Lesson 01

INTRODUCTION TO ENTREPRENEURSHIP

Introduction

Entrepreneurship is basically geared towards self-employment. It is generally

pertains to engaging in small and medium-sized business. An entrepreneur learns
the tenets of entrepreneurship so he can put up and operate his own business
whatever the size or magnitude. In engaging with business, entrepreneurial skills are
needed in order to deliver the sales and revenue for the company or organization.
Entrepreneurship also the ability and readiness to develop, organize and run a
business enterprise along with any of its uncertainties in order to make a profit. The
most prominent example of entrepreneurship is the starting of new businesses.

Entrepreneurship, which is one the most powerful economic force known to

humankind, is empowering individuals to seek opportunity where others find
intractable problems. Entrepreneurship is the symbol of business tenacity and
achievement; it is a vital source of change in all facets of society. Entrepreneurs, with
their inherent intelligence, drive and hard work, have made best use of the
opportunities available to them. This lesson will help you to understand the concept
of entrepreneurship, analyze the key indicators of being an entrepreneur, and
distinguish the contribution of entrepreneurship in the community and individual.

Learning Objectives

At the end of the lesson, the learners should able to:

 discuss the concept of entrepreneurship and its evolution

 discuss the relationship between motivation and entrepreneurship.
 understand the key factors affecting entrepreneurial viability.
 distinguish the myths, legends among entrepreneurs.
 identify the challenges facing entrepreneurs.

Lesson Proper

ENTREPRENEURSHIP

Entrepreneurship is the art of starting a business, basically a start-up

company offering creative product, process or service. We can say that it is
an activity full of creativity. An entrepreneur perceives everything as a chance
and displays bias in taking decision to exploit the chance.

Is the act of creating a business or businesses while building and scaling it

to generate profit? Basically it gear someone towards self-employment.
 Generally pertains to engaging in small and medium-sized businesses.
In the modern world, entrepreneurship definition is all about transforming the
world by solving big problems. Like initiating social change, creating an
innovative product, or presenting a new life changing solution.

At present, many businesses experiencing failure, this is an indication that

only the competent entrepreneurs stand a better chance of succeeding in
today’s highly competitive marketplace.

Age of Business Failure Rate Cumulative

(Years) (%) (%)
Under 1 27.6 27.6
1-2 13.8 41.4
2-3 11.2 52.6
3-4 10.1 62.7
4-5 6.4 69.1
5-10 9.3 78.4
10-20 8.7 87.1
Over 20 12.9 100
Table 1.1 Age of Business Failures

Causes %
Neglect 3.0
Fraud 1.1
Lack of Technical Expertise 8.5
Lack of Management Expertise 17.4
Lack of Experience 21.2
Incompetence 44.9
Disaster and other reason 3.9
100.0
Table 1.2 Causes of
Business Failures

CONCEPT OF ENTREPRENEURSHIP

Entrepreneurship started in France after the French revolution. It was the

start of Capitalism and end of Feudalism. The word entrepreneur was
coined by Jean Baptiste Say, a renowned French economist.

Say argued that the concept of Entrepreneurship, though closely tied with
the theory of economics and society, is independent of the classical and is
unable to co-exist with it.

20th Century, Joseph Schumpeter, also an economist, used Say’s ideas

as the groundwork of his book The Theory of Economic Dynamics. He
postulated that it is not optimization and equilibrium but rather the dynamic
 disequilibria, brought about by the innovative entrepreneur that brings a
healthy economy and is the central reality for economic theory and
practice.

In entrepreneurship, there is an agreement about a kind of behaviour that

includes initiatives taking, organizing, or re-organizing of social economic
mechanisms to turn resources and situation to practical account and the
acceptance of risk.

In the Philippines, According to the Philippine Entrepreneurship Report of

the DE La Salle University Publishing House, from their Global
Entrepreneurship Monitor (GEM) Report, The Philippines registered the
highest societal perception of entrepreneurship in terms of
entrepreneurship as a good career choice and media attention on
entrepreneurship among countries in Southeast Asia in the 2015 GEM
survey. Comparisons with the ASEAN countries and the factor-driven
economy are shown in Figure 4. Societal perception is defined by GEM
(2015) as the view or importance society places on entrepreneurship. This
will affect the entrepreneurial intentions and support people accord to
entrepreneurship. In the Philippines, 76% of the survey respondent placed
high status on entrepreneurs and 73% regard entrepreneurship as a good
career choice as supported by the high media attention given to
entrepreneurship.

WHO ARE THE ENTREPRENEURS?

The word entrepreneur originated from the French word entreprende, which
means, “To undertake”. It as an individual who shifts economic resources out of an
area of lower and into an area of higher productivity and greater yield.

An entrepreneur is a creator or a designer who designs new ideas and

business processes according to the market requirements and his/her own passion.
To be a successful entrepreneur, it is very important to have managerial skill and
strong team building abilities. Leadership attributes are a sign of successful
entrepreneurs. Some political economists regard leadership, management ability,
and team building skills to be the essential qualities of an entrepreneur.

The performance of an entrepreneur is dependent on his/her ability and

willingness to perform. Here, by ability we mean a function of education, experience
and skill and by willingness we mean to perform depending upon the level of
motivation. Motivation is one of the fundamental factor required for an entrepreneur
to promote his/her ideas.

Entrepreneurs take and accept risks

Entrepreneurs own ventures

 Entrepreneurs are Managers

o The entrepreneurs are creator, manager is a custodian

o The entrepreneurs take risks, the manager seeks stability
o The entrepreneur is personally responsible, the manager is merely
responsible
o The entrepreneurs achieve, managers attain targets.
o The entrepreneurs are future oriented, managers are now oriented
o The managers thrive on chaos, managers thrive on structure

Entrepreneurs establish new ventures and develop existing ones

Entrepreneurs identify opportunities in the market
Entrepreneurs apply their expertise
Entrepreneurs process market information
Entrepreneurs bring innovation
Entrepreneurs provide market efficiency
Entrepreneurs maximize investment returns
Entrepreneurship provide Leadership

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.

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; landowners, who were financially independent, 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 a price that is uncertain, 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 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 the
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 that is 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).

Distinction between Entrepreneur and Manager

Jean-Baptiste Say (1767-1832), also from the French School, advanced

Cantillon’s work, but added that entrepreneurship was essentially a form of
management. Say “put the entrepreneur at the core of the entire process of
production and distribution” (Hebert & Link, 2009, p. 17). Say’s work resulted in
something similar to a general theory of entrepreneurship with three distinct
functions; “scientific knowledge of the product; entrepreneurial industry – the
application of knowledge to useful purpose; and productive industry – the
manufacture of the item by manual labour” (Chell, 2008, p. 20).

Frank Knight made several contributions to entrepreneurship theory, but

another of note is how he distinguished an entrepreneur from a manager. He
suggested that a manager crosses the line to become an entrepreneur “when the
exercise of his/her judgment is liable to error and s/he assumes the responsibility for
its correctness” (Chell, 2008, p. 33). Knight said that entrepreneurs calculate the
risks associated with uncertain business situations and make informed judgments
and decisions with the expectation that – if they assessed the situation and made the
correct decisions – they would be rewarded by earning a profit. Those who elect to
avoid taking these risks choose the relative security of being employees (Chell,
2008).
 Alfred Marshall (1842-1924), from the English School of thought, was one of
the founders of neoclassical economics. His research involved distinguishing
between the terms capitalist, entrepreneur, and manager. Marshall saw capitalists as
individuals who “committed themselves to the capacity and honesty of others, when
he by himself had incurred the risks for having contributed with the capital”
(Zaratiegui & Rabade, 2005, p. 775). An entrepreneur took control of money
provided by capitalists in an effort to leverage it to create more money; but would
lose less if something went wrong then would the capitalists. An entrepreneur,
however, risked his own reputation and the other gains he could have made by
pursuing a different opportunity.

Amasa Walker (1799-1875) and his son Francis Walker (1840-1897) were
from the American School of thought, and they helped shape an American
perspective of entrepreneurship following the Civil War of 1861-1865. These
scholars claimed that entrepreneurs created wealth, and thus played a different role
than capitalists. They believed that entrepreneurs had the power of foresight and
leadership qualities that enabled them to organize resources and inject energy into
activities that create wealth (Chell, 2008).

Why is Motivation Required?

The term motivation has been derived from the word ‘motive’ which is nothing
but what prompts any person to act in a particular manner. Motives are the
definition of a person’s goals, dreams and needs. They direct human behaviour to
towards achieving their goal.

The following points answer this question and gives an idea why motivation is
an important factor for an entrepreneur −

 Tough competition − an entrepreneur needs to face tough competition, in

order to sustain and make a mark in this global market. To cope with this
competition, motivation is required at each stage of the firm.

 Unfavourable environment − Nobody knows what the future holds. One has
to take care of the current economy and should be prepared for the worst
situations of deteriorating economic conditions. For this, motivation and
optimism are essential.

 To create public demand − Market runs by the people and for the people.
To run a business profitably, it is required to create a public demand for your
product or service in the market and attract as many customers as possible.
To do this in the right way, motivation is required.

 To enhance creativity − Market always wants something new and different.

If every firm offers the same product without any variation then there is no
point of preferring one brand in particular. To sustain one has to be
innovative. Add some new features in the existing products and services,
 make them more user friendly in a considerable budget. This requires
motivation too.
 To increase productivity − It is very important to take care of the quality of
the product as well as the profit. People will always prefer a product which is
cost efficient and of good quality. So, motivation is required for increase the
productivity.

Thus, motivation plays a unique role in establishing a company by frequently

boosting the entrepreneur to do effective things efficiently.

What Motivates an Entrepreneur?

Many research studies have been conducted by researchers to understand

and answer this question so that the factors that motivate people to take all the risk
and start a new enterprise can be identified.

The 6Cs that motivate entrepreneurs to establish their own business are as

follows −

 Change − Entrepreneurs frequently want change, not only change, they also
want to be the bearers of change. They are solution givers and want to
interrupt the status quo. They have a vision like "I want to assemble the
world's information" or "I want to put an AC at every desk" and they take an
attempt to make this change. In this attempt, some succeed and some fail.

 Challenge − some people love challenges and they opt for starting a new
business as it is very challenging to handle big problems. These people find
typical job in a big corporate as boring and not challenging enough.

 Creativity − Running one’s own business is all about being more creative
and having the independence to make new discoveries. For example, testing
a new website design, launching a new marketing scheme, creating inventive
items that solve a known issue in a different way, creating new advertising
campaigns, etc. One needs to have an infinite room to welcome and
introduce creativity in a small business.

 Control − some people tend to start a business because they don't want to
be pushed around and work for a product/company in which they have no
way to shape their destiny. They want to be their own boss having their own
time, own pace, location of their choice, employees of their choice and have
a progressive role in deciding the direction of the company.

 Curiosity − Successful entrepreneurs are always anxious and ask − "what if

we do X this way?” They want to have more than one option to do a work
and choose the best one from them. They want to understand the customer's
perceptions, point of views, markets and competitors. They are frequently
anxious to see how their particular theory like "people want to do A with B"
works. In this aspect, they can’t be differentiated from a scientist who is trying
to prove his theorem.
  Cash − the last but not the least part is the cash. Money says it all. Many
non-entrepreneurs have a misconception that cash comes first for
entrepreneurs but this is never really true. If this would be the case, then
there is no reason for an Ellison or Gates to keep expanding their business
aggressively after they have made more than billion dollars. However, money
is not the primary motivation.

WHAT MAKES THE SUCCESSFUL ENTREPRENEUR?

Entrepreneurs are in Good Physical Health

Entrepreneurs have Superior Conceptual Abilities
Entrepreneurs have the broad thinking of the generalist
Entrepreneurs have high self-confidence
Entrepreneurs have strong personal drive
Entrepreneurs need to control and direct
Entrepreneurs have moderate interpersonal skill
Entrepreneurs are moderate risk takers
Entrepreneurs have a realistic outlook
Entrepreneurs have a high degree for emotional stability
Entrepreneurs have a low need-level for status.
Other characteristic of an Entrepreneur:

o Perseverance
o Energy, diligence
o Resourcefulness
o Ability to calculate risk
o Dynamism, leadership
o Optimism
o Need to achieve
o Versatility
o Initiative
o Flexibility
o Creativity
o Intelligence
o Profit-orientation
o Cooperativeness
o Commitment
o Aggressiveness

Inspiring Entrepreneurs

A. Walt Disney

 Co founded the Walt Disney Company as one of the leading motion picture
studios. He was also the visionary of theme parks like Disneyland and Walt
Disney World.
 His brand started with the creation of Mickey Mouse character and eventually
expanded to include other characters such as Snow White, Cinderella and more.
 As an entrepreneur, he overcome adversity with challenges such as people
stealing his work, commercial failures and more. However, he kept pushing
through staying committed to his vision.

B. Mark Zuckerberg

 Created several products before building Facebook. He created an instant

messaging tool that his father used in the dentistry practice to communicate with
the receptionist.
 He also created music software that Microsoft and AOL were interested in
buying. Then Facebook created with 1 million users in the first run and now with
68.3 billion net worth.

THE MYTHS, FEARS, AND EXCUSES OF PEOPLE WHO ARE NOT

ENTREPRENEURS

Entrepreneurs are born

Entrepreneurs are super human
Entrepreneurs are inventors
Entrepreneurs inherit business traits
Entrepreneurs possess a definite characteristic profile
The gender-difference myths (Men are better entrepreneurs)
Entrepreneurs are academic and social misfits
Entrepreneurs are gamblers and risk takers
Luck and money are the only things needed to become entrepreneurs
Entrepreneurs experience a lot of failures

THE ADVANTAGES OF BECOMING AN ENTREPRENEUR

Have the opportunity to create your own destiny

Have the opportunity to be financially well-off
Have the opportunity of knowing yourself better
Have the opportunity to excel, be recognized and contribute to society

IMPORTANCE OF ENTREPRENEURS

Entrepreneurs create jobs

Entrepreneurs create change
Entrepreneurs give to society

WHY DO PEOPLE BECOMES ENTREPRENEUR

To change the world

They don’t want a boss
They want flexible hours
They’re the risk-takers
They don’t fit into corporate environment
They’re curious
 They’re ambitious
They’re can’t get a job
Self-Progress Test/Activity

A. Guide Questions (Short Essay) 30 POINTS

Direction:

Choose 3 Questions Only

Answer each questions through short essay (for 3 sentences only)
Answer in one page only
Each question is equivalent to 10 POINTS. Check the Rubrics below
Guide Question Rubrics

Rubrics for Short Essay

FEATURES 10 POINTS 7 POINTS 5 POINTS 3 POINTS

1. Outstanding 1. Satisfactory 1. Good construction 1. Poor construction of
construction of ideas construction of ideas. of ideas ideas.
Concept 2. The Piece was 2. The piece w written 2. The piece has little 2. Piece had no style
written in an in an extraordinary style. 3. Gives no new
Quality of
extraordinary style style. 3. Give some new information and very
Writing
3. Very informative 3. Somewhat information but poorly poorly organize.
and well organize. informative and well organized.
organize.
1. Virtually no spelling, 1. Few spelling and 1. A number of 1. So many spelling,
Grammar, punctuation or punctuation errors, spelling, punctuation punctutation, and
Usage& grammatical errors minor grammatical or grammatical errors grammatical errors
Mechanics errors that it interferes with
the meaning.

Questions

1. Define Entrepreneurship. Discuss certain areas why Entrepreneurs are

needed in this modern time?
2. Do you agree that entrepreneurial success follows from personal effort,
knowledge and practice rather than a preordained destiny? Discuss.
3. “An entrepreneur is one who is driven by opportunity.” Do you agree?
4. Give some common traits of being an entrepreneur. Are these common traits
among entrepreneurs that can guarantee success?
5. Can we consider an owner-entrepreneur who operates his business as a
manager? Can he be both? Why or why not?

Summary of the Lesson

 Entrepreneurship is the art of starting a business, basically a start-up
company offering creative product, process or service. We can say that it
is an activity full of creativity. An entrepreneur perceives everything as a
chance and displays bias in taking decision to exploit the chance.

Entrepreneurship started in France after the French revolution. It was the

start of Capitalism and end of Feudalism. The word entrepreneur was
coined by Jean Baptiste Say, a renowned French economist.

The word entrepreneur originated from the French word entreprende,

which means, “To undertake”. It as an individual who shifts economic
resources out of an area of lower and into an area of higher productivity
and greater yield.

An entrepreneur is a creator or a designer who designs new ideas and

business processes according to the market requirements and his/her own
passion.

Motivation is one of the most important component undergoing

Entrepreneurship. Because of tough competition and unfavourable
environment and also to create public demand, to enhance creativity,
and to increase productivity.

There are 6C’s to drove motivation in entering new business such as

Change, Challenge, Creativity, Control, Curiosity, and Cash.

There are certain factors that needs to consider in order to be a successful

entrepreneurs.

Supplementary Readings/Materials
 https://www.youtube.com/watch?v=aozlwC3XwfY
https://www.youtube.com/watch?v=pp-5ArpcxwM

References

Books
Bajao, Grayfield D.; Osorno, Rene D 2020 Entrepreneurship in Tourism and
Hospitality Wiseman’s Books Trading, Inc.

Camposano, Jorge A. 2008 Entrepreneurship for Modern Business National

Bookstore

Lashley, Conrad; Ross, Darren Lee 2009 Entrepreneurship and Small Business
Management in Hospitality Industry Elsevier LTD.

Journals
Philippine Entrepreneurship Report 2015-2016 De La Salle University

Internet Sources
https://www.tutorialspoint.com/entrepreneurship_development/entrepreneurship_
development_qualities.htm