Entrepreneurship: What does it REALLY mean?

Introduction:
In a world where ideas drive economies, it is no wonder that innovation and entrepreneurship
are often seen as inseparable bedfellows. The governments around the world are starting to
realize that in order to sustain progress and improve a country’s economy, the people have
to be encouraged and trained to think out-of-the-box and be constantly developing innovative
products and services. The once feasible ways of doing business are no longer guarantees
for future economic success!

In response to this inevitable change, some governments are rethinking the way the young
are educated by infusing creative thinking and innovation in their nation’s educational
curriculum. In the same vein, they are putting much emphasis on the need to train future
entrepreneurs through infusing entrepreneurship components within the educational system,
espec! ially at the tertiary level. Some countries have taken this initiative to a higher level by
introducing entrepreneurship education at elementary schools and encouraging them to be
future entrepreneurs when they are of age. In a series of survey funded by Kauffman Center
for Entrepreneurial Leadership, it was found that nearly seven out of 10 youths (aged 14-19)
were interested in becoming entrepreneurs. Being an entrepreneur is now the choice of the
new generation as compared to the preferred career choices of yesteryears such as being a
doctor, lawyer or a fighter pilot. In a recent visit to the bustling city of Shanghai in China, an
informal survey was carried out among Chinese youths by the author. The results of the
survey showed that being an entrepreneur, especially in the field of computer and e-
commerce, is perceived as a ‘cool’ career and is an aspiration for many Chinese youths Prior
to the ‘opening up’ of modern China, being an entrepreneur was perceived as the ou! tcome
of one’s inability to hold a good government job and those who dared to venture, were often
scorned at by their peers. Times have indeed changed.

With this change in mindset and the relative knowledge that entrepreneurs bring forth
increased job creations, the awareness and academic studies of entrepreneurship have also
heightened. In many tertiary institutes, many courses of entrepreneurship and innovation are
being developed and offered to cater to the increasing demand. The term "entrepreneurship"
has also evolved with numerous variations. The proliferation of jargons such as netpreneur,
biotechpreneur, technopreneur and multipreneur are coined to keep up with the ever-
changing times and business conditions that surround us.

In view of these changes, it is important that the definition of entrepreneurship be refined or

redefined to enable its application in this 21st century. To put it succinctly, "Good science has
to begin with good definitions (Bygra! ve & Hofer, 1991, p13)." Without the proper definition, it
will be laborious for policymakers to develop successful programs to inculcate
entrepreneurial qualities in their people and organizations within their country.

The paper will provide a summary of the definitions of entrepreneurship provided by scholars
in this subject area. The author will also expand on one of the definitions by Joseph
Schumpeter to create a better understanding of the definition of the term "entrepreneurship"
as applied in today’s business world.

Entrepreneurship through the Years:

It was discovered that the term ‘entrepreneurship’ could be found from the French verb
‘entreprende’ in the twelfth century though the meaning may not be that applicable today.
This meaning of the word then was to do something without any link to economic profits,
which is the antithesis of what entrepreneurship is all about today. It was only in the early
1700’s, when French economist, Richard ! Cantillon, described an entrepreneur as one who
bears risks by buying at certain prices and selling at uncertain prices (Barreto, 1989, Casson
1982) which is probably closer to the term as applied today.

In the 1776 thought-provoking book ‘The Wealth of Nations’, Adam Smith explained clearly
that it was not the benevolence of the baker but self-interest that motivated him to provide
bread. From Smith’s standpoint, entrepreneurs were the economic agents who transformed
demand into supply for profits.

In 1848, the famous economist John Stuart Mill described entrepreneurship as the founding
of a private enterprise. This encompassed the risk takers, the decision makers, and the
individuals who desire wealth by managing limited resources to create new business
ventures.

One of the definitions that the author feels best exemplifies entrepreneurship was coined by
Joseph Schumpeter (1934). He stated that the entrepreneur is one who applies "innovation"
within th! e context of the business to satisfy unfulfilled market demand (Liebenstein, 1995).
In elaboration, he saw an entrepreneur as an innovator who implements change within
markets through the carrying out of new combinations. The carrying out of new combinations
can take several forms:

The introduction of a new good or standard of quality;

-The introduction of a novel method of production;

-The opening of a new market;

-The acquisition of a new source of new materials supply; and

-The carrying out of the new organization in any industry.

Though the term ‘innovation’ has different meanings to different people, several writers
tended to see "innovation" in the form of entrepreneurship as one not of incremental change
but quantum change in the new business start-ups and the goods/services that they provide
(egs, Bygrave, 1995; Bygrave & Hofer, 1991).

In the view of Drucker (1985), he perceived entrepreneurship as the creation! of a new

organization, regardless of its ability to sustain itself, let alone make a profit. The notion of an
individual who starts a new business venture would be sufficient for him/her to be labeled as
an entrepreneur. It is this characteristic that distinguishes entrepreneurship from the routine
management tasks of allocating resources in an already established business organization.
Though the definition tends to be somewhat simplistic in nature, it firmly attaches the nature
of entrepreneurial action with risk-taking and the bearing of uncertainty by the individual
(Swoboda, 1983)

In a Delphi study, Gartner (1990) found eight themes expressed by the participants that
constitute the nature of entrepreneurship. They were the entrepreneur, innovation,
organization creation, creating value, profit or non-profit, growth, uniqueness, and the owner-
manager. The themes could be seen as a derivative and expansion of Schumpter’s earlier
concept.

Expanding on Schump! ! eter’s Definition:

After digesting the numerous definitions of entrepreneurship, one would tend to see a strong
link between these two terms: entrepreneurship and innovation. In retrospect, most of the
definitions tended to be, to some extent, a re-work and expansion of Schumpeter’s definition
of entrepreneurship (which is that of innovation being applied in a business context). As
defining the term of ‘innovation’ is highly debatable and would merit a paper on its own, the
author has thus, for convenience, summarised the definition of innovation. Innovation can be
perceived simply as the transformation of creative ideas into useful applications by combining
resources in new or unusual ways to provide value to society for or improved products,
technology, or services.

In the author’s opinion, the difficulties of defining "innovation" could be the reason for the
quandary one finds in attempting to arrive at a clear-cut definition of the term "
Entrepreneurship".!

Take for example, if someone starts another run-of-the-mill hot dog stand in the streets of
New York, will he termed as an entrepreneur? According to Drucker’s definition, he will be
seen as one. However, if the above definition by Schumpeter was used as a guideline, the
answer is probably ‘NO’. Why? The core of the matter lies in what is so innovative about
setting up another hot-dog stand which are in abundance in New York. On the contrary, if he
is the first one to start a stand selling hot-dogs with Oriental Sweet and Sour sauce topping;
he could be termed as an entrepreneur (even based on Schumpeter’s requirement) as he
has done what others have not done before. In the context of entrepreneurship, creativity
and innovation are key points in the whole scheme of things.

In this manner, by adding "innovative" features to a product or services and setting up a

business based on these additional features to compete in the existing market, new entrants
may be ! able to gain this competitive advantage over existing market players.

In the case of the hot-dog seller, it may be argued that his addition of Oriental Sweet and
Sour sauce toppings may be seen as nondescript. This runs in contrary to some scholars’
definition of entrepreneurship as requiring quantum changes in the products/ services to be
justified as being entrepreneurial (Bygrave, 1985; Bygrave & Hofer, 1991).

Consistent with creating new products for sale, someone who starts a business by providing
a totally new way of serving his customers/ clients is considered to be entrepreneurial too.
Though, it is often argued that there are no real new products or services in a case where
one does not look to the past products and services for ideas for improvements. Thus, the
notion of incremental improvements should be accepted as being innovative too.

Innovation in the business sense may not necessarily involve, in the physical sense, the
introduction o! f a new product or service. It can be in the form of what is commonly known as
creative imitations. For example, if an individual starts selling a product that is already
common in his area or country, he will not be seen as being entrepreneurial. However, if he
is the first to sell the same product in a virgin locale or to an untouched market segment, he
will be seen as an entrepreneur in his own rights.

Take Muhammad Yunus, for example. Yunus became an entrepreneur when he started a
micro-loan program for the poor villagers in a rural part of Bangladesh named Grameen, with
only US$26. The loan was divided among 42 villagers to assist them to buy small items such
as combs, scissors, needles and other necessities to start their own home businesses. In the
past 22 years, Grameen Bank has grown with over $2 billion loans granted. It has now
become a model for several micro-loan facilities.
From the following example, Yunus created banking and lending facilities i! n Grameen
specifically for the poor villagers. Banking and lending money activities are not new but
Yunus was the first to provide such facilities in a rural part of Bangladesh and that is
definitely innovation and risk-bearing on his part as a social entrepreneur. In short, innovation
need not arise mainly from a new product or service but it could be an old product or service
finding a new market for penetration.

An individual could be termed as an entrepreneur if he or she sells a product or service using

new systems and/ or mediums of marketing, distribution or production methods as a basis for
a new business venture. A good example will be Jeff Bezos, the founder of Amazon, the
successful Web-based bookstore. He was one of the first to sell books on a large scale using
an online store and also patented the one-click system for online buying. Though selling
books is not an innovation in itself, Jeff Bezos was innovative in the use of the Internet then
as a viable ! marketing and sales channel for selling books.

Another example from the field of e-commerce is Stuart Skorman, the founder of Reel.com.
Reel.com is essentially one of the first cyber movie store with a very large inventory of over a
100 000 videos. Though setting a movie store was revolutionary then, Reel.com main
distinction was being known as the first online store to expand by opening an offline store.
The founder felt that by doing so, the online store could be an advertisement for the offline
store and vice versa, thus strengthening this click and mortar business venture- an example
of creativity and innovation applied in a profitable business context.

Conclusion:

This paper has started as an attempt to redefine the term of entrepreneurship but ended up
‘updating’ the wheel, based on the definition as proposed by Schumpeter. The paper
expanded on this influential work by giving examples to illustrate what innovation in
entrepreneurship was and hope ! that along the way, new insights were unearthed in the
study of defining entrepreneurship.

In summary, the author hopes that this paper would further encourage the infusion of
creative thinking and innovation within the educational system to nurture future
entrepreneurs with a competitive edge. In the author’s view, the characteristics and
capabilities to set up a new business venture based on doing things that have not done
before should be encouraged. Innovation needs to be the cornerstone of entrepreneurship as
opposed to the mere setting up of another new enterprise without implementing changes or
adding features of improvements to the products and services provided and/ or its business
processes.

Dr.Alvin Chan is a Research Fellow at a research forum in Asia. In addition, he acts as an

Advisor for several organizations such as CambridgePI (Europe) and Tumble Tots
(Singapore and Asia-Pacific). Contact Dr. Chan at alvinchan88@gmail.com. Article on
entrepreneurship, meaning by Dr. Alvin Chan