Definitions of Entrepreneurship

“Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or organise a profit-oriented business unit for the production or distribution of economic goods and services. – A.H.Cole

“Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed, what constitutes knowledge practice is largely defined by the ends, that is, by the practice.” – Peter Drucker

“Entrepreneurship is applied to the function of buying labour and material and uncertain prices and selling the resultant product at contracted price”. – Bernard Belidor

Meaning and Definitions of Entrepreneurship

“Entrepreneurship involves a wide range of areas on which a series of decisions are required which can be grouped into three categories – (a) perception of an opportunity (b) organizing an industrial unit and (c) running the industrial unit as a profitable, going and growing concern.” – H. N. Pathak

1. Meaning of Entrepreneurship

Entrepreneurship is a process undertaken by an entrepreneur to augment his business interest. Thus Entrepreneurs do not emerge spontaneously on their own. Entrepreneurs appear to have been motivated by a combination and interaction of various factors. Thus entrepreneurship is influenced by a host of factors and in recent years entrepreneurship has become a fine art as it has evolved as a science of management and a catalytic tool of economic growth and development.

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Hence entrepreneurship as a process undertaken by an entrepreneur to augment his business interest involves innovation and creativity that will go towards establishing an enterprise. The qualities of entrepreneurship are his ability to discover and innovate opportunity and to organise an enterprise, thereby contributing to real economic growth.

Entrepreneurship is a composite skill, the resultant of a mix of many qualities and traits—these include tangible factors such as imagination, readiness to take risk, ability to bring together and put to use other factors of production such as capital, labour, land, and also intangible factors such as the ability to mobilise scientific and technological advances. Therefore entrepreneurship is the propensity of mind to take calculated risk with confidence to achieve a predetermined business or industrial objective. In the words of A.H. Cole, entrepreneurship is the purposeful activity of an individual or a group of associated individuals undertaken to initiate, maintain or organise a profit oriented business unit for the production or distribution of economic goods and services.

2. Definitions of Entrepreneurship

Although there is no official definition of entrepreneurship, the following one has evolved from work done at Harvard Business School and is now generally accepted by authors- “Entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled”.

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Drucker says, “Entrepreneurship is “risky” mainly because so few of the so-called entrepreneurs know what they are doing.” He further proposed that ‘entrepreneurship’ is a practice. What this means is that entrepreneurship is not a state of being nor is it characterized by making plans that are not acted upon. Entrepreneurship begins with action and creation of new organisations.

What is the Best Definition of Entrepreneurship

This is perhaps the best definition of entrepreneurship:

According to Drucker Peter F Entrepreneurship occurs when resources are redirected to progressive opportunities not used to ensure administrative efficiency. He further states that entrepreneurship is not natural; it is not creative. “It is work. Entrepreneurship requires entrepreneurial management.” Specifically, entrepreneurial management requires policies and practices in four major areas.

First, the organisation must be made responsible to innovation and willing to perceive change as an opportunity rather than a threat. It must be organised to do the hard work of the entrepreneur. Policies and practices are needed to create the entrepreneurial climate.

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Second, systematic measurement or at least appraisal of a company’s performance as entrepreneur and innovator is mandatory as well as built in learning to improve performance.

Third, entrepreneurial management requires specific practices pertaining to organisation structure, to staffing and managing and to compensation, incentives and rewards.

Fourth, there are some “don’ts” things not to do in entrepreneurial management.

Thus, in the above definition, Drucker tries to give management orientation to entrepreneurship. He further states that the entrepreneurial organisation requires different management from the existing. But like the existing it requires systematic, organised and purposeful management.

And while the group rules are the same for every entrepreneurial organisation, the existing business, the public service institutions and the new venture present different challenges, have different problems and have to guard against different degenerative tendencies. There is also a need for individual entrepreneurs to face up to decisions regarding their own roles and their own commitments.

On the basis of these definitions, we can say that Entrepreneurship is a process of innovation that reallocates resources to new opportunities, often creating new opportunities through unusual combinations of resources and the skills of risk taking entrepreneurs.

