TOPIC 2: ENTREPRENEURSHIP
2.1. THE CONCEPT OF ENTREPRENEURSHIP
MEANING
OF ENTREPRENEURSHIP
Entrepreneurship is the process of taking risks to initiate,
organise and control factors of production such as land, labour, and capital to
start and manage a business. It is the process of identifying a business
opportunity, gathering the necessary resources, and taking the risk to
establish and manage a new business venture with the goal of making a profit.
TYPES OF
ENTREPRENEURSHIP
There are three main types of entrepreneurship based on the
fundamentals of starting business. These are:
1.
Business Entrepreneurship
2.
Intrapreneurship / Corporate Entrepreneurship
3.
Social Entrepreneurship
1. BUSINESS
ENTREPRENEURSHIP
This is a type of entrepreneurship that begins with the
identification of business opportunity, generation of business idea, setting-up
of the business entity, and running a business with a purpose of making profit.
It is the most common type of entrepreneurship widely seen in the world. It
generally exists in most Small and Medium Enterprises (SMEs).
For examples of such business are Local grocery stores, tea
shops, plumbers, electricians, barbers, carpenters, and consultants.
Characteristics
of Business Entrepreneurship
1.
Profit-Making Goal
Business entrepreneurs focus on earning money by selling
goods or services. For example, a person opening a food kiosk in a busy market
focuses on earning a profit by selling chapati, tea, and rice to customers.
Their goal is to earn more than what they spend on ingredients and rent.
2.
Risk-Taking
Entrepreneurs invest their resources, knowing there’s a
chance they might lose. For example, someone who starts a mama ntilie business
(small food vendor) risks preparing food every day without knowing if all the
food will sell.
3.
Finding Market Opportunities
Business
entrepreneurs identify what people in their community need but don’t have. For
example, if a village doesn’t have a shoe repair shop, a person with skills in
shoe repair might open one to meet that need.
4.
Innovation and Creativity
Successful entrepreneurs often introduce new ideas or
improve existing ones. For instance, a tailor might start offering personalized
kitenge designs to attract customers
who want something unique.
5.
Growth and Expansion
Entrepreneurs aim to grow their businesses by serving more
customers or introducing new products. For example, a fruit seller who starts
by selling bananas might expand to sell mangoes, oranges, and pineapples as
their business grows.
2. INTRAPRENEURSHIP
/ CORPORATE ENTREPRENEURSHIP
Intrapreneurship refers to entrepreneurial activities carried
out by employees within an existing organization. Intrapreneurs act like
entrepreneurs but operate under the umbrella of the company they work for. It
is a process of behaving entrepreneurially in an established organisation.
Characteristics
of Intrapreneurship
1. Using Organizational Resources
Intrapreneurs use their company’s tools, funds, and
infrastructure to bring their ideas to life. For example a worker at a factory might suggest
using leftover fabric to create affordable school uniforms, using materials the
company already has.
2.
Innovation Within the Organization
Intrapreneurs find ways to make their organization better
by improving products or processes. For instance, a librarian in a school might suggest
creating a digital catalog system to make it easier for students to find books.
3.
No Personal Financial Risk
Unlike business entrepreneurs, intrapreneurs don’t lose
their own money if their ideas fail. For example: a bank employee who
introduces a mobile banking system doesn’t lose anything if the project doesn’t
work because the bank absorbs the loss.
4.
Helping the Organization Grow
Intrapreneurs’ ideas contribute to the success of the
organization. For example, a teacher suggesting a school farm project might
increase the school’s income by selling produce to nearby communities.
5.
Team Collaboration
Intrapreneurs often work with others in their organization
to implement their ideas. Example: A nurse in a hospital might work with
doctors and administrators to start an outreach program for health education in
rural areas.
MEANING
OF ENTREPRENEUR AND INTRAPRENEUR
ENTREPRENEUR
An
entrepreneur is a person who starts and manages their own business or project,
taking on financial risks to make a profit. Entrepreneurs use their creativity
and skills to identify opportunities, solve problems, and build something new.
INTRAPRENEUR
An intrapreneur is an employee who
is self-motivated and proactive in the use of his or her entrepreneurial
abilities and initiatives to pursue creative and innovative activities within
an organisation. However, they do not own the business and don’t bear personal
financial risks.
3. SOCIAL
ENTREPRENEURSHIP
This type of entrepreneurship that focus to provide
innovative solutions to social problems such as access to food, money,
environmental challenges and education. Such enterprises include garbage
collection, recycling, environmental conservation, and community micro-finance
initiatives. The goal of these enterprises is to make the world better.
Characteristics
of Social Entrepreneurship
1. Solving
community problems
The core purpose of social entrepreneurship is to address
social, cultural, or environmental issues, rather than simply making profits.
