Historical Development of Entrepreneurship
The word “entrepreneurship” has evolved over a long period starting before the 15 th
century. It had different meanings at different points in time.
It is important to, at the onset, distinguish between ‘entrepreneurship’ and an
‘entrepreneur’. The word entrepreneur is a noun referring to the person, while
entrepreneurship is a process.
First, the word ‘entrepreneur’ originated from the French word ‘entrepredre’ which means
a person who voluntarily heads a military expedition. It was translated to mean a ‘go-
between’, describing a person who sells goods on behalf of a venture capitalist. It was
later used to describe a person who managed a production system.
In the 18th century, entrepreneurs were described as investors who attempt to turn their
inventions into products (i.e. commercial values) in commercial quantities. But because
they lacked the requisite capital, they liaise with venture capitalists to make this happen.
In the 19th century, the concept of entrepreneurship took an economic and managerial
perspective. During that period, an entrepreneur was seen as a factor of production that
combined and managed other factors of production (land, labour and capital) to create
value.
In the 20th century, the concept of innovation was added to the entrepreneurial process.
As such, an entrepreneur was seen as an innovator, one who not only manages factors of
production but also does that in a revolutionised way. That is, he introduces new ways,
new machines, new processes, new materials in order to bring about new (or better)
products that give better value or satisfaction for a new market. Arguing in this regard,
Hisrich and Peters (1985) asserted that the entrepreneur is “an innovator, an individual
who develops something that is unique …… and that his function is to reform and
revolutionalise patterns of production or the production process”.
In 1975, Albert Shapiro described an entrepreneur as one who takes initiatives, organises
human and economic resources to create product/services of economic value. David
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McClelland described an entrepreneur as someone with a very high need for achievement.
He explained that an entrepreneur’s needs are to:
i) Attain a milestone in his business pursuit
ii) Try out something new in business
iii) Accomplish a particular task
iv) Exit/escape an unpleasant situation.
Joseph Schumpeter argued that entrepreneurs are the drivers of economic growth and
development through innovation.
Definitions of Entrepreneurship
Jones and Sekong (1980) defined entrepreneurship as “a force that mobilises other
resources to the unmet market demand”. This definition took an economic dimension of
entrepreneurship by looking at it as a factor of production.
Ronstadt (1984) defines it as “the dynamic process of creating incremental wealth”. In
other words, entrepreneurship is a process of value addition.
Stevenson and Gumpert (1985) defined it as “the process of creating value by pulling
together a unique package of resources to exploit an opportunity”. This definition is an
emphasis on the fact that the process of entrepreneurship starts with the identification of
opportunities before the mobilization of resources to exploit them.
Low and McMillan (1988) and Gartner (1989) see it as “the creation of new enterprise”.
Bob Reiss (2000) defined it as “the recognition and pursuit of opportunity without regard
to one’s current resources, with confidence and assurance of success and with the
flexibility to make changes as necessary and the will to rebound from any setback”.
Embedded in these definitions are that entrepreneurship:
i) Is a process (i.e. has an order)
ii) Is a creative process (i.e. exploitation of opportunities)
iii) Involves uniqueness (i.e. doing things differently)
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iv) Involves the mobilization of resources
v) Involves some kind of reward at the end
vi) Involves risk-taking (i.e. by venturing into uncertainty).
Who is an Entrepreneur?
Joseph Schumpeter (1934) defined an entrepreneur as “one who develops something
new” (i.e. an inventor).
Bagby (1988) defines him as “one who utilizes the opportunity of instability, turbulence or
lack to produce something new or modify an existing one for profit motive”. Thus, the
ability of an individual to clearly identify an opportunity inherent in an unstable or
turbulent situation or from making available of what is lacking in order to either bring up
something new or to do an old thing differently is what makes him an entrepreneur.
Gartner (1989) describes an entrepreneur as “one who creates an organisation”.
Peckle and Abrahamson (1990) defined an entrepreneur as “one who organises and
manages a business, undertakes and assumes the risk for the sake of profit”.
From all these definitions, what can be deduced about an entrepreneur is that he is an
agent of change who has passion for doing things differently in order to bring about a new
satisfaction to product/service users.
Characteristics of Entrepreneurs
Entrepreneurial characteristics can both be developed and be learnt. To be a successful
entrepreneur, Timmons (1978) believes that one must have the entrepreneurial spirit.
That is, one must possess the following features;
1. Adaptability – this is the ability to cope and adjust to new situations easily and
quickly and find creative solutions to problems. A successful entrepreneur is one
who easily integrates with and easily gets used to new situations and
circumstances.
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2. Competitiveness – this is the willingness to compete with and test oneself against
others. Successful entrepreneurs are competitive in nature. They see every
relationship as a contest. They are always in the lookout for what others are doing
or have done with a view to coming up with better ideas.
3. Confidence – this is the belief that you can accomplish what you set out to achieve.
Successful entrepreneurs have strong beliefs in themselves. That is, they have a
very high sense of self-opinion.
4. Discipline – this is the ability to stay focused and adhere to schedules and datelines.
Successful entrepreneurs have self-control, i.e. the ability to restrain themselves in
doing what will only help them in achieving their goals even if doing such things
may not please them.
5. Drive – this is the desire to work hard to achieve one’s goals. Because the successful
entrepreneur is driven by his passion, he has the capacity to work indefatigably for
long hours and is always interested in working towards the achievement of goals.
6. Honesty: this is a commitment to refrain from lying and deceit, to be truthful and
sincere in dealing with others. The successful entrepreneur has the responsibility of
building a good and reliable personality for himself such that people who deal with
him have high regards for him in terms of reliability, dependability, confidence and
assurance.
7. Organisation – this is the ability to structure one’s life and keep schedules and
information in an order. A successful entrepreneur has the orderliness required to,
for instance, know exactly where to get what (e.g. documents) at any point when
the need for that arises. He knows his daily schedules and goes after them in an
orderly way. He keeps track of events (e.g. using diaries) and knows when and how
to schedule appointments/events. Orderliness is an important feature of a
successful entrepreneur.
8. Perseverance – this is the refusal to quit unpalatable situations and the willingness
to keep goals in sight and work towards them despite obstacles and challenges. In
other words, a successful entrepreneur is not easily discouraged by obstacles and
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challenges. That is, he has a persistent determination to adhere to a course of
action in spite of obstacles and challenges.
9. Persuasiveness – this is convincingness. It is the ability to convince people to accept
one’s point of view and to make them interested in one’s ideas. This is done not
only by eloquence but also by careful choice of appropriate words during
discussions with other people.
10. Risk taking – this is the courage to expose oneself to possible losses. Successful
entrepreneurs are typically risk-takers but they take calculated risk. Risk may
sometimes lead to failure. Because a typical successful entrepreneur does not
dread failure and is neither frustrated by it, he instead sees failure as a lesson from
which to learn and reinforce future success. He therefore will naturally be expected
to be a risk-taker.
11. Understanding – this is the ability to listen to and understand other people’s points
of view. Successful entrepreneurs are not only convincing but also listen to others
with a view to understanding their points of view. They have empathy for others.
Naturally, the ability to listen to others gives them some feeling of importance
which leads to respect for the listener.
12. Vision – this is an ideal or a goal towards which one aspires. Successful
entrepreneurs have the ability to see the end results of their goals while working to
achieve them. In other words, they have a clear sense of purpose and direction.
They know exactly what they want to achieve. This may be translated to mean that
they know the benefit for which they strive i.e. what is expected to accrue at the
end of the day or the expected benefit for their effort.
13. Energy – successful entrepreneurs need to be energetic. This is the impetus or
impelling power or stimulating factor behind all activities. In other words, successful
entrepreneurs must have the capacity to do work, in most cases, indefatigably over
long periods. This means they must have a lot of energy. This, however,
characterises most young people rather than the older ones. Youthfulness,
therefore, is an important feature making for successful entrepreneurship.
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14. Optimism – this is the tendency to expect the best or at least a favourable outcome.
Successful entrepreneurs tend to be optimists. This makes them have no fear for
failure. They neither dread failure nor are they frustrated by it. Instead, they see
failure as a lesson from which to learn and reinforce future success. They think
positively about their ventures.
It is very unlikely for an individual to possess all the features or qualities of successful
entrepreneurs at birth. In other words, no one may be born with all the aforementioned
characteristics making for successful entrepreneurship. The reality is that some individuals
are born with some of these features and learn most others. For instance, one who has
the drive and perseverance traits may learn to develop other traits like honesty,
organisation, discipline etc.
Looking at the biographies of world’s leading successful entrepreneurs, one would realise
that most of them started their lives with very little money and education. They grew up in
difficult environments and mostly from poor family backgrounds. These made them tough-
minded and competitive in nature. It is also important to mention that most successful
entrepreneurs started their business lives with small business ventures but have big
dreams about the future success of their ventures.
The Entrepreneurial Process
The starting point in providing any solution is to clearly identify and understand the
problem itself. In the same vein, as a process, entrepreneurship begins with problem
identification. This is referred to as opportunity identification or opportunity recognition.
1. Opportunity recognition – it is important to distinguish between a business idea
and a business opportunity. An idea is a plan formed by thinking. That is, ideas
result from thoughts. Therefore, a business idea is a business-related thought that
is believed to be capable of solving an identified problem or giving some kind of
satisfaction to an identified need. An opportunity however, is based on what
consumers want (not necessarily based on what idea you have). Thus, a business
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idea that meets the needs of consumers becomes a business opportunity,
otherwise it only remains idea.
Generally speaking, a business idea becomes a good business opportunity if;
i) It meets a customer need
ii) The resource and skills for translating it into a product or service are
available. In other words, if an enterprise can be created from the idea.
iii) The product/service created from the idea can be supplied at a price
affordable to customers.
iv) Some profit can be made from selling the product or service.
v) The production of the product or service can be sustained while the
opportunity lasts.
How are business opportunities recognised?
Entrepreneurs recognise business opportunities from a variety of sources:
a. Problems: Entrepreneurs recognise business opportunities where they see
problems. Problematic situations can wrap up promising business
opportunities. For instance, within the local setting, the owner of Erisco
Foods saw the problem in fresh tomatoes preservation and recognised a
business opportunity in it to produce and sell canned tomatoes in the
Nigerian market. Duriya online shopping venture came into existence due to
the unwillingness of people to go shopping in the traditional market settings
as a result of the security risks brought about by insurgency in Maiduguri and
most part of the north-east region. The business opportunity exploited by
Duriya is that of bringing products/services to the customers instead of
customers going to look for and buy products/services.
In the international scene, successful entrepreneurs like Geogette Klinger
founded the world’s famous skin-care company because she had acne. Bill
Gates founded Microsoft as a solution to the complexity of using the then
existing softwares. Anita Roddick founded the Body Shop – a cosmetics
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company that used natural ingredients and recycles its bottles and jars –
because she was tired of paying for expensive fancy packaging when she
brought make up.
Therefore, business opportunities can be recognised from problematic
situations
b. Changes – business opportunities can also be recognised in changes.
Changing circumstances, situations, trends, laws etc. maycome with
promising business opportunities. In Nigeria for instance, the change in the
telecommunication situation has led to the demise of NITEL and the
proliferation of GSM communication. Similarly, the problem of insurgency
has forced a change in transport regulation that has led to the ban of
motorcycles which brought a business opportunity for the manufacture and
sell of tricycles. Pension reform has brought about the establishment of
Pension Fund Administrators (PFAs) as business opportunities, etc.
c. Inventions – to invent means to come up with something new (i.e. a process
or a mechanism). Inventions are results of ideas and thoughts that are meant
to provide solutions to problems. It can either be a new way of doing
something or a better way of doing an old thing. For instance, the
advancement made in the field IT has brought a completely new process of
students’ registration in our educational system. Kerosene lamps have given
way to lanterns. Erratic power supply has brought about rechargeable touch
lights, rechargeable fans, etc. these are business opportunities as a result of
inventions.
d. Competition – a market characterised by stiff competition compels the
competitors to be on their toes, looking for opportunities to outdo their
competing rivals. They continuously look for and capitalise on competitive
advantages which may be in many forms including pricing, quality, location,
reputation, reliability, cost of production, etc. A competitor who identifies
and exploits an advantage can supply a competing product/service in a way
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that cannot be done by his rivals in the market. Since competition can
compel competing rivals to identify and exploit areas of comparative
advantage, it therefore represents a good source of business opportunity
(e.g. FARO water).
e. Advancement in Technology – advancement in technological innovations
represents a major source of business opportunities. Technological
innovations can satisfy an unsatisfied need or bring about a better way of
satisfying an existing need. Technological developmentsare a major source of
promising business opportunities in any economy of the world affecting all
facets of human life.
f. Imagination/unique knowledge – sometimes, through imaginations,
entrepreneurs can come up with products or services that can be good
business opportunities. Also, an entrepreneur who has some unique
knowledge or information can use it as a good source of business
opportunity. For instance, someone who, through economic analysis, bought
dollars at the inception of the Buhari administration in May, 2015, would
have more than doubled his wealth now, given the current exchange rate of
the Naira to the Dollar.
2. Evaluate the business opportunity – to evaluate a business opportunity means to
assess it in terms of how it will perform in the market place. Important questions to
ask in this respect may include; can the product/service be produced? At what cost
can it be produced? What will be its acceptability in the market? Are there similar
products existing? How are they produced? How does the product compare to the
existing ones? How would customers react to the product? Can profit be made
from it? etc. Answers to these questions can help in arriving at the conclusion
regarding the product’s/service’s viability.
3. Write a business plan. According to Joseph Mancuso, a business plan is the road
map that gives a business direction. It is a document that explains a business idea
and gives details of how it will be executed. It outlines the financing and marketing
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plans, ownership structure, accounting system, projected income statement and
balance sheet, breakeven and ratio analysis. A well written business plan does not
only give direction to the business but also convinces investors to invest in it and
wins financing for the business.
4. Build a team – the question here is can you go it alone or you need to partner with
one or more people to start and run the business? When you are deficient in some
of the prominent features, qualities or factors necessary for the success of the
proposed business then it is only wise to partner with others who possess them in
order to build a ‘winning team’ that can guarantee the success of the business.
5. Mobilise resources – no matter how simple the proposed product/service is or how
small the proposed business may be, resources will be required for its actualisation.
Where will the resources for the actualisation of the product or business come
from? This explanation must have been given by the business plan. This stage
requires the mobilisation of the required resources to implement the plan.
6. Decide on the ownership structure – decision about the ownership structure must
also have been specified in the business plan. Generally, the proposed business can
be owned and ran in a number of ways including sole proprietorship, partnership or
a corporation. These ownership structures have their relative merits and demerits.
An appropriate structure will depend on such considerations as the dispositions and
preferences of the owners, the nature of the business, the funding requirements of
the business, the owners’ future plans for the business, etc.
7. Keep adequate records – one of the most important success factors in running any
business is adequate record keeping. Records relating to the meetings, operations
and finances must be kept and backed up and in such a way as to make it easily
retrievable and safe. Such records should also be kept in some order e.g. monthly,
quarterly or annually.
8. Always stay in tune with your economics of one unit. This means you should always
be aware of your unit cost of production (i.e. what cost components make up your
unit cost of production) when you are manufacturing, your unit cost of retail or
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wholesale or your unit cost of service. You should be aware of how to strategically
fix the selling price per unit. These will enable you know your gross profit per unit.
Understanding your cost centres will help you determine and adopt cost
improvement strategies that can help you fix competitive selling prices that may
lead to larger market share. The argument here is when your economics of one unit
is profitable, the whole business can be profitable too.
9. Understand your customers in order to keep satisfying their needs. This can be an
onerous task because the customers are not only diverse; having different or
varying tastes and preferences, but that they are also dynamic (i.e. the same
individual can be different in different circumstances or at different times). These
diverse and dynamic nature of the customers make them difficult to be understood.
Yet without this understanding, the entrepreneur cannot continuously satisfy
customers’ needs. And without satisfying customers’ needs, business will obviously
fail. Sometimes the entrepreneur needs to understand the customers so well to be
able to anticipate their future changing needs and respond to them by providing
products/services that can satisfy such anticipated changes in tastes and
preferences. Nokia failed because of its inability to keep track of and leave up to the
changing customers’ phone needs.
10. Create/add value – the essence of any entrepreneurial effort is to enjoy some
benefit which may be financial and non-financial. Entrepreneurs who provide
products/services expect financial profit as the reward for their entrepreneurial
efforts. With a favourable economics of one unit, the entrepreneur creates wealth.
If this is done successfully over a period of time, wealth is accumulated and the
entrepreneurial capital is enlarged. This can be used to enlarge and expand the
business or even for business diversification, depending on prevailing business
opportunities.
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