Simple Definition of Entrepreneurship

Entrepreneurship is a process of actions of a person (entrepreneur) who is in search of something new and exploits such ideas into profitable opportunities by accepting the risk and uncertainty with the enterprise. It is a process of identifying the opportunities in the market, bringing together the necessary resources to pursue these opportunities for long term gains.

According to Peter Drucker, “Entrepreneurship is defined as a systematic innovation, which consists in the purposeful and organised search for changes and it is the systematic analysis of the opportunities. Such changes might offer economic and social innovation.”

One can safely conclude that entrepreneurship implies a commitment to expand and grow which is also one of the major determinants of industrial development. James opines that some think of entrepreneurs primarily as innovators, some chiefly as managers of an enterprise, some as bearers of risks and others place major emphasis on their function as mobilizers and allocators of capital. The meaning of entrepreneurship varies from country to country. But in India, the suitable definition of an entrepreneur is a person or a group of persons who are responsible for the existence of a new business enterprise.

10 Definitions of Entrepreneurship

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1. “Entrepreneurship means the function of seeing investment and production opportunity, organizing an enterprise to undertake a new production process, raising capital, hiring labour, arranging for supply of raw materials and selecting top managers for day to day operations of the enterprise.” – Higgins

2. “Entrepreneurship is essentially a creative activity or it is an innovation function. The process of innovation may be in the form of – (a) Introduction of a new product, (b) Use of a new method of production, (c) Opening of a new market, (d) The conquest of new source of supplying raw material, (e) A new form of organization.” – Joseph A. Schumpeter

3. “Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed, what constitutes knowledge in practice is largely defined by the ends, that is, by the practice.”- Peter F. Drucker

4. “Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or organize a profit-oriented business unit for the production or distribution of economic goods and services”. – A. H. Cole

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5. “Entrepreneurship is that form of social decision making which is performed by economic innovators.” – Robert K. Lamb

6. “Entrepreneurship connotes innovativeness, an urge to take risk in face of uncertainties, and an intuition, i.e., a capacity of seeing things in a way which afterwards proves to be true.” – V. R. Gaikwad

7. “Entrepreneurship is the investing and risking of time, money and effort to start a business and make it successful”. – Musscleman and Jackson

8. “Entrepreneurship involves a wide range of areas on which a series of decisions are required which can be grouped into three categories – (a) perception of an opportunity (b) organizing an industrial unit and (c) running the industrial unit as a profitable, going and growing concern.” – Higgins

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9. “Entrepreneurial role involves doing things in new and better ways.” – Mc Clelland

10. “Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed, what constitutes knowledge in practice is largely defined by the ends, that is, by the practice.” – Peter F. Drucker

Definition of Entrepreneurship as Defined by Different Authors

Entrepreneurship can be defined as the propensity of mind to take calculated risk with confidence to achieve a predetermined business or industrial objective. That points out the risk-taking ability of the individual coupled with correct decision-making. Entrepreneurship is a multi-dimensional task defined differently by different authors.

Some important definitions of entrepreneurship by different authors are as follow:

1. A.H. Cole:

2. Joseph A. Schumpeter:

(a) “Entrepreneurship is based on purposeful and systematic innovation. It includes not only the independent business man but also company directors and managers which actually carry out innovative functions.”

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(b) “Entrepreneurship is essentially a creative activity or it is an innovation function.

The process of innovation may be in the form of:

Introduction of a new product;
Use of a new method of production;
Opening of a new market;
The conquest of new source supplying raw material;
A new form of organisation.

3. Carl Menger:

Carl Menger of Austria was of the view that economic changes do not arise from the circumstances but from the individual’s awareness and understanding of these circumstances. The entrepreneur, therefore, becomes a change agent who transforms resources into useful goods and services, thus creating the circumstances leading to industrial growth.

As per Menger’s classic theory of production, resources having no direct use in terms of fulfilling human needs were transformed into highly valuable products that directly fulfilled human needs. He saw the entrepreneur as an astute individual who could envision this transformation and create the means to implement it. He adds value to the original resource and this value is rewarded through profits.

“Entrepreneurship is essentially a creative activity or it is an innovation function.”

