1Chapter

Introduction: Entrepreneurs and Entrepreneurship

Introduction

A Society that has emerging entrepreneurs is considered to be a successful society. This

is because an entrepreneur is an individual who is creative, dynamic and innovative.
These entrepreneurs are willing to take risks and face all the unpredictable and uncertain
challenges through their creativity and the will power to achieve success. This
courageous spirit helps them to e confident and look forward towards more opportunities.
Entrepreneurs need to develop and penetrate new business fields in order to be
competitive so that they can offer more choices to society.

WHY SOCIETY NEEDS ENTREPRENEUR?

There are four main reasons why entrepreneurs are important in a society.

1. To utilize the factors of production such as land, capital, technology, information and
human resources in producing effective tasks
2. To identify opportunities in the environment by increasing activity that will be
beneficial to everyone
3. To select the best approach to utilize all the factors of production in order to minimize
wastage in entrepreneurial activities
4. For the benefit of the future generation

FOUR THEORIES THAT EXPLAIN ECONOMIC GROWTH

Theory 1: The theory of mercantilism was the first major economic theory known in the
word. It drove the economic system during the 16th to 18th centuries in the “known”
world. It was based on the idea that a nation’s wealth will increase only if government
regulated all the nation’s commercial interests. The government, according to

mercantilism, should take care of all the economic activities of a country. The Theory of
Mercantilism holds that the wealth of a nation can be measured by its ready supply of
capital, generally held in the concrete from of god or silver. Mercantilism states that the
global supply of wealth is fixed amount, and that therefore any gain of wealth by one
nation must necessarily represent a loss by another.

Theory 2: Toward the 18th Century, Adam Smith wrote “An Inquiry into the Nature and
Causes of the Wealth of Nations” where he documented industrial development in
Europe. He expounded the need to minimize the role of government intervention and
taxation in the free markets, saying that an “invisible hand” guide supply and demand,
reflecting the concept that each person, by looking out for herself, creates the best
outcome for all. Smith called this the laissez-faire theory, which along with other
philosopher,claimed, “It is not from the benevolence of the butcher, the brewer, or the
baker, that we can expect our dinner, but from their regard for their own interest.’ (Filed
on February 26, 2009, Filed Under Adam Smith, Finance/Economics Pioneer,
Microeconomics, Supply and Demand.)

Theory 3:Meanwhile, Karl Marx disagreed with Adam Smith and the laissez faire
theorists. He interpreted human history as class struggle between workers and employers.
He declared that free enterprise (laissez faire) would lead to increasingly severe losses
and would eventually bring out revolution by the workers. They called for an economy
where the government owned all called for an economy where the government owned all
the property and distributed everything equally among all the people through socialism.

Theory 4:Today, experts realize that there is not one single theory that can explain
economic growth.

In 1934, an economist named Joseph Schumpeter explained that economic growth is

started by people (whom he called entrepreneurs) not produces goods not only for
personal profit but also for the good of everyone around them. He called entrepreneurs
the backbone of the economy. Entrepreneurs, according to him, are people who find joy
in creating or producing good; who find self-fulfillment in getting things done; and who
have a strong need for achievement. This entrepreneur centered theory is widely used to
answer the need for socio-economic development.

DEFINITON OF ENTREPRENEUR AND ENTREPRENEURSHIP

The word ‘entrepreneur’ is derived from the French word entreprendre, meaning ‘to
undertake or trying’. According to KamusDewan, ‘entrepreneur’ is defined as an ability
which includes effort, activity, action and others to accomplish a task.
There are various definitions of entrepreneur and entrepreneurship. Schumpeter (1934)
in Dollinger (1995) defined entrepreneurshipas a firmthat operates and implements a
combination of new activities such as product development, marketing and resources for
raw materials, manufacturing approach, and new organizational structure. Cole (1969)
defined entrepreneurship as activities that produce beneficial result through developing
profit oriented businesses.

Besides that, Kuratko and Hodgets (1992) stated clearly that the entrepreneur is one
who undertake to organize, manage and assume the risks of business. Furthermore,
Dollinger (1995) argued that the emergence of entrepreneurs is not a new phenomenon.
Entrepreneurs have existed long before the new millennium, but the concept and
implementation are different especially in term of development and exploration. Kirzner
(1979)explained the entrepreneur as an individual who is always alert about the business
opportunities that has not seen by others. Entrepreneurs take a proper action that is
imaginative, creative and innovative. Furthermore, He stated that:

“An entrepreneur is more than just a risk-taker and innovative. He or she the one
who sees the future that no one else has seen and, if this perception is correct, brings
about a reordering of resources to produce greater consumer satisfaction and
technological efficiency.”

Stevenson, Roberts and Grousbeck (1989) briefly defined entrepreneurship as

individual preparedness to grab opportunities without considering the resources at hand.
Based on the various definitions, Dollinger defined entrepreneurship as establishing an
economical firm that is innovative, profit oriented, willing to take risks as to face
uncertainty of the environment.

PERSPECTIVES OF ENTREPRENEURSHIP

There are eight perspectives relating to the field of entrepreneurship. They are:

1. To increase wealth through profit from business

2. To develop the business by combining their strength
3. To develop innovation through creating new products or ideas through confidence
and determination
4. To develop changes by adapting human wants, situations, and environment
 5. To develop jobs by creating job opportunities through entrepreneurial activities
6. To develop growth through sales and income growth
7. To develop values by concentrating on social responsibilities
8. To submit to God through prayers and religious norms and rules

ENTREPRENEURSHIP: A DISCIPLINE

Entrepreneurship is a new field that involves many models, theories, and concepts that
have not been explored. However, this discipline continues to grow and attract the
interest of the various sectors of society. Entrepreneurship gained attention and awareness
in the 1970s. Various discipline namely management, economic, sociology, socio-
psychology or psychology have contributed to the emergence of entrepreneurship as
another separate discipline.

The concept of entrepreneurship was initially introduced only as a discipline. Throughout

the word, institutes of higher learning are offering it as an elective or a majoring course.
These institutions started to introduce and explore it as the focus of excellence in the
entrepreneurship as another academic field that plays an important role in the future well-
being of the society.
 CHAPTER 1
QUESTIONS FOR REVIEW AND DISCUSSION

1. Give and explain the four theories that explain economic growth.

2. From the various definition of the word entrepreneurship, what do you think is the
best idea that describes/explains the term? Explain your answer and cite your
bases.

3. From the different perspective of entrepreneurship, choose three (3) and explain
how those ideas relate to entrepreneurship.

4. Why do we say the entrepreneurship is a discipline? Justify your answer.

MY ANSWERS:

1. Mercantilisim-wealth of a nation determined by the accumulation of gold and running trade

surplus.
- Classical Theory-Adam Smith placed emphasis on the role of increasing returns to scale (economies
of scale/specialization).
- Neo-Classical Theory-growth based on supply side factors such as labour productivity, size of the
workforce, factor inputs.
- Endogenous Growth Theories - rate of economic growth strongly influenced by human capital and rate
of technological innovation.

2.Transforming the world by solving big problems, like bringing about

social change or creating an innovative product that challenges the status quo
of how we live our lives on a daily basis.

3.To increase wealth through profit from business

-To develop growth through sales and income growth
-To develop the business by combining their strenght
 4.The concept of entrepreneurship was initially introduced only as a
discipline. Throughout the word, institutes of higher learning are offering it as
an elective or a majoring course.
 CHAPTER 1
ACTIVITY 1

Based on what you have learned so far about entrepreneurship; discuss why entrepreneurs
are called the “backbone of the economy.” In addition, try to imagine what a business
enterprise needs in order to survive.

MY ANSWER: People who find joy in creating or producing good who find self- fulfillment in
getting things done and who have a strong need for achievement.

CHAPTER 1
EXERCISES
Test I. IDENTIFICATION. Identify what words are being described in the following
statement. Write your answer on the space given before the number.

Innovation 1. Refers to an individual whose creative, dynamic and innovative.

Mercantilisim 2. This term is based on the idea that a nation’s wealth will increase only if
the government regulated the entire nation’s commercial interest.

Karl Max's3. He interpreted the human history as a class struggle between the workers
and employers.
ADAM SMITH 4. He expounded the need to minimize the role of government
intervention and taxation in the free markets.

FREE-MARKET THEORIES 5. Smith along with other philosopher, claimed, “it is not
from the benevolence of the butcher, the brewer of the breaker, that we can expect our
dinner but from their regard for their own interest.” What economic theory is that?

JOSEPH SCHUMPETER 6. He explained that economic growth is started by people

(whom he called entrepreneurs) not produces goods not only for personal profit but also
for the good of everyone around them.

MERCANTILISIM 7. This term holds that the wealth of a nation can be measured by it’s
ready supply of capital, generally held in the concrete from of gold or silver.

JOSEPH SCHUMPETER 8. According to him, this creates wealth not only for the people
in business, but also for the whole country where the citizens work to provide for
themselves and others and where they take care of their own financial needs.

ENTREPRENUER 9. It is the French word, meaning ‘to undertake or trying’.

ENTREPRENUERSHIP 10. According to Schumpeter, it is a firm that operates and

implements a combination of new activities such as product development, marketing,
resources for raw materials, manufacturing approach, and new organizational structure.