An entrepreneur is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is usually encountered in starting a business, which may include other values than simply economic ones.
An entrepreneur is an individual who creates and/or invests in one or more businesses, bearing most of the risks and enjoying most of the rewards. The process of setting up a business is known as entrepreneurship. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures.
More narrow definitions have described entrepreneurship as the process of designing, launching and running a new business, which is often similar to a small business, or as the “capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit.” The people who create these businesses are often referred to as entrepreneurs. While definitions of entrepreneurship typically focus on the launching and running of companies, due to the high risks involved in launching a start-up, a significant proportion of start-up businesses have to close due to “lack of funding, bad business decisions, government policies, an economic crisis, lack of market demand, or a combination of all of these.”
In the field of economics, the term entrepreneur is used for an entity that has the ability to translate inventions or technologies into products and services. In this sense, entrepreneurship describes activities on the part of established firms and new businesses.
Perspectives on entrepreneur
As an academic field, entrepreneurship accommodates different schools of thought. It has been studied within disciplines such as management, economics, sociology and economic history. Some view entrepreneurship as allocated to the entrepreneur. These scholars tend to focus on what the entrepreneur does and what traits an entrepreneur has (see for example the text under the headings Elements below). This is sometimes referred to as the functionalistic approach to entrepreneurship. Others deviate from the individualistic perspective to turn the spotlight on the entrepreneurial process and immerse in the interplay between agency and context. This approach is sometimes referred to as the processual approach or the contextual turn/approach to entrepreneurship.
Relationship between small business and entrepreneurship
The term “entrepreneur” is often conflated with the term “small business” or used interchangeably with this term. While most entrepreneurial ventures start out as small businesses, not all small businesses are entrepreneurial in the strict sense of the term. Many small businesses are sole proprietor operations consisting solely of the owner—or they have a small number of employees—and many of these small businesses offer an existing product, process or service and they do not aim at growth. In contrast, entrepreneurial ventures offer an innovative product, process or service and the entrepreneur typically aims to scale up the company by adding employees, seeking international sales and so on, a process which is financed by venture capital and angel investments. In this way, the term “entrepreneur” may be more closely associated with the term “startup“. Successful entrepreneurs have the ability to lead a business in a positive direction by proper planning, adapting to changing environments and understanding their own strengths and weaknesses.
Types of entrepreneurship