For example, in a village without electricity, someone might create affordable
solar lamps that students can use for studying at night.
2.
Inclusive and collaborative approach
Social entrepreneurs engage communities, stakeholders, and
beneficiaries to ensure their solutions are relevant and widely accepted.
Collaboration with local organizations and governments is common. For example,
a project to install solar panels in rural homes involving local technicians to
ensure sustainability.
3.
Measurable Social Impact
Social entrepreneurs prioritize measurable results that
show how their work benefits the community or the environment. They focus on
outcomes such as improved literacy rates, reduced waste, or increased access to
healthcare.
CHARACTERISTICS
OF ENTREPRENEUR
Entrepreneurs have many characteristics that affect their
entrepreneurial behaviour and enterprising tendencies.
They include the following:
1.
Creativity:
This is an ability to produce new and unique ideas. In a
competitive business environment, the presence of creativity is vital for the
survival of a company as it fosters the generation of fresh concepts and ideas.
2.
Innovativeness
This involves the act of being able to come-up with new or
improved ideas and commercialize them. It can be done either by developing new
or improved businesses, products, ways of production, distribution and
promotion.
3.
Risk taking:
Risk-taking is the ability of an entrepreneur to embrace
uncertainty and invest resources, such as time and money, into ventures with no
guaranteed success. Entrepreneurs carefully calculate these risks, knowing that
failure is possible, but they see it as an opportunity to learn and grow.
4.
Curiosity:
This is the desire to know or learn through investigation
and inquiry. It enables an entrepreneur to learn from mistakes, try new things,
and explore new business ideas.
5.
Perseverance
This is the ability to remain determined and focused
despite challenges, setbacks, or failures. To build a perseverance mindset,
entrepreneurs need to resist the desire to quit, create an action plan, and
prioritise improvements.
6.
Vision:
This refers to the designed thoughts for achieving certain
goals or objectives. Entrepreneurs must have the ability to form thoughts,
concepts or objects by imagination. They must have a clear vision, then set
goals and objectives to achieve that vision.
7.
Need for achievements
This is the internal drive to excel and achieve in
relation to a set of self-imposed goals. Entrepreneurs with a high need for
achievement are more likely to start and sustain their businesses.
8.
Networking
This is the ability to connect with people and identify
opportunities for partnership or collaboration.
Meeting with people gives access to resources and
knowledge required to run the business.
9.
Passion:
This refers to loving what one is doing. Passion helps
entrepreneurs to work hard and handle challenges faced in running a business.
It makes entrepreneurs enjoy doing their work.
10. Self-motivation:
This refers to personal initiatives to pursue goals and
complete tasks. They are self-driven to initiate and try different alternatives
to reach their goals.
11. Hard
working:
This is the use of extra efforts to achieve a certain
goal. Entrepreneurs are always ready to do any job in the business and to
commit any amount of time to succeed in their ventures.
12. Commitment:
This is an intense dedication to the business or project.
Starting and sustaining a business requires dedication and sacrifice.
Commitment may be manifested through sacrifice which may be in terms of time,
energy and other resources dedicated to the business.
13. Optimism:
This is a sense of being positive and maintaining high
expectations even in hard and challenging situations.
They aim and hold high expectations about their
businesses.
14. Flexibility:
This is the willingness to change, compromise, and adjust
to the changing environment. This is because business factors like technology,
price of products, costs of acquiring factors of production, resources, laws
and regulations, value for money and purchasing power varies with time.
15. Proactiveness:
This is the ability of acting in advance of a future
situation, rather than reacting. Entrepreneurs are selfstarters who take the
initiative to tum their ideas into reality. They do not solely wait for
opportunities to come to them but actively create opportunities and drive their
businesses forward.
16. Autonomy:
This is an independence or freedom of an entrepreneur
preferring to work alone. Entrepreneurs strongly need to do their own things on
their own way. They prefer being their own bosses.
RELATIONSHIP
BETWEEN INVENTION, INNOVATION & CREATIVITY
1.
Creativity
Creativity is the ability to generate new ideas, think
outside the box, or find unique solutions to problems. It forms the foundation
for both invention and innovation. Creativity often involves imagination,
curiosity, and exploration of possibilities
2.
Invention
Invention is the process of creating something entirely
new that did not exist before. It typically involves developing a novel
product, device, or method using creative ideas. Inventions are often technical
or scientific breakthroughs
3.
Innovation
Innovation refers to improving or modifying existing
ideas, processes, or products to make them more effective, efficient, or
relevant. It often involves applying inventions in practical ways to solve
real-world problems.
ENTREPRENEURIAL
SKILLS
Entrepreneurial skills are
abilities that an individual needs to possess as an entrepreneur. These skills
are:
1.
Business management skills
These are necessary skills for an
entrepreneur to manage various aspects of the business. They include the
following:
i)
Financial management skills
This is an ability to manage business finances. It is
important for an entrepreneur to be able to predict a business cash flow,
sales, as well as profit and loss.
ii)
Sales and marketing skills
This involve effectively promoting products or services to
attract and retain customers while driving revenue growth. Key skills include
communication, understanding customer needs, branding, advertising, and digital
marketing.
iii)
Decision making skills
This involve the ability to analyze information, evaluate
alternatives, and choose the best course of action to achieve a desired
outcome. It requires critical thinking, problem-solving, and assessing risks
and benefits to make informed, timely, and effective choices.
iv)
Negotiation skills:
This is the ability to resolve an issue in an acceptable
and clear manner with others. An entrepreneur faces issues, discusses them, and
bargains to gain advantages for own business.
2.
Leadership skills
Leadership is the ability of an entrepreneur to influence
people towards accomplishment of common goals. It involves the use of friendly
influences to direct the behaviour of the group members towards achieving
certain goals.
3.
Interpersonal and Intrapersonal skills
Interpersonal Skills
Interpersonal skills are the ability to interact
effectively with others, building strong relationships and maintaining a
positive environment. It includes
i)
Networking skills
This involve building and maintaining relationships with
others in a way that benefits both parties, creating opportunities for
collaboration, growth, and support. For
example using social media to connect with people and share business ideas.
ii)
Communication
This is the entrepreneur’s ability to communicate and
interact with others for the purpose of establishing and maintaining positive
relationships in a business environment
Intrapersonal
Skills
Intrapersonal
skills refer to the ability to understand and manage your own emotions,
thoughts, and behaviors, which helps with self-motivation, stress management,
and personal growth. It includes
i) Self-discipline:
This is the capacity to stick with what one believes to be
correct despite pressure to change one’s mind. It increasing inner strength and
power to stick to one’s own decisions.
ii) Self-reflection
This is the internal examining one’s thoughts, actions, and
emotions to gain deeper insights and improve personal growth. It helps identify
strengths and areas for improvement.
IMPORTANCE
OF ENTREPRENEURSHIP
The importance of entrepreneurship
includes:
1.
Creating employment:
Entrepreneurial activities create employment opportunities
through creating jobs for oneself as well as for those who will be employed in
that business.
2.
Promote innovation:
It promote innovation which enhances the creation of new
and improved products, markets, sources of raw materials, production systems,
and organisations.
3.
Fosters economic development:
Entrepreneurship fosters economic development through
established businesses which create job opportunities for the people and create
new products and contribute to the national income.
4.
Promotes social change:
Entrepreneurship promotes social change by making
entrepreneurs think beyond ordinary ways of doing things which leads to
improved lifestyles, morals, and better
financial options in society.
5.
Encourages investment:
Through market research on the availability of various
business opportunities, entrepreneurs establish new types of businesses in
different economic sectors, which lead to increased investments.
6.
Stimulates competition:
Entrepreneurs often compete for the same market and
resources; hence, they ensure production of quality and sufficient quantity of
goods and services with affordable prices to win the market.
7.
Improved Standard of Living
By providing goods and services that meet people’s needs,
entrepreneurship can improve quality of life and overall well-being in society.
8.
Personal Development
Entrepreneurship encourages personal growth by challenging
individuals to be innovative, resilient, and adaptable to market changes.
9.
Community Development
Social entrepreneurs often reinvest in their communities,
supporting local initiatives, creating social programs, and improving
infrastructure.
10. Resource
Optimization
Entrepreneurs often find creative ways to use available
resources efficiently, reducing waste and maximizing the impact of limited
assets, which contributes to environmental sustainability and costsaving
practices
11. Cultural
Impact
Entrepreneurs help shape and redefine culture by
introducing new ideas, brands, and lifestyles. They create trends that
influence how people think, live, and interact with one another, driving social
and cultural change.
2.2. THEORIES OF ENTREPRENEURSHIP
Entrepreneurship theories are
frameworks that explore the various approaches and concepts that explain how
entrepreneurs identify opportunities, innovate, and manage risks to build
successful businesses. These theories includes the following:
1. INNOVATION
THEORY
Founder: Professor Joseph
Schumpeter, an Austrian economist and political scientist Year: 1934 Theory
Details:
The theory says that entrepreneurs bring new ideas to life
by creating new products, improving ways of working, or finding better ways to
sell goods. They use innovation to change the way businesses and economies
work. For examples:
— Creating new products
— Improving production
— Entering new markets
— Changing industries
2.
NEED ACHIEVEMENT THEORY
Founder: Professor David McClelland, a psychologist Year:
1961 Theory
Details:
The theory says that people who have a strong desire to
achieve goals and do things better are more likely to become entrepreneurs.
These people take calculated risks, work hard, and focus on achieving success.
According to David McClelland, a person acquires three
types of needs based on life experiences. These are:
i)
Need for Achievement
This is the desire to excel, accomplish challenging goals,
and do tasks better. This helps entrepreneur to be motivated by success, set
ambitious but realistic goals, and take calculated risks.
ii)
Need for Power
This is the desire to control or influence others and have
authority. It helps entrepreneur in leadership and in making decisions
iii)
Need for Affiliation
This is the desire to build and maintain friendly and close
relationships with others. It helps entrepreneur to build teamwork, avoid
conflict, and create social connections and approval.
These three needs vary from person to person and influence
their behavior, choices, and success as entrepreneurs.
3.
THEORY OF STATUS WITHDRAWAL
Founder: Everett E. Hagen, an economist and
sociologist Year: 1962 Theory Details:
The theory states that entrepreneurship emerges when
certain groups or individuals experience loss of status or prestige in society.
This loss motivates them to withdraw from traditional roles and innovate or
start businesses as a way to regain respect and recognition.
Example: Individuals affected by job losses in traditional
industries (like coal mining or agriculture) may innovate and start new
ventures in different fields, such as technology or services.
FOUR
TYPES OF PERSONALITIES
The loss of status, cause the rise of entrepreneurship is
influenced by certain personalities. These personalities are
i)
Retreat:
Entrepreneur who continues to work in society but remains
indifferent to his work or status;
ii)
Ritualist:
One who works as per the norms in the society with no hope
of improvement in the working conditions or his status;
iii)
Reformist:
One who is a rebellion and tries to bring in new ways of
working and new society.
iv)
Innovator:
An entrepreneur who is creative and tries to achieve his
goals set by himself.
4. ECONOMIC
THEORY OF ENTREPRENEURSHIP
Founder: Papanek and Harris Year: 1970 Theory Details:
The theory suggests that entrepreneurship thrives when
economic conditions are favorable. Entrepreneurs are motivated by opportunities
like
— access to capital,
— availability of resources,
— market demand,
— bank credit availability
— loanable funds at lower rate of interest;
— high demand for consumer goods and services,
— communication
— transportation facilities.
— supportive government policies to start and grow
businesses.
5. RISK
BEARING THEORY
Founder: Richard Cantillon Year: 1755 Theory
Details:
The theory suggests that entrepreneurs are people who take
risks by investing resources in uncertain situations to earn profits. The more
risk the nature of business is, the greater must be the profit earned by it.
Entrepreneurs are rewarded with profits as compensation for bearing this risk.
According to the theory, entrepreneurs face the following types of risks:
a)
Market Risk. Uncertainty about
customer demand for a product or service.
b)
Risk of losing money due to investment or
borrowing. For example: If a business fails, the entrepreneur might
lose their savings or be unable to repay loans.
c)
Production Risk. Challenges in
making products or delivering services efficiently.
d)
Competitive Risk. The risk of
being outperformed by competitors in the market.
e)
Economic Risk. Risks due to
changes in the economy, such as inflation or recession.
f)
Legal and Political Risk. Risks
from changes in laws, regulations, or government policies.
g)
Natural Risk. Risks caused by
unforeseen natural events like floods or earthquakes.
IMPORTANCE
OF ENTREPRENEURSHIP THEORIES
The following are the importance of
entrepreneurship theories.
1.
Provides a Framework for Understanding
Theories explain what entrepreneurship is and how it
works, helping individuals grasp its key concepts and practices.
2.
Guides Entrepreneurial Decisions
They offer insights into risk-taking, innovation, and
resource allocation, enabling entrepreneurs to make informed decisions.
3.
Encourages Innovation
Theories highlight the role of creativity and innovation,
motivating entrepreneurs to develop unique products or services.
4.
Identifies Opportunities
They help entrepreneurs recognize gaps in the market and
seize opportunities for business growth.
5.
Risk Management
Theories explain how to assess and handle various risks,
reducing the chances of failure in entrepreneurial ventures.
6.
Supports Policy Development
Governments use these theories to create policies and
environments that encourage entrepreneurship.
7.
Inspires Aspiring Entrepreneurs
Understanding the challenges and rewards of
entrepreneurship motivates individuals to start their own businesses.
8.
Contributes to Economic Growth
Theories emphasize the role of entrepreneurship in job
creation, innovation, and improving the economy.
