Entrepreneur 5. It is a risk-taking venture.

- The salient features of entrepreneurship provide better

- The term "entrepreneur" originates from the French
understanding of the whole concept.
word entreprendre which means "to undertake." It
connotes a business paradigm which signifies the start
- They also act as the point of reference in determining
of a new business undertaking.
whether a particular business endeavor is operating
- the term "entrepreneurship" comes from the word
within the realm of entrepreneurship:
entrepreneur. It refers to a particular field of practice or
process, as compared to an entrepreneur which is a
person practicing entrepreneurship. ENTREPRENEURSHIP IS AN ART OF
- Comparatively, the relationship is like that of a CORRECT PRACTICES
manager and the management in which a manager is a
person who correctly practices the concept of
- Entrepreneurship is an art and not a science.
management.
- It is not governed by fixed and absolute rules, whereas
The American Heritage Desk Dictionary defines an
science is.
entrepreneur as a person who organizes, operates, and
assumes the risk of business ventures. In this book,
- Entrepreneurship, therefore, is not static or stagnant.
however, an entrepreneur is defined as a person who
strongly advocates and correctly practices the concepts
- It continuously grows, develops, improves, and expands;
and principles of entrepreneurship in operating and
the change does not stop.
managing the self-owned business venture. This venture
is also called enterprise.
- As an art, entrepreneurship is dynamic. By the
moment the economic activity changes, the political,
social, and entrepreneurial activities will eventually
Small Business and Ordinary Small change.
Business
- As an art, entrepreneurship is closely related to
creativity.
Small business
- By creativity, there is a constant change or evolution
- refers to a business or enterprise that correctly adopts that contributes towards the enhancement of the
and practises the principles of entrepreneurship. enterprise.
- It is owned by one person with a limited workforce of - Creativity results in new ideas which are the backbone
not more than 20 persons. of entrepreneurship.
- The term also includes the small and medium - Entrepreneurs keep on searching for something new.
enterprises (SMEs) that have been strongly promoted by They find ways to transform new ideas into
both government and non-governmental organizations entrepreneurial opportunities.
(NGOs) in their desire to improve the lives of the Filipino
people through entrepreneurship.
ENTREPRENEURSHIP IS A WEALTH-
Ordinary small business CREATING VENTURE

- pertains to a business enterprise managed and - Entrepreneurship, however, is operating within the
operated by an owner who is not an advocate of and concept of wealth creation rather than profit generation.
does not practice the concepts and principles of
entrepreneurship. - The concept of profit is more applicable in the area of
accounting as a way of measuring the operating
- In the Philippines, small businesses, whether ordinary performance of a business.
or not, are flourishing and sprouting like mushrooms.
They can be found almost anywhere and everywhere - - This book strongly underscores the word "abundance"
along city streets, municipal roads and national roads, in the conceptual definition of wealth.
and in public markets, hospitals, schools, and amusement
places. - The concept of abundance, and not of accounting
profit, is the very essence of wealth in entrepreneurial
LESSON SUMMARY endeavor.

1. Entrepreneur refers to a person who strongly ENTREPRENEURSHIP IS PROVIDING

advocates and correctly practices the concepts and VALUE TO CUSTOMERS
principles of entrepreneurship in operating and
managing the self-owned entrepreneurial venture.
- Entrepreneurship creates economic wealth by providing
goods and services to the consumers. - These goods and
2. Entrepreneurship is the art of observing correct
services must have a value in order to create wealth.
practices in managing and operating a self-owned,
Otherwise, they become wasted.
wealth-creating business enterprise by providing
goods and services that are valuable to the
- One essential principle in entrepreneurship then is,
customers.
"not to sell waste to consumers but only valuable goods
and services." Anything of no value to anybody is
Salient Features of Entrepreneurship definitely a waste.

From its operational definition, entrepreneurship ENTREPRENEURSHIP IS A RISK-TAKING

consists of five salient features.
VENTURE
1. It is an art of correct practices.
2. It is a wealth-creating venture.
- The basic concept of risk in entrepreneurship can be
3. It provides valuable goods and services.
expressed in this statement, "Risk is inherent in an
4. It entails opening and managing the self-owned
entrepreneurial venture."
enterprise.
 development, most especially when the economy was
- Risk cannot be detached from any entrepreneurial experiencing depression.
venture and the only way to remove it is to close the
venture. ALFRED MARSHALL THEORY
- The risk in entrepreneurship is called a business risk.
- The entrepreneurship theory of Alfred Marshall, an
So every time the word risk is used in this book, it refers
English economist, was introduced in his book,
to a business risk.
Principles of Economics.

LESSON SUMMARY - As he strongly asserted that there are four factors in

the production (land, labor, capital, and organization) of
1. Entrepreneurial concepts and principles are goods and services in the economy, he considered
not fixed. They constantly change and are organization as the coordinating element
highly influenced by the changes in the
environment. - Marshall regarded the entrepreneurs as the prime
movers in the organization.
2. A wealth-creating venture is an
entrepreneurial undertaking wherein wealth RISK AND UNCERTAINTY-BEARING
is created.
THEORY
3. Value is basically the opposite of waste.
Products and services are considered - Frank Hyneman Knight, an American economist,
valuable when they provide additional conceptualized the risk and uncertainty-bearing theory
benefits to the buyers and users. In of entrepreneurship in his book, Risk, Uncertainty
entrepreneurship, value is always measured and Profit.
from the perspective of the consumers.
- By adopting some concepts of the early economists,
4. All businesses, whether big or small, are Knight viewed an entrepreneur as an agent of the
operating within the concept of risk-taking production process where he or she connects the
because of uncertainty. producers and the consumers.
Knight, however, added risk-taking as an important
dimension that will differentiate an entrepreneur from a
Theories on Entrepreneurship worker.

A theory is a generalization that explains a set of facts - Knight considered uncertainty an important factor in
or phenomena. It is not an absolute truth. It can be the production of goods and services.
supported by another observation or proven to be
otherwise. - He believed that the entrepreneur must anticipate
possible random events to happen while shouldering the
There are several theories on entrepreneurship. Here are risk at the same time. The entrepreneur would
some of them: eventually be rewarded with high profits.

1. Innovation theory
2. Keynesian theory OTHER THEORIES ON
3. Alfred Marshall theory ENTREPRENEURSHIP
4. Risk and uncertainty-bearing theory
5. Other theories on ehtrepreheurship 1. Weber's sociological theory. In sociological
theory, Max Weber stressed that culture is the primary
INNOVATION THEORY driving element of entrepreneurship. The entrepreneur is
expected to perform the role of a good constituent by
executing his or her entrepreneurial activities in line
- The innovation theory on entrepreneurship was
with good customs and traditions, religious beliefs, and
contributed by Joseph Schumpeter, an Austrian
morals.
economist and political scientist. He wrote about it in
his book, The Theory of Economic Development.
2. Kaldor's technological theory. The
- The innovation theory regards economic development technological theory was developed by Nicholas Kaldor
as the product of structural change or innovation. who considered modern technology as an essential factor
Schumpeter argued that the in production. In the absence of modern technology
It becomes the primary role of the entrepreneur to application in entrepreneurship, economic development
introduce innovation in any of the following forms: would be slow and growth might not be expected. The
entrepreneur is expected to keep abreast with modern
1. new product technology and find ways to apply the same in the
2. new production method entrepreneurial endeavor. Proper application of modern
3. new market technology will promote efficiency in the production of
4. new supplier goods and services.
5. new industry structure
3. Leibenstein's gap-filling theory. In this
KEYNESIAN THEORY theory on entrepreneurship, Henry Leibenstein
proposed that the primary role of entrepreneurship in
any economic activity is to fill the existing gap.
- The Keynesian theory on entrepreneurship was Entrepreneurship is responsible for recognizing trends in
developed by John Maynard Keynes, a British the market. The entrepreneur is expected to possess
economist. The key concepts of the theory were abilities that will connect the different markets. He or
included in his book, The General Theory of she must extend assistance to entrepreneurial ventures
Employment, Interest and Money, which was experiencing failures and deficiencies.
published during the Great Depression in 1936.
4. Kirzner's learning-alertness theory. Israel
- The theory put so much emphasis on the role of the Kirzner was the main proponent of this theory. He
government in entrepreneurial and economic pointed out spontaneous learning and alertness as the
two major attributes of entrepreneurship in any given
economy. The entrepreneur must be alert in recognizing On the other hand, the owner of an ordinary small
entrepreneurial opportunities and the ignorance of business opens a business with the primary goal of
consumers as well. He or she must immediately find making it his or her source of livelihood. The business
appropriate remedies to correct the error or wrong becomes a major provider of the family for their financial
perception. requirements. The owner of an ordinary small business
operates with a basic motive of earning profit. However,
LESSON SUMMARY the level of profitability is sometimes neglected. The
profitability aspect and the level of profitability are two
distinct important issues.
1. A theory is a generalization that explains a set of facts
or phenomena. It is not an absolute truth. It can be
supported by another observation or proven to be PERCEPTION OF RISK IN THE BUSINESS
otherwise.
The entrepreneur takes and faces the business risk
2. Some theories on entrepreneurship include the squarely. He or she considers it inherent in the business
following: venture, prepares the business for it, and finds ways to
minimize its effects.
 a. Innovation theory. The innovation theory of
Joseph Schumpeter considers innovation as the The owner of an ordinary small business, on the other
primary factor affecting development. hand, believes that the business risk is a deterrent to the
operation of the business and must be avoided.
 b. Keynesian theory. The Keynesian theory of
John Maynard Keynes attributes economic REACTIONS TO CHANGES IN THE
growth, especially during depression, to the
government.
ENVIRONMENT