The process of innovation may be in the form of –

Introduction of a new product;
Use of a new method of production;
Opening of a new market;
The conquest of new source supplying raw material;
A new form of organisation.

4. William Diamond:

“Entrepreneurship is equivalent to enterprise which involves the willingness to assume risks in undertaking an economic activity particularly a new one. It may involve innovation but not necessarily so. It always involves risk-taking and decision-making, although neither risk nor decision-making may be of great significance.”

5. Howard W. Johnson:

“Entrepreneurship is a composite of three basic elements: Invention, Innovation and Adoption.”

6. Rober Ronstadt:

“Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by individuals who assume the major risks in terms of equity, time and/or career commitment of providing value for some product or service. The product or service itself may or may not be new or unique but must somehow be infused by the entrepreneurs by securing and allocating the necessary skills and resources.”

7. Rober Hisrich and Michael Peters:

Entrepreneurship is the process of creating something new with value by devoting necessary time and effort, assuming the accompanying financial, psychic and social risks and receiving the resulting rewards of monetary and personal satisfaction and independence.”

8. Entrepreneurship Centre at Ohio University:

“Entrepreneurship is the process of identifying, developing and bringing a vision to life. The vision may be an innovative idea, an opportunity or simply a better way to do something. The end result of this process is the creation of a new venture, formed under conditions of risk and considerable uncertainty”.

Entrepreneurship Definition by Authors

1. Jaffrey A. Tummons:

The ability to create and build something from practically nothing. A human creative activity, finding personal energy by initiating, building and achieving an enterprise or organisation rather than by just watching, analysing or describing one. It requires the ability to take calculated risks and to reduce the chance of failure. It is the ability to build a founding team to complement the entrepreneurs’ skills and talents.

2. Hagen:

Entrepreneurship is the function of seeking investment and production opportunity, organising an enterprise to undertake a new production process raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique and commodities, discovering new sources of raw materials and selecting top managers of day to day operations of the enterprise.

3. John Kao:

“Entrepreneurship is an attempt to create value through recognition of business opportunity, the management of risk taking appropriate to the opportunity and through the communicative and managerial skills, to mobilise human, financial and material resources necessary to bring a project to final end.”

In this definition, entrepreneurship is treated as a dynamic and risky process. It incorporates the capital, technology and human talent. Entrepreneurial process itself is the result of art and science.

3. Schumpeter J.A:

“Entrepreneurship as defined essentially consists in doing things that are not generally done in the ordinary course of business routine.”

In this definition, Schumpeter emphasised on the innovation process to be undertaken by the entrepreneur. Entrepreneur is required to gather resources, organise talent and provide leadership to make the business a commercial success.

4. Ronstadt Robert C:

“Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by individuals who assume the major risks in terms of equity, time and or career commitment of providing value for some product or service. The product or service itself may or may not be new or unique but value must somehow be infused by the entrepreneur by securing and allocating the necessary skills and resources”.

This definition identifies the creation of incremental wealth as an end result of entrepreneurship. The process of value creation is a risky process but entrepreneurs have to reduce the risks in terms of equity and time.

5. Higgins B:

“Entrepreneurship is meant the function of seeking investment and production opportunity, organising an enterprise to undertake a new production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique and commodities, discovering new sources of raw materials and selecting top managers of day to day operations of the enterprise.”

6. David Ricarco:

“Profit leads to saving of wealth which ultimately goes to capital formation and leads to economic development.”

7. Lewis:

“The proximate ways of economic development are the efforts to economise the increase of knowledge, its application to productions & increasing the amount of capital of resources per head.”

8. Peter Drucker:

As per Peter Drucker, the management guru, entrepreneurial role is one of getting and using resources. The difference is that in an entrepreneurial role the resources must be allocated to the opportunities, whereas, in the managerial role the resources are allocated to solve the problems. Entrepreneurship occurs when resources are redirected towards progressive opportunities, and are not used for ensuring administrative efficiency. This redirection of resources distinguishes between the entrepreneurial and managerial roles.

According to Peter Drucker an entrepreneur is one who always searches for change, responds to it and exploits it as an opportunity. Innovation is an instrument of entrepreneurship. An entrepreneur innovates and creates resources because there is no such thing as resource until someone finds a use for something and endows economic value to it. Drucker considers increasing the value and consumer satisfaction of a resource is an entrepreneurial activity.

9. Arthur P. Cole:

“Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaking, to initiate, maintain or aggrandize profit by production or distribution of economic goods and services.”

10. Conference of Entrepreneurship, U.S.A:

“Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity and through the communicative and management skills to mobilise human, financial and material resources necessary to bring a project to fruition.

Joseph Schumpeter Definition of Entrepreneurship

Joseph Schumpeter (1930) – “Entrepreneurship is based on purposeful and systematic innovation. It includes not only the independent businessmen but also company directors and managers who actually carry on innovative functions.”

Joseph Schumpeter, an economist described entrepreneur as one who seeks to reform or revolutionise the pattern of production by exploiting an innovation or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of material or a new outlet of products. Entrepreneurship, as defined, essentially consists of doing things that are not generally done in ordinary course of business routine.

An entrepreneur is one who innovates, raises money, collects inputs, organises talent, provides leadership and sets the organisation.

Schumpeter did not equate entrepreneur with an inventor. An inventor is one who creates a new product while Schumpeter’s entrepreneur exists if the factors of production are combined for the first time. To him, maintenance of a combination is not an entrepreneurial activity.

Definitions of Entrepreneurship as Described by Eminent Authors

Entrepreneurship is a process undertaken by the entrepreneurs which involves innovation, thrill seeking, creativity, risk bearing etc., that favours them in establishing their enterprise.

Different authors have defined entrepreneurship differently, as each of them view it in a different manner.

According to the conference held on entrepreneurship in the United States, the term entrepreneurship is defined as, “Entrepreneurship is the attempt to create value through recognition of business opportunity and through the communicative and management skills to mobilise human, financial and material resources necessary to bring a project to fruition”.

1. Robert Ronstand:

Robert Ronstand had described entrepreneurship as a dynamic process of creating incremental wealth. This wealth is created by persons who assume the major risk, in terms of equity, time and/or career commitment of providing value for some product or service. Product or service itself may or may not be unique but value must be infused by entrepreneurs through allocation of necessary skills and resources.

Encyclopedia Britannica defines entrepreneur as – “an individual who bears the risk of operating a business in the face of uncertainty about future conditions”.

2. Adam Smith:

As per Adam Smith, the father of political economy, the entrepreneur has a role of an industrialist. In his book, Wealth of Nations, he describes the entrepreneur as an individual who forms an organisation for commercial purpose. He is a proprietary capitalist, a supplier of capital and at the same time a manager who intervenes between the labour and the consumer. Adam Smith also treated him as an employer, master, merchant but explicitly considered him a capitalist.

Entrepreneur is one who has unusual foresight to recognise potential demand for goods and services. He is a change agent who transforms demand into supply. He is one who possesses certain arts and skills of creating new economic enterprises. He is a person with exceptional insight into the society’s needs and possesses abilities to fulfil them. He is “Economic Risk Taker” of Cantillon and “Industrial Manager” of Adam Smith. The British economist John Stuart Mill had described entrepreneurs as business founders and thus became the fourth economic factor with land, labour and capital.As per all above definitions, entrepreneurship refers to the various functions undertaken by an entrepreneur in establishing an enterprise. Innovation and risk bearing are the two important elements involved in entrepreneurship.

3. Richard Cantillon:

The word Entrepreneur is derived from a French word entreprendre, i.e., individuals who were ‘undertakers’ meaning those who undertook the risk of new enterprise. The word entrepreneur was first used in the writings of French economist, Richard Cantillon. He described an entrepreneur as a person who pays a certain price for a product to resell it at an uncertain price thereby making decisions about obtaining and using resources while assuming “the risk of enterprise”.

As per Cantillon, an entrepreneur’s function is to combine factors of production into a producing organism. Entrepreneurs consciously make decisions about resource allocation. Smart entrepreneurs always look for the best opportunity of using resources for high commercial gain.