Concepts and Characteristics of Entrepreneurship

Broadly speaking, entrepreneurship refers to a person working for

himself or herself. And because this definition paints a picture of a

selfish man, thus, the narrower concepts were developed, highlighting

certain characteristics of entrepreneurship. So let us revisit the

definition of entrepreneurs and entrepreneurship.

Entrepreneurship

An entrepreneur is a person who undertakes a venture with some

profit potential and involving a considerable amount of risk and

therefore, entrepreneurship is the venture undertaken by the

entrepreneur. The most obvious example of entrepreneurship is the

starting of a new business.

Entrepreneurship can be of varying degrees and is not necessarily

alike. It can be categorized into various subcategories, starting with

small and home businesses to multidimensional industries that were

started from the ground level.

Ideally speaking, anyone who has the capacity to start a venture and

undertake risks can become an entrepreneur. But not all entrepreneurs

are successful. There are certain characteristics of entrepreneurship

that make for a successful venture. So let us talk a little about these

traits that an entrepreneur must possess in order to be successful.

Characteristics of Entrepreneurship

While there can be as many characteristics of entrepreneurship as

there are people in this world with opinions, there are some

characteristics that are considered indispensable or necessary in an

entrepreneur. These are listed here as follows.

Ability to take Risks

This is the first and foremost trait of entrepreneurship. Starting any

business involves a considerable amount of risk of failure. Therefore,

the courage and capacity to take the said risk are essential for an

entrepreneur.

Understand the Nature of Business Risk here in detail.

Innovation

In a world, where almost everything has been done, innovation is a

priceless gift to have. Innovation basically means generating a new

idea with which you can start a business and achieve a substantial

amount of profits. Innovation can be in the form of a product, i.e.,

launching a product that no one is selling in the market. It can also be

in the form of process, i.e., doing the same work in a more efficient

and economical way.

An easy example of product innovation could be the launching of

touch screen cell phones when the world was still using a keypad on

cell phones.

Process innovation can be seen in capital-intensive industries that have

to replace manual labour with machines, therefore, increasing their

production and reducing their costs.

Another type of innovation can be the one concerned with usage. For

examples, cell phones are now used for various functions such as

viewing, creating and editing various files and documents, thus,

eliminating the need for computers to a large extent.

Visionary

Every entrepreneur needs to be a visionary. Without a vision for the

future of his venture, he or she would just be working aimlessly

without reaching any point of success.

Leadership

An entrepreneur has a vision. However, it takes a lot of resources to

turn that vision into reality. One of these resources are the people that

the entrepreneur hires to perform various functions like production,

supplying, accounting, etc.

A single person cannot perform all the tasks and therefore it is

important to bring some more people to do it. This also makes

leadership very important as a leader provides the required direction to

the efforts of the employees. Without proper leadership, everyone

would be working independently without achieving the desired results.

Open Minded

A good entrepreneur realizes that every situation can be a business

opportunity. Thus can be utilized for the benefit of the organization.

For example, Paytm realized the significance of demonetization and

recognized that the need for online transactions was more than ever

during this time and so it utilized and grew massively during this

period.

Confident and Well Informed

An entrepreneur needs to be confident about his ideas and skills. This

confidence also inspires the confidence of the people working for him

as well as the other stakeholders involved in his business.

Learn more about Stakeholders and their Information Requirement

This confidence comes from being well informed about the industry

and environment. Various legal and political policies enhance business

and trade opportunities, while some hinder them. Having knowledge

about these can really help an entrepreneur make the right decision at

the right time.

Solved Question for You

Q: Are the characteristics of entrepreneurship inherent or can they be

learned?

Answer: It is often debated that some entrepreneurial qualities like

leadership and confidence are inherent. Many believe that these can be

learned over time with learning, practice, and application in real world

situations.

The most practical example of this could be that no one is born a

leader or confident. They become so over time. This is due to their

family and social surroundings. It can also be because of the situations

that they have been exposed to in their respective lives.

Functions of Entrepreneurs in the Economy

As we all know, entrepreneurs are their own bosses and work towards

achieving profits by satisfying the need of the economy. An

entrepreneur does a little more than that. You must have often

wondered why the government keeps coming up with new policies

and ideas to promote entrepreneurship in India (like the mudra

yojana). What could the entrepreneur provide to the country that

makes him qualified for this special treatment?

Well, you might be surprised to know that there are quite a few

functions of the entrepreneurs in our economy that we will discuss in

this article. A little clarification can be found by understanding what

the economy actually means.

Functions of Entrepreneurs in the Economy

In layman’s terms, an economy can be defined as a general area of

production, distribution, trade and consumption. It follows a simple

rule of demand and supply. Whatever the consumers need and demand

is produced and supplied by the producers in the economy.

As soon as a need is recognized in the society, an entrepreneur comes

into action to efficiently and profitably satisfy these needs. Let us see

some important functions an entrepreneur fulfils in the economy.

1] Contribution to the GDP

GDP refers to the monetary value of all final goods and services

produced in an economy during a specified period of time- usually a

year. These goods and services are provided by the entrepreneurs of

that particular economy

In a fast-growing economy like India, the entrepreneurs play a vital

role in producing the optimum amount of products and services in

response to the demand by the people. If there were no entrepreneurs,

the country would be solely dependent on the imports and

multinational companies and the GDP would be adversely affected or

collapse. Therefore, the economy is hugely dependent on the

entrepreneurs for its GDP generation.

2] Foreign Exchange Earnings

Industries like the handloom and many other industries produce goods

not only to meet the domestic requirements but also export these

goods and earn valuable foreign exchange for the country. This adds

to the economic growth of the country.

3] Generates Employment

Starting new ventures inevitably means the requirement of various

resources including the very valuable human resource to get the work

done. People are required to perform various functions in an

organisation. So one of the major functions of entrepreneurs is helping

the economy by generating employment.

4] Tax Generation

More employment to the people also results in more taxable income

for the government. This helps the government increase their tax

revenues that which they use for the development of the country and

improve the standard of living of the people.

5] Eradicating Poverty

India is a labour intensive economy because of the vast population in

the country. And since entrepreneurs help in generating employment,

they directly help the government in eradicating unemployment and

poverty in the economy. More income means that people are able to

afford more and better things.

6] Entrepreneurs Introduce New Technology

Since a long time, entrepreneurs have been introducing new

technologies in the economy. For example, Steve jobs introduced the

MAC software. Such technological advancements help to develop the

economy as a whole. This is one of the reasons that the government

supports and promotes the entrepreneurs

7] Entrepreneurs help other Industries in the Economy

A lot of industries use the products of other industries as a raw

material for their finished products, thus generating even more goods

and services as well as more revenue.

For example, while flour is a finished product for a person who owns

a flour mill, it is a raw material for the factory producing biscuits. In

this way, it goes on and on. One idea or product leads to the

development of another or complementary product or service.

8] Specific Tax Revenue

Entrepreneurs pay various direct and corporate taxes to the state

governments without which they cannot function in the states.

Therefore, the entrepreneurs help in additional tax revenue generated

in the country.

9] Bringing in FDI

A lot of start-ups are funded by various companies in foreign

countries. This helps the economy bring in more and more foreign

investments. In fact, RBI helps these start-ups by relaxing policies on

FDI.

In light of the above points, it is clear that an entrepreneur is a huge

asset for a country and the functioning of an economy greatly depends

on the existence of entrepreneurship.

Solved Question for You

Q: What is the significance of entrepreneurs with concern to the GDP?

Answer: The entrepreneurs contribute a great deal to the GDP.

Entrepreneurship is concerned with the production of goods and

services in the economy. Thus, it directly affects employment, revenue

generation, and foreign exchange. Therefore, it affects the whole

economy in general.

Role of Entrepreneurs with Relation to Enterprise

What is the role of a parent in their child’s growth? The answer is a bit

obvious, isn’t it? Similarly, the role of entrepreneurs in the

development of an enterprise is like the role of a parent in the growth

of their children. Let us take a look.

Role of Entrepreneurs

A lot of hard work goes into starting and eventually expanding an

enterprise. This hard work starts with the entrepreneur and trickles

down the entire organization. But this is a very broad definition and

does not really appreciate and highlight the actual role of

entrepreneurs with respect to their enterprises.

So to explain it in a better way, let us break it down into points about

how an entrepreneur is vital to the enterprise.

Initiator

The entrepreneur is the one who initiates the process of creating an

enterprise by coming up with the idea for the business and planning

out how to turn that idea into a reality.

Risk Taker

In an enterprise, the entrepreneur, being the owner, is the biggest risk

taker. He is the one who finds the capital to back up his idea and also

the person who is accountable in the face of the failure of that

particular idea.

Reduces Risk

It is also one of the most important roles of entrepreneurs to reduce the

risk of an enterprise failure by bringing in people that can help the

organization grow. These people can be shareholders or investors that

have a stake in the company and therefore are motivated to help the

company succeed.

Learn more about Concepts and Characteristics entrepreneurship

here in detail

Allocator

An entrepreneur procures and allocates various resources in the

organization. The most important of these resources is manpower. The

entrepreneur is responsible for hiring an efficient staff to help him

carry out his business. This is important because a good manager can

take a business to new heights, while a bad manager can destroy the

business.

He is also responsible for creating an organizational structure and

departments for a more efficient functioning of the enterprise.

Adhering to Legal Norms

To ensure that the enterprise adheres to legal norms and policies, such

as obtaining a license is also the duty of the entrepreneur. Not

pertaining to these can mean serious legal consequences for the

enterprise. These could be in terms of financial losses for the

organization or something even more serious such as shutting down of

an enterprise.

Forecasting

Last but far from least, the role of entrepreneurs involve acting as a

forecaster. The enterprise works in a business environment and is

affected by changes occurring in various aspects of this environment.

It could be internal, such as strikes, machinery breakdowns, budget

cuts etc. or these could be external, such as legal policy changes,

political or social unrest, technological advancements, etc.

An entrepreneur must be able to correctly forecast these changes and

prepare the organization to deal with these changes.

Solved Question for You

Q: Is an entrepreneur the same as a manager?

Answer: There are a lot of similarities between an entrepreneur and a

manager with respect to the allocation of resources, decision making

and guiding the employees. so, in a way, every entrepreneur can be a

manager. However, the reverse is not necessarily true.

This is because, essentially, to be an entrepreneur, you must be the

owner of the business and in a lot of cases managers work for

someone else’s business.

Process of Entrepreneurship Development

In a very general sense, development refers to enhancing an existing

potential or asset through the process of learning and application. It is

a process of evolving one’s skills in a systematic manner. Therefore,

same goes for the process of entrepreneurship development. But

before we dive headfirst into the process of entrepreneurship

development, let us first shed some light upon what the term

entrepreneurship development entails.

Definition of Entrepreneurship Development

Basically, entrepreneurship development is basically the process of

improving the skill set as well as the knowledge of the entrepreneurs.

This can be done through various methods such as classroom sessions

or training programmes specially designed to increase the

entrepreneurial acumen.

Another definition of this term could be the process of enhancing the

capacity to develop, manage and organize a business venture while

keeping in mind the risks associated with it.

But instead of complicating things with big words and sophisticated

terminologies, let us understand it simply. The process of

entrepreneurship development is nothing but helping the entrepreneurs

develop their skills through training and application of that training. It

instils in them the quality of making better decisions in the day to day

business activities.

Now that we understand the meaning of entrepreneurship

development, let’s discuss the process of entrepreneurship

development.

Browse more Topics under Entrepreneurship Development

● Concept and Characteristics of Entrepreneurship

● Functions of Entrepreneurs in Economic Development

● Role of Entrepreneurs in Relation to Enterprise

● Relationship between Entrepreneurship and Management and

Need for Entrepreneurship

Process of Entrepreneurship Development

Clear View of the Objective of the Program

Before you get into training the prospective entrepreneurs, it is very

important to have a clear objective and plan in mind about what the

program is going to encompass.

Without a proper plan and direction, the training would not yield the

desired results. This would lead to a loss of time, money, effort and

most of all, valuable potential.

Selecting the Potential Targets

It is important to select the potential targets who are willing to

enhance their skills and who can be identified as the people who have

some amount of business acumen. These can be further divided into

two categories- the educated target audience and the uneducated target

audience.

Educated audience refers to the target people who have a decent

educational background and want to be entrepreneurs. These people

have the motivation to put their education to use by starting a venture

and working for themselves.

Uneducated audience refers to the people who are not as privileged as

others in terms of education about the market and have the potential to

become entrepreneurs. These people are constantly looking for

alternative ways to earn money and support their families. Therefore

they are highly motivated and, given the right training and direction,

can prove to be exceptional entrepreneurs.

Identifying Local Talents and Markets

The process of entrepreneurship development program can be seen as

most effective and efficient when it is applied in the local markets and

on the local entrepreneurs who know about it. These people

understand and absorb the knowledge way more quickly and can

apply it in the current scenario because of which the results of the

program can be seen more quickly and effectively.

Choosing the Right Location

In India unfortunately, these programs can only be launched where

support institutions and resources are available, but ideally, these

programmes should be planned and launched in the areas where most

people are interested and willing to take advantages of these

programmes so that this opportunity can be used most effectively and

there is no loss of resources.

Learn more about the Role of Entrepreneurs with Relation to

Enterprise here

Tying up with Institutions

A lot of times these programmes involve tying up with various

institutions like universities, NGO and some private institutions. This

is done to give a real-world experience to assist the program and give

the people some idea of the situations in the real world.

Develop the Entrepreneurship Program as Needed

People and their skill sets are different and develop over time. Thus, it

is very important to keep developing the programs to suit the needs of

the people enrolled in it. Moreover, the focus must be on harnessing

their strengths and working to minimize their weaknesses.

Analyze the Result for Future Development

This is a very important and final step in the process of

entrepreneurship development. After the program has run its course, it

is very important to analyze the effectiveness of the program. This is

necessary to ensure that in future more effective programs can be

developed. For this one has to minimize the shortcomings of the

existing program.

Read the Characteristics of Entrepreneurs here.

Solved Question for You

Question: Is entrepreneurship development important for existing

entrepreneurs?

Answer: Entrepreneurship development programs are developed for

both aspiring as well as existing entrepreneurs. This is because these

programs are also designed to help the entrepreneur expand their

existing enterprise. These programs are more effective on the existing

entrepreneurs. It is because they already know a lot about their

markets and industry. Hence can effectively apply the learnings in

their business and analyze the results more quickly.

Relation between Entrepreneurship and Management and Need for Entrepreneurship

Asking whether there is a need for entrepreneurship in the country is

like asking whether you need air to survive. The answer is you just

cannot do without it! Entrepreneurs are an essential cog in the

machinery that is the economy, without which the economy will not

be able to function as efficiently.

Need for Entrepreneurship

Entrepreneurship does not only imply being able to start and manage

your own business but it also helps the economy in a lot of ways. For

starters, it contributes greatly to the GDP of the country as

entrepreneurship primarily involves production and supply of goods

and services with a profit motive in mind. This is one of the most

important need for entrepreneurship.

An entrepreneur also generates employment in the economy and helps

in reducing unemployment as well as in improving the standard of

living of the people. This is because more jobs mean more income

from the people and more revenue in the economy.

Moreover, it is because of the entrepreneurs in the economy that

realize the need of goods and services of the people that we do not

have to depend on western produced goods.

This, in turn, helps the country’s money stay within the country. It

also helps the country to earn foreign exchange by exporting the goods

that are produced in excess in the country to other countries that have

a demand for these goods and services.

Another need for entrepreneurship in the country is that it helps to

develop and nurture latent potential in the country. This is especially

important in a country like India which has a huge population. This

helps the overall growth of the country. It also improves the standard

of living of the people living in the economy.

Management and Entrepreneurship

Management refers to the art of getting things done by other people.

Entrepreneurship refers to the starting a venture with a profit motive in

mind. It also involves the ability to take considerable risks for that

venture. Now let us talk about the relationship between a manager and

an entrepreneur.

While an entrepreneur is the owner of the business and takes all the

risk of the business and procures the resources required to start and

run the business, a manager takes care of managing and allocating

these resources to various uses and making sure that work is being

done with efficiency and effectiveness.

Similarities between an Entrepreneur and Manager

From the above explanation, it can be drawn out that while an

entrepreneur can be a manager, a manager is not necessarily an

entrepreneur. However, there are certain similarities between the two.

● Decision Making: A manager, just like an entrepreneur needs

to be a quick and effective decision maker at their respective

levels.

● People Person: Both the manager and the owner needs to be

good at social skills. This is necessary to convince people to

work with them. Further, it helps ensure that peace and order

are maintained within the company.

● Confidence: Just as an entrepreneur, to be effective as a

manager, a person needs to conduct himself with confidence.

This confidence inspires other people as well and makes them

want to work for the company.

Speaking of the need for entrepreneurs with respect to the

management, if the entrepreneurs didn’t exist, there would be nothing

for the managers to do. In other words, entrepreneurs are concerned

with starting a new business, while managers are concerned more with

managing the ongoing operations.

The need for entrepreneurship especially arises when there is a

particular need arising in the society that is not being met by the

existing players in the market. In such situations, an opportunity

presents itself in the market for entrepreneurs to find a solution to

serve such needs and that becomes their business.

Governments also promote new businesses in the economy since it

directly affects their revenue. The government levies taxes in

respective states where the business is operational, to be paid by these

businesses. Another way the government makes revenues out of these

businesses is by charging them for licensing of their businesses. All

businesses operating in the country need a license to operate. It is a

legal formality that is mandatory for all functional businesses.

Solved Question for You

Question: What are the essential qualities of an entrepreneur?

Answer: There are a lot of qualities that make an entrepreneur

successful. But some can be categorized as a few of the ‘must have’

traits. These are mandatory traits if you want to be a successful

entrepreneur.

For example, the primary quality of an entrepreneur is that he should

be a risk taker. A very common saying in the world of business is-

bigger the risk, bigger the rewards. Other qualities are confidence and

a quick decision maker in the face of economic turbulence.