The entrepreneur reacts positively to the changes in the

 c. Alfred Marshall theory. The Alfred Marshall
environment. Changes in the business environment
theory generalizes that the organization plays the
bring new ideas for entrepreneurial opportunities.
most significant role among the different factors
of production.
The entrepreneur considers changes in the environment
a creative mechanism for development and growth in the
 d. Risk and uncertainty-bearing theory. The entrepreneurial activities. They become a new source of
risk-uncertainty bearing theory of Frank possible entrepreneurial venture. Entrepreneurs do not
Hyneman Knight states that an entrepreneur simply wait for the changes to happen in the
faces the risk of uncertainty in the process of entrepreneurial environment. They outline alternative
connecting the supplier and the buyer. courses of action in anticipation of the changes to
happen.
 e. Weber's sociological theory. The sociological
theory of Weber asserts that culture has On the other hand, the owner of an ordinary small
significant contributions to entrepreneurship. business remains passive and static to changes in the
environment where his or her business operates. He or
 f. Kaldor's technological theory. The she usually believes that change in the environment is not
technological theory of Kaldor gives importance a plus factor to the daily operations but rather a source
to the advancement of technology as an element of negative consequences.
of production.
VIEW ON COMPETITION
 g. Leibenstein's gap-filling theory. The gap-
filling theory of Leibenstein advocates that
entrepreneurship fills the gap in an economic For the entrepreneur, the presence of competition is a
activity. sign of a healthy economic environment. The environment
where the venture operates can be considered neutral or
 h. Kirzner's learning-alertness theory. The free-trade because of healthy competition. Competition
learning-alertness theory of Kirtzner focuses on will undoubtedly force entrepreneurs to continuously
learning and alertness as the primary attributes improve their present products or services. It will be one
of entrepreneurship. of the factors that will make them creative in their
endeavor.
Entrepreneurship and Ordinary Small The owner of an ordinary small business, however,
Business Activities views competition as an unhealthy element in the
business environment and tries to avoid it. He or she is
Entrepreneurship and the activities of ordinary small very uncomfortable working in a competitive
businesses differ in the following areas: environment and strongly discourages competition in the
business community.
1. motive in opening a business
2 perception of risk in the business
3. reactions to changes in the environment
4. view on competition
VISION FOR DEVELOPMENT AND
5. vision for development and growth GROWTH
6. horizon of business operation
7. sources of business funds
The entrepreneur usually outlines the course of his or
her entrepreneurial venture in terms of short-term,
MOTIVE IN OPENING A BUSINESS medium-term, and long-term plans of action. He or she
makes sure that the vision and mission of his or her
An entrepreneur starts a business venture based on business is clear.
entrepreneurial concepts and principles and the
aspiration to become successful. He or she is constantly The entrepreneur aligns the daily business activities
on the lookout for new and fresh ideas, which can be toward the attainment of the plans. He or she properly
found in the business environment. manages the venture in such a way that the operations
will provide development and growth to the venture.
The owner of an ordinary small business, on the other  1. Entrepreneurship applies only to
hand, relies upon chance or luck in maintaining the manufacturing businesses.
status quo of his or her business. He or she is not so  2. Entrepreneurship applies only to small
much concerned about its development and growth as businesses.
long as he or she is satisfied with its earnings.
 3. Entrepreneurship applies mostly to persons
with good educational background in
HORIZON OF BUSINESS OPERATION  business courses.
 4. Entrepreneurship applies only to a good
An entrepreneur thinks globally but acts locally. His or economy.
her sight is always focused on the stars above, while his  5. Entrepreneurship is simply opening a small
or her feet are firmly anchored on the ground. He or she business.
is primarily concerned with the major economic events not
only in the local environment but also in the global ENTREPRENEURSHIP APPLIES ONLY TO
business market. The entrepreneur has a strong notion
that the business venture will be going out of the local MANUFACTURING BUSINESSES
market and will soon face healthy competition in the
international market. The entrepreneur has both local It is a misconception that entrepreneurship is only
