Module 1.

1: FOUNDATIONS OF ENTREPRENEURSHIP

OVERVIEW
This module provides you with an overview of entrepreneurship and the language of
entrepreneurship. The challenges associated with defining entrepreneur and entrepreneurship are
explored, as is an overview of how entrepreneurship can be studied.
The objective is to enable you to apply current concepts in entrepreneurship to the
evaluation of entrepreneurs, their ventures, and the venturing environment. You will develop
skills, including the capability to add value in the new venture sector of the economy. You will
acquire and practice evaluation skills useful in consulting, advising, and making new venture
decisions.
4. To identify and discuss the most commonly cited characteristics found in successful
entrepreneurs

Learning Objectives:
1. To appreciate the historical development of entrepreneurs and entrepreneurship
2. To distinguish between entrepreneur and entrepreneurship
3. To explain the importance of entrepreneurs for economic growth
4. To identify and discuss the most commonly cited characteristics found in successful
entrepreneurs

ENTREPRENEURS AND ENTREPRENEURSHIP

“While there is no universally accepted definition of entrepreneurship, it is fair to say that it is
multi-dimensional. It involves analyzing people and their actions together with how they interact
with their environments, be these social, economic, or political, and the institutional, policy, and
legal frameworks that help define and legitimize human activities. – Blackburn (2011, p. xiii)
Entrepreneurship involves such a range of activities and levels of analysis that no single
definition is definitive. – Lichtenstein (2011, p. 472)
It is complex, chaotic, and lacks any notion of linearity. As educators, we have the responsibility
to develop our students’ discovery, reasoning, and implementation skills so they may excel in
highly uncertain environments. – Neck and Greene (2011, p. 55)

Considerations Influencing Definitions of Entrepreneur and Entrepreneurship

It is necessary to be able to determine exactly who entrepreneurs are before we can, among
other things, study them, count them, provide special loans for them, and calculate how and how
much they contribute to our economy.
• Does someone need to start a business from scratch to be called an entrepreneur?
• Can we call someone an entrepreneur if they bought an ongoing business from someone
else or took over the operations of a family business from their parents?
• If someone starts a small business and never needs to hire employees, can they be called
an entrepreneur?
• If someone buys a business but hires professional managers to run it so they don’t
• Is someone an entrepreneur because of what they do or because of how they think?
• Can someone be an entrepreneur without owning their own business?

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It is also necessary to fully understand what we mean by entrepreneurship before we can
study the concept.
Gartner (1990) identified 90 attributes that showed up in definitions of entrepreneurs and
entrepreneurship provided by entrepreneurs and other experts in the field. The following are a few
of these attributes:
1. Innovation – Does a person need to be innovative to be considered an entrepreneur? Can an
activity be considered to be entrepreneurial if it is not innovative?
2. Activities – What activities does a person need to do to be considered an entrepreneur?
3. Creation of a new business– Does someone need to start a new business to be considered to be
an entrepreneur, or can someone who buys a business, buys into a franchise or takes over an
existing family business be considered an entrepreneur?
4. Starts an innovative venture within an established organization – Can someone who works
within an existing organization that they don’t own be considered an entrepreneur if they start an
innovative venture for their organization?
5. Creation of a Not-for-Profit business – Can a venture be considered to be entrepreneurial if it
is a not-for-profit, or should only for-profit businesses be considered entrepreneurial?

EIGHT (8) ENTREPRENEURSHIP THEMES

After identifying the 90 attributes, Gartner (1990) went back to the entrepreneurs and other
experts for help in clustering the attributes into themes that would help summarize what people
concerned with entrepreneurship thought about the concept. He ended up with the following eight
entrepreneurship themes:
1. The Entrepeneur – The entrepreneur theme is the idea that entrepreneurship involves
individuals with unique personality characteristics and abilities (e.g., risk-taking, locus of control,
autonomy, perseverance, commitment, vision, creativity). Almost 50% of the respondents rated
these characteristics as not important to a definition of entrepreneurship (Gartner, 1990, p. 21, 24).
“The question that needs to be addressed is: Does entrepreneurship involve entrepreneurs
(individuals with unique characteristics)?” (Gartner, 1990, p. 25).
2. Innovation – The innovation theme is characterized as doing something new as an idea, product,
service, market, or technology in a new or established organization. The innovation theme suggests
that innovation is not limited to new ventures, but recognized as something which older and/or
larger organizations may undertake as well (Gartner, 1990, p. 25). Some of the experts Gartner
questioned believed that it was important to include innovation in definitions of entrepreneurship
and others did not think it was as important.
“Does entrepreneurship involve innovation?” (Gartner, 1990, p. 25).
3. Organization Creation – The organization creation theme describes the behaviors involved in
creating organizations. This theme described acquiring and integrating resource attributes (e.g.,
Brings resources to bear, integrates opportunities with resources, mobilizes resources, gathers
resources) and attributes that described creating organizations (new venture development and the
creation of a business that adds value). (Gartner, 1990, p. 25)
“Does entrepreneurship involve resource acquisition and integration (new venture creation
activities)?” (Gartner, 1990, p. 25)
4. Creating Value – This theme articulated the idea that entrepreneurship creates value. The
attributes in this factor indicated that value creation might be represented by transforming a
business, creating a new business growing a business, creating wealth, or destroying the status
quo.“Does entrepreneurship involve creating value?” (Gartner, 1990, p. 25).
5. Profit or Non-profit
“Does entrepreneurship involve profit-making organizations only” (Gartner, 1990, p. 25)?

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6. Growth
Should a focus on growth be a characteristic of entrepreneurship?
7. Uniqueness – This theme suggested that entrepreneurship must involve uniqueness. Uniqueness
was characterized by attributes such as a special way of thinking, a vision of accomplishment, the
ability to see situations in terms of unmet needs, and creates a unique combination.
“Does entrepreneurship involve uniqueness?” (Gartner, 1990, p. 26).
8. The Ownwer-Manager – Some of the respondents questioned by Gartner (1990) did not
believe that small mom-and-pop types of businesses should be considered to be entrepreneurial.
Some respondents felt that an important element of a definition of entrepreneurship was that a
venture be owner-managed.
To be entrepreneurial, does a venture need to be owner-managed?

DEFINITIONS OF AN ENTREPRENEUR

Here are examples of Definitions of Entrepreneur:

An entrepreneur can be described as “one who creates a new business in the face of risk and
uncertainty to achieve profit and growth by identifying significant opportunities and assembling
the necessary resources to capitalize on them” (Zimmerer & Scarborough, 2008, p. 5).
An entrepreneur is “one who organizes, manages, and assumes the risks of a business or
enterprise” (Entrepreneur, n.d.).

DEFINITIONS OF ENTREPRENEURSHIP
The following are definitions of Entrepreneurship:
Entrepreneurship can be defined as a field of business that seeks to understand how opportunities
to create something new (e.g., new products or services, new markets, new production processes
or raw materials, new ways of organizing existing technologies) arise and are discovered or
created by specific persons, who then use various means to exploit or develop them, thus producing
a wide range of effects. (Baron, Shane, & Reuber, 2008, p. 4)

A concise definition of entrepreneurship “is that it is the process of pursuing opportunities without
limitation by resources currently in hand” (Brooks, 2009, p. 3) and “the process of doing
something new and something different for the purpose of creating wealth for the individual and
adding value to society” (Kao, 1993, p. 70)

THE EVOLUTION OF ENTREPRENEURSHIP THOUGHT

This section includes an overview of how entrepreneurship has evolved to the present day.
The following timeline shows some of the most influential entrepreneurship scholars and
the schools of thought (French, English, American, German, and Austrian) their perspectives
helped influence and from which their ideas evolved. Schools of thought are essentially groups of
people who might or might not have personally known each other, but who shared common beliefs
or philosophies.

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Figure 1 – Historical and Evolutionary Entrepreneurship Thought (Illustration by Lee A.
Swanson)
The Earliest Entrepreneurship
The function, if not the name, of the entrepreneur, is probably as old as the institutions of
barter and exchange. But only after economic markets became an intrusive element of society did
the concept take on pivotal importance. Many economists have recognized the pivotal role of the
entrepreneur in a market economy. Yet despite his central importance in economic activity, the
entrepreneur has been a shadowy and elusive figure in the history of economic theory (Hebert &
Link, 2009, p. 1).

Historically those who acted similarly to the ways we associate with modern-day
entrepreneurs – namely those who strategically assume risks to seek economic (or other) gains –
were military leaders, royalty, or merchants. Military leaders planned their campaigns and battles
while assuming significant risks, but by doing so they also stood to gain economic benefits if their
strategies were successful. Merchants, like Marco Polo who sailed out of Venice in the late 1200s
to search for a trade route to the Orient, also assumed substantial risks in the hope of becoming
wealthy (Hebert & Link, 2009).

The entrepreneur, who was also called adventurer, projector, and undertaker during the
eighteenth century, was not always viewed in a positive light (Hebert & Link, 2009).

Development of Entrepreneurship as a Concept

RISK AND UNCERTAINTY
Richard Cantillon (1680-1734) was born in France and belonged to the French School of
thought although he was an Irish economist. He appears to be the person who introduced the term
entrepreneur to the world. “According to Cantillon, the entrepreneur is a specialist in taking on
risk, ‘insuring’ workers by buying their output for resale before consumers have indicated how
much they are willing to pay for it” (Casson & Godley, 2005p. 26). The workers’ incomes are
mostly stable, but the entrepreneur risks a loss if market prices fluctuate.
Cantillon distinguished entrepreneurs from two other classes of economic agents;
financially independent landowners and hirelings (employees) who did not partake in the decision-
making in exchange for relatively stable incomes through employment contracts. He was the first
writer to provide a relatively refined meaning for the term entrepreneurship. Cantillon described
entrepreneurs as individuals who generated profits through exchanges. In the face of uncertainty,
particularly over future prices, they exercise business judgment. They purchase resources at one
price and sell their product at an uncertain price, with the difference representing their profit (Chell,
2008; Hebert & Link, 2009).
Farmers were the most prominent entrepreneurs during Cantillon’s lifetime, and they
interacted with “arbitrageurs” – or middlemen between farmers and the end consumers – who also

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faced uncertain incomes, and who were also, therefore, entrepreneurs. These intermediaries
facilitated the movement of products from the farms to the cities where more than half of the farm
output was consumed. Cantillon observed that consumers were willing to pay a higher price per
unit to be able to purchase products in the smaller quantities they wanted, which created
opportunities for the intermediaries to make profits. Profits were the rewards for assuming the risks
arising from uncertain conditions. The markets in which profits were earned were characterized
by incomplete information (Chell, 2008; Hebert & Link, 2009).
Adolph Reidel (1809-1872), form the German School of thought, picked up on Cantillon’s
notion of uncertainty and extended it to theorize that entrepreneurs take on uncertainty so others,
namely income earners, do not have to be subject to the same uncertainty. Entrepreneurs provide
a service to risk-averse income earners by assuming risk on their behalf. In exchange,
entrepreneurs are rewarded when they can foresee the impacts of the uncertainty and sell their
products at a price that exceeds their input costs (including the fixed costs of the wages they
commit to paying) (Hebert & Link, 2009).
Frank Knight (1885-1972) founded the Chicago School of Economics and belonged to
the American School of thought. He refined Cantillon’s perspective on entrepreneurs and risk by
distinguishing insurable risk as something separate from uncertainty, which is not insurable. Some
risks can be insurable because they have occurred enough times in the past that the expected loss
from such risks can be calculated. Uncertainty, on the other hand, is not subject to probability
calculations. According to Knight, entrepreneurs can’t share the risk of loss by insuring themselves
against uncertain events, so they bear these kinds of risks themselves, and profit is the reward that
entrepreneurs get from assuming uninsurable risks (Casson & Godley, 2005).

IMPORTANCE OF ENTREPRENEURS/ENTREPRENEURSHIP FOR ECONOMIC

GROWTH
Entrepreneurship can be considered a national asset, and entrepreneurs are the drivers of
that asset for any country. It is a dynamic process that not only increases wealth and but can also
create value that results in improved well-being.
Entrepreneurship plays an important role in changing society, so it makes sense to cultivate,
motivate, and remunerate this greatest asset to the greatest extent possible.

Importance of Entrepreneurship
In entrepreneurship, unutilized resources, labor, and capital are utilized most efficiently.
Entrepreneurs take on risks in the hopes of making a profit, or in the case of social
entrepreneurship, of solving a problem facing communities. So the significance of entrepreneurs
and the role of entrepreneurship go beyond the business world. The importance of entrepreneurship
is so broad that it’s quite tough to explain all the aspects of it in a short blog post. However, I
would like to shed some light on the importance and role of entrepreneurship in economic
development and society.

1. Entrepreneurship Accelerates Economic Growth

Entrepreneurs are important to market economies because they can act as the wheels of the
economic growth of the country.
By creating new products and services, they stimulate new employment, which ultimately
results in the acceleration of economic development. So a public policy that encourages and
supports entrepreneurship should be considered important for economic growth.
A large number of new jobs and opportunities are created by entrepreneurship.
Entrepreneurship creates a huge amount of entry-level jobs that are very much important to turn
unskilled jobholders into skilled ones. It also prepares and provides experienced workers to large

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industries. The increase in the total employment of a country largely depends on the rise of
entrepreneurship. So the role of entrepreneurship in creating new job opportunities is huge.
By bringing innovation to every aspect of businesses, entrepreneurial ventures enhance
production utilizing the existing resources in the most effective ways. Entrepreneurs develop new
markets by introducing new and improved products, services, and technology. Thus, they help
generate new wealth and add more to the national income. So the government can offer the citizens
more national benefits.

2. Entrepreneurship Promotes Innovation

Through the right practices of research and development, entrepreneurs bring new
innovation that opens the door of new ventures, markets, products, and technology. Entrepreneurs
have a role to play in solving problems that existing products and technology have not yet solved.
So by producing new products and services or bringing innovation to existing products and
services, entrepreneurship has the potential to improve peoples’ lives.

3. Entrepreneurship Can Promote Social Changes

Entrepreneurs change or break the tradition or cultures of society and reduce the
dependency on obsolete methods, systems, and technologies. Entrepreneurs are the pioneer of
bringing new technologies and systems that ultimately bring changes to society. These changes
are associated with improved lifestyle, generous thinking, better morale, and higher economic
choice. In this way, social changes gradually impact national and global changes. So the
importance of social entrepreneurship must be appreciated.

4. Entrepreneurship Promotes Research and Industrial Development

Along with producing new business ideas and thinking out of the box, entrepreneurs also
promote research and development. They cultivate their ideas, shape them into a new form, and
turn them into a successful business endeavor.
Entrepreneurs are a special kind of people, they are always working to discover new ideas
and improve existing ones. But their impact extends beyond their own companies and ventures:
when an entrepreneur develops a new product, service, or idea, others often follow (and sometimes
even further refine the ideas).
Innovation and industry are accelerated through the combined action of entrepreneurs.
They can motivate each other, share ideas and inspiration, and share planning to establish new
industries. The change of the existing industrial climate opens the doors for others at the same
time. Therefore, we see that the importance of entrepreneurship to the economy is multi-
functional.

5. Entrepreneurship Develops and Improves Existing Enterprises

We often think of entrepreneurs as inventing new products and ideas, but they also impact
existing businesses. Since entrepreneurs think differently, they can come up with innovative ways
to expand and develop existing enterprises. For example, modernizing production processes,
implementing new technology in the overall distribution and marketing processes, and helping the
existing enterprises to utilize existing resources in more efficient ways.
To sum up, supporting and promoting entrepreneurship can have a positive impact on the
country’s economy and even existing businesses, and social entrepreneurship increases the
likelihood of finding innovative solutions to social challenges faced by communities around the
world.

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10 IMPORTANT PERSONAL CHARACTERISTICS OF ENTREPRENEURS
Some say that entrepreneurs are born, not made. Whether you believe this or not, there are
some personality traits that many successful entrepreneurs share.

What are the successful entrepreneurship characteristics?

Being an entrepreneur requires much more than big ideas. A true entrepreneur possesses a
unique cocktail of skills and characteristics that enable them to beat the odds and go after their
dreams full throttle. But what are those attributes? What does an entrepreneur need to succeed? It
would be nice to have a handbook to tell us whether or not we have the ‘E Factor’ that makes a
great entrepreneur. But the truth is, there’s no discernible formula for success, but there are a few
traits that successful entrepreneurs tend to have.

Some people may be born with the traits, but those who are not can often develop them.
Here are some of the personal characteristics that successful entrepreneurs have, with tips along
the way to help you develop them.

1. Entrepreneurs are goal-oriented

Entrepreneurs are all about setting goals and putting everything they have into achieving
them. They’re determined to make their business succeed and will remove any obstacles that stand
in their way. They also tend to be strategic in their game plans and have a clear idea of what they
want to achieve and how they plan to do it.
How to become goal-oriented:
• Create short and long term goals for your business. Short-term goals are those you
can complete in an hour, a day, or as long as a week. Long-term goals might take
you a year or longer.
• Whenever you have a choice to make about what to focus on, choose the thing that
will help you make the most progress toward one of your goals.
• Entrepreneurs are committed to their business
• Entrepreneurs are not easily defeated. They view failure as an opportunity for future
success. If they don’t succeed the first time, they’ll continue to try until they do.
Most entrepreneurs don’t take ‘no’ for an answer.

How to remain committed:

• Each time you run up against an obstacle, rather than thinking that your idea won’t work
or that you’ve failed, think about what you can learn from the experience.
• Figure out another way to reach your goal from where you are.
• Remember that many successful entrepreneurs fail several times before they succeed.

2. Entrepreneurs are committed to their business

Entrepreneurs are not easily defeated. In fact, they view failure as an opportunity for future
success. If they don’t succeed the first time, they’ll continue to try until they do. Most
entrepreneurs don’t take ‘no’ for an answer.

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3. Entrepreneurs are hands-on
Entrepreneurs are inherently proactive and know that if something needs to get done, they
should do it themselves. They are ‘doers’ and tend to have very exacting standards. They view
their business as an extension of themselves and like to be present in day-to-day operations – even
when they don’t have to be.
How to stay hands-on:
• Having a business that grows to the point where you can’t do everything yourself
is a good problem to have. But it’s still important to know how things are being
done. Consider:
• Spending some time with each of your key people at least once a month to make
sure you know how they’re doing their work.
• Filling in for people when they go on vacation just to keep your hand in it.

4. Entrepreneurs thrive on uncertainty

Not only do entrepreneurs thrive on facing new challenges, but they also remain calm in
the face of those challenges. Sometimes things go wrong in business, and when they do, it’s your
job as the head of the company to keep your cool. Successful entrepreneurs know this and flourish
in the wake of a challenge.

How to thrive on uncertainty: Manage uncertainty in three steps.

• When the unexpected happens, stop and take a deep breath.
• Think about how you can solve the problem, and how you can learn from it.
• Remember your goals. How can you continue to move toward them despite this
uncertainty?

5. Entrepreneurs continuously look for opportunities to improve

Entrepreneurs view every event or situation as a business opportunity, and they’re
constantly generating new and innovative ideas. They can look at everything around them through
the lens of their goals, seeing opportunity everywhere.
How to continuously improve:
• Outside-the-box thinking doesn’t come naturally to everyone, but you can practice it.
• Each time you do something – whether it’s ordering supplies, making a sales call, or
creating a new product – ask yourself if there’s a way you could do it better.
• If you have employees, reward them for making suggestions that lead to improvement.

6. Entrepreneurs are willing to take risks

Most entrepreneurs don’t ask themselves whether or not they will succeed – they believe
they will. This innate confidence allows them to take risks because they firmly believe those risks
will pay off.
How to practice taking risks:
• When deciding whether or not to take a risk, ask yourself, “What is the worst thing that
could happen?” and then, “How likely is it that the worst thing will happen?” The answers
to these two questions can inform your decision.
• If the worst possible outcome is not that bad or is extremely unlikely, it’s probably a risk
worth taking.

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7. Entrepreneurs are willing to listen and learn
The most important part of learning is listening – and a good entrepreneur will do this in
abundance. They also know that they can learn something new from just about everyone they meet,
so they don’t hesitate to ask questions.
How to listen and learn:
• When talking to people about your business, make sure you’re asking more questions than
you’re answering.
• You should be trying to learn something from every interaction, whether it’s with a
customer, a supplier, an employee, or someone you just met.

8. Entrepreneurs have great people skills

Entrepreneurs tend to have strong communication skills, and this strength, combined with
their passion for their product or service, helps them to talk to anyone and everyone about their
business. They’re also natural leaders who can motivate, inspire, and influence those around them.

How to develop people skills:

• This is another skill that many people think you need to be born with, but it can be learned.
• Start by making an effort to strike up a conversation with someone you don’t know.
• Ask open-ended questions.
• Continue the discussion based on their answers to your questions.
As long as you’re asking more questions than you’re answering, you’ll likely keep their
interest.

9. Entrepreneurs are inherently creative

This is one trait that, due to their nature, entrepreneurs tend to have in abundance. They
can come up with ingenious ideas and also have the ability to turn those ideas into profits.
How to harness your creativity:
• People who don’t consider themselves creative can sometimes be intimidated by those
whose creativity is apparent. But this trait can also be built by practice.
• When faced with a problem, start by writing down every possible solution.
• Make it a point to include solutions you think will never work – the more outlandish the
better.
The one you settle on probably won’t be one of these, but it will get you into the habit of
considering every possible scenario.

10. Entrepreneurs are passionate and positive

Passion may be the most important trait of a successful entrepreneur. They genuinely love
what they do and are willing to put in the extra hours to make their business grow. They get a sense
of satisfaction from their work that goes beyond making money.
How to be passionate and positive:
• Choose a product or service that you’re genuinely interested in.
• You must be convinced that your business solves a real need in a way that will improve
people’s lives.
Once you are sure about that, it’s easy to be passionate and positive about what you do.

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