ENT 105 –

Chapter 2:
INNOVATION
MANAGEMENT

ENTREPRENEURSHIