial development