Theories & Concepts of

Entrepreneurship
Entrepreneurship
ETR3153
By: Wan Nurhamizah Wan Zakaria

Session Objectives
At the end of the session, students

should be able to:

Understand the various theories
and concepts of entrepreneurship
Have a deeper understanding of
the discipline of entrepreneurship

Definition of an
Entrepreneur

An entrepreneur is a person

who undertakes to do a job.

The term entrepreneur originated
from a French word
entreprendre was first coined
by Richard Cantillon (1755).
In Malaysia, the term usahawan
is used to mean entrepreneur.

Definition of
Entrepreneurship
Entrepreneurship involves not only the
process that leads to the setting-up of a
business entity but also the expansion
and development of an going concern.
The study of entrepreneurship is
concerned with the entrepreneurial
behavior, the dynamics of business setup and expansion or development of an
entrepreneurial organization.

Development of
Entrepreneurship Theories
Adam Smith (1776) An entrepreneur is a

person who acts as agent in transforming

demand into supply.
Jean Baptiste Say (1803) An entrepreneur is a
person who shifts resources from an area of low
productivity to higher productivity.
John Stuart Mill (1848) An entrepreneur is a
prime mover in the private enterprise. The
entrepreneur is the fourth factor of
production.

Development of
Entrepreneurship Theories
Carl Menger (1871) The entrepreneur acts as an

economic agent who transforms resources into

products and services. These transformation process
gives added value to the output.
Joseph Aloysius Schumpeter (1934) The
entrepreneur is an innovator. The economy moves
through leaps and bounds because of the
innovations. This process is known as creative
destruction
Alfred Marshall (1936) The process of
entrepreneurship development is evolutionary. The
entrepreneur is responsible for the evolution of sole
proprietorships into a public company.

Development of
Entrepreneurship Theories
Ibnu Khaldun (Abdul Rahman Mohamed

Khaldun) The entrepreneur is seen as a

knowledgeable individual and is instrumental
in the development of a city-state where
enterprises emerge.
David C. McLelland (1951) The entrepreneur
is a person with a high need for achievement.
This need for achievement is the foundation of
the entrepreneurship process.

Islamic Entrepreneurship
Discussion on Islamic

entrepreneurship is based on the

following main topics:
Integration
Human nature
Motivation
Islamic business and entrepreneurs
Islamic economic system
Guidelines
Exemplary conducts

The Concept of Integration

Islam is a complete way of life. There

is no separation between business

and religion.
Islamic entrepreneurship is part of the
way of life.
Muslims are encouraged to get
involve in business activities. (9/10
rezeki adalah dalam perniagaan
Hadis Nabi)

Human Nature
It is part of human nature to follow the

teachings of their religion.

In Islam, Muslims are required to fulfil
two important duties, ibadah and
khalifah.
In Islamic entrepreneurship, Muslims
are able to perform both duties.
Maximizing profit is not the ultimate
aim of Muslim entrepreneurs.
Islamic Man versus Economic Man

Motivation
Following the sunnah of ambiya and

the companion of Rasulullah saw.

Islamic entrepreneurship leads to
the path of success both in this
world and the hereafter.
Success in Islam is not measured by
the end result but also the means
and ways of achieving them.

The type of success according to

Al-Qurtubi
Halal (Rightful means of living)
Qanaah (Satisfying)
Taufiq (Guidance)
Saadah (Tranquility/Happy)
Jannah (Heaven)

The level of success according to

Al-Ghazali
Depends on the following:
Level of knowledge
Level of repentance
Level of challenges
Level of obstacles
Level of motivation
Level of handicap
Level of praise and thankfulness

Possession of Wealth
In Islam, possession of wealth is allowed

based on the following principles:

Allah s.w.t. is the absolute owner of wealth
Allah s.w.t. has created wealth in
abundance (melimpah ruah) and
sufficient (mencukupi) for all
Allah s.w.t. has created wealth for
mankind
Wealth is entrusted to mankind

Entrepreneurship as Ibadah
Muslim entrepreneurs involvement in

business is to fulfill an obligation known

as fardhu kifayah
Fardhu kifayah~ Unless and until there
is an entrepreneur in a community, the
entire community is deemed to be sinful.
Muslim entrepreneurs bear the
responsibility to provide goods and
services primarily to the Muslim
community and to others

Islamic Entrepreneurship
Model
Islam Propagates
(Business Venture)
Allah Prepared
(Facilities)
Islam Provides
(Guidelines & Procedures)
Allah Promised
(Rewards)

Islamic Economic System

Islamic entrepreneurship is part of

the framework of the Islamic

Economic System.
Islamic economic system involves:
Islamic banking
Islamic insurance (takaful)
Islamic capital markets
Islamic economic system is based
on Islamic jurisprudence.

Guidelines and Procedures

Islam has provided an extensive

guidelines for Islamic

entrepreneurship activities.
Among others:
The principle of buying and selling
The permissible types of business
The principle of zakat in business
Business ethics

Entrepreneurial Ethics
Prevent laziness
Eradicate fear/shyness
Search for legitimate ventures
Avoid unlawful sources of income
Show gratitude and thankfulness
Grow and develop wealth
Diversify business ventures
Avoid greediness

Entrepreneurial Ethics
Avoid malicious behavior
Avoid squandering (elakkan membazir)
Avoid stinginess (elakkan kedekut)
Pay zakat and alms (sedekah)
Be trustworthy
Pray consistently
Tawakkal
Patience
Qanaah

Exemplary Conducts of
Muslim Entrepreneurs
Business is secondary to the call of

jihad (crusade)
Never use power or influence for selfinterest
Afraid of accumulated wealth
Leadership qualities in all aspects
Practice moderate way of life