and global perspectives. applicable to manufacturing but not to merchandising and
service. It should be remembered that merchandising
The owner of an ordinary small business, meanwhile, and providing services are also business ventures. There
is centered only on the local environment. He or she does are exchanges of values in these businesses but there
not intend to participate in the global environment. The are also risks. Also, creativity and innovation are hardly
concept or view of operating outside the local market is noticeable in merchandising and service because there is
inconceivable. In other words, expansion has never been no transformation in the appearance and content of the
an idea worth entertaining for the owner of an ordinary product.
small business.
On the other hand, in a manufacturing operation, the
SOURCES OF BUSINESS FUNDS product passes through the different stages of processing
from raw materials to finished goods. It is during the
processing period stat creativity and innovation take
When the entrepreneur finds that the proposed place. Regardless of whether the business venture is
business endeavor is a wealth-creating venture, he or
merchandising, service, or manufacturing, the concept of
she explores ways to generate the much-needed funds
entrepreneurship is applicable.
from both internal and external resources. He or she
strongly believes that the wealth that the venture may
create is more than enough to compensate for the ENTREPRENEURSHIP APPLIES ONLY TO
sourced funds. SMALL BUSINESSES
On the contrary, the owner of an ordinary small
business tends to limit the funding of his or her business Entrepreneurial concepts and principles do not make any
enterprise to personal resources. Loans from external distinction as to the size of the business venture. The
resources can be a risky undertaking for him or her. He amount of the business capital does not serve as a
or she fears that financial institutions will not be willing reckoning ground for classifying whether the venture is
to extend financial assistance to the business. In other operating within the concept of entrepreneurship or
words, he or she is already fully convinced that he or she ordinary small business. Entrepreneurship principles, in
is pursuing the unprogressive type of business endeavor. their strict sense, apply to small, medium, and big
businesses, though, many programs of the government
and NGOs on entrepreneurship are focused on the
organization and development of small businesses.
LESSON SUMMARY
Nevertheless, when the business venture becomes big,
expands its operations, or opens other branches locally
1. The entrepreneur and the owner of an ordinary small or abroad, the owner usually employs a qualified
business are different in the following areas: manager to run the day-to-day operations of the
branches. In doing so, the owner may relinquish to the
 a. motive in opening a business manager certain functions such as financing and
 b. perception of risk in the business c, reactions marketing. In effect, entrepreneurship then becomes
to changes in the environment corporate entrepreneurship, which is a process that goes
 d. view on competition on inside an existing business venture and may lead to
 e. vision for development and growth new ones and the development of new products and
 f. horizon of business operation services.
Franchising and the transition of a sole proprietorship to a
 g. sources of business funds
corporation are good examples of this case.
2. Knowing the differences between an entrepreneur
and an owner of an ordinary small business will help ENTREPRENEURSHIP APPLIES MOSTLY
you assess if you are an entrepreneur or a mere owner of TO PERSONS WITH GOOD EDUCATIONAL
an ordinary small business. Such knowledge will enable
you to completely avoid the perceptions or behavior of BACKGROUND IN BUSINESS COURSES
the latter and focus more on the perceptions or behavior
of the former. Nobody is born an entrepreneur. To become a successful
entrepreneur, you must know the basic concepts and
Misconceptions on Entrepreneurship principles of entrepreneurship and apply them properly to
your chosen business. The environment in which your
Listed below are some common misconceptions on business operates also contributes to its success.
entrepreneurship. Knowing them will enable you to
understand the concept of entrepreneurship and That entrepreneurship applies mostly to persons with
differentiate it from the activities of ordinary small sound academic background in business courses is a
businesses. misconception. In reality, successful entrepreneurs come
from all walks of life and have different educational
backgrounds from different colleges and universities in
the country. It is your inner driving force that carries you Importance of Entrepreneurship
towards becoming a dynamic entrepreneur.

COMPOUNDED BENEFITS OF
ENTREPRENEURSHIP APPLIES ONLY TO
A GOOD ECONOMY ENTREPRENEURSHIP

First, it is important to have a background

An entrepreneur finds business opportunities in both
understanding of the effects of entrepreneurship on the
flourishing and distressed economies. Entrepreneurship
lives of individual Filipinos, the local community, and the
can exist in both good and bad economies. During a
Philippine economy. Basically the benefits derived from
financial crisis, big businesses usually adopt a
entrepreneurship are compounded from one level to the
conservative approach in utilizing their resources.
next.
They reduce their production output and hold on to their
cash. This will ultimately reduce employment and
congest the flow of money in the economy. Importance to the Filipino People

While big businesses are contracting their production Entrepreneurship makes the following contributions to
output during such an event, small businesses, on the the lives of the Filipinos:
other hand, increase their output. Since small businesses
are expected to suffer small losses in the event the 1. It provides guidelines in their wealth-creating
operating performance will not be favorable, the truly ventures.
committed ones make substantial application of 2. It helps improve their financial and social life.
resources and maximize their biggest assets- time and 3. It helps broaden their creativity.
manpower - to sustain their businesses. 4. It helps make their lives happy, fruitful, and
successful.
Even during a financial crisis, new ideas can be created
and new business opportunities can be identified. The Importance to the Local Community
bad economy does not completely serve as a constraint
to the continuation of entrepreneurial ventures and even Entrepreneurship, in one way or another, makes the
the creation of new ones. following contributions to the local community:

ENTREPRENEURSHIP IS SIMPLY 1. It provides employment in the community.

OPENING 2. It creates new demand in the market.
3. It makes substantial contributions to the raising and
A SMALL BUSINESS collection of taxes.
4. It facilitates the movement of the factors of
production.
Entrepreneurship does not merely mean opening a small
5. It creates new business opportunities.
business. This is simply the first step in actualizing the
6. It promotes a peaceful and loving community.
entrepreneurial venture. Prior to this, the business must
7. It increases constructive competition.
have already passed through the preliminary stages of
scanning the environment and preparation of the
feasibility study and business plan. Entrepreneurship Importance to the Philippine Economy
does not start and end with opening a small business. It
is a long, continuing process. Entrepreneurship makes the following contributions to
the Philippine economy:
LESSON SUMMARY
1. It encourages competitiveness and thereby challenges
entrepreneurs to keep improving their products and
1. The term entrepreneurship is commonly services.
misunderstood. It is often equated with the activities of 2. It helps find an entrepreneurial niche in the world
ordinary small businesses. market.
3. It helps hasten the economic recovery process of the
2. The common misconceptions on entrepreneurship Philippines during financial turmoil or crisis.
include the following: 4. It facilitates the smooth flow of money in the market.
5. It assists the national government in its desire to have
 a. Entrepreneurship applies only to favorable economic ratings in the world market.
manufacturing businesses.
 b. Entrepreneurship applies only to small
businesses. Sources of Entrepreneurial Ideas
 c. Entrepreneurship applies mostly to persons
As a future entrepreneur, always remember that a
with good educational background in business
business must be firmly established on existing business
courses.
opportunities, and that there can be no business
 d. Entrepreneurship applies only to a good opportunities in the absence of an entrepreneurial idea.
economy.
 e. Entrepreneurship is simply opening a small In contrast, the owner of an ordinary small business
business. usually opens a business even if they are no business
opportunities existing in the community. As a result, the
3. Knowing some common misconceptions on business can hardly move from where it started even
entrepreneurship will enable you to understand the after several years of operation.
concept of entrepreneurship and differentiate it from the
activities of ordinary small businesses. A clear Thus, it all boils down to the basic need to identify the
perspective of entrepreneurship will provide you with a sources of entrepreneurial ideas, some of which are as
good foundation in the study of this field. follows:

1. Changes in the environment

2. Technological discovery and advancement
3. Government's thrust, programs, and policies
4. People's interests
5. Past experiences
CHANGES IN THE ENVIRONMENT local goverment (municipal, city, or provincial) or the
national government and its branches.

Entrepreneurial ideas arise from the changes that The programs and agenda of the Philippine government
happen in the external environment with entrepreneurial intuitively address the needs of the Filipino people. There
implications. Not everyone welcomes changes in the are also instances when the national government
external environment. responds to the call of international agencies or the world
However, a person with an entrepreneurial drive views market. Whenever there are changes in the policies and
these changes positively. He or she determines what programs of the government, new entrepreneurial ideas
business opportunities they may provide. are likely born.

The term external environment in this lesson refers to PEOPLE'S INTERESTS

the physical environment, societal environment, and
industry environment where the business operates.
The interests, hobbies, and preferences of people are a
1. The physical environment includes rich source of entrepreneurial ideas.
 a. climate,
 b. natural resources, and For example, the increasing number of Internet cafés at
present could be attributed to the strong attachment of
 c. wildlife.
young people to computers. The rise of amusement
parks, nightspots, and nature farms could be a response
2. The societal environment includes various forces like
to the need of people for fun and relaxation.
 a. economic forces,
 b. sociocultural forces, However, an entrepreneur must be keen in identifying
 c. political forces, and the cycle of interests and trends of his or her target
 d. technological environment. market since these tend to continuously change. He or
she must be ready to address the change properly and
3. The industry environment of the business includes immediately to avoid possible negative effects on the
 a. government, operations of the business venture
 b. competitors, .
As a future entrepreneur, your business venture should
 c. suppliers,
be adaptive to the interests and hobbies of the people to
 d. customers, protect and sustain your business. Keep evaluating the
 e. creditors, and interests of your target customers.
 f. employees.
Past Experiences

Past experiences and exposures are also a good source of

entrepreneurial ideas. The expertise and skills developed
by a person who has worked in a particular field may
lead to the opening of a related business enterprise.

For example, an auditor who has learned the appropriate

auditing and management advisory skills and techniques
in a prominent auditing firm can start his or her
entrepreneurial venture by opening his or her own
auditing office.

In a similar manner, a good engine mechanic who has

worked in a leading car manufacturer may find it
appropriate to open his or her vehicle repair shop. Thus,
his or her relevant job experiences in the past can lead
to that entrepreneurial venture.

LESSON SUMMARY

1. Following the entrepreneurial process, a business

venture is opened or created based on existing business
TECHNOLOGICAL DISCOVERY AND opportunities, which arise from business ideas.
ADVANCEMENT
2. The following are good sources of entrepreneurial
ideas:
Discovery and advancement in the use of technology are
another good source of entrepreneurial ideas and  a. changes in the environment
opportunities. Most people welcome technological  b. technological discovery and advancement
discoveries and advancements but cannot identify or
 c. government's thrust, programs, and policies
determine entrepreneurial opportunities stemming from
them. On the other hand, a person with entrepreneurial  d. people's interests
interest looks at the possibility of business opportunities  e. past experiences
in any new discovery or advancement in technology.

GOVERNMENT'S THRUST, PROGRAMS,

AND POLICIES

The priorities, projects, programs, and policies of the

government are also good sources of entrepreneurial
ideas. The term government in this lesson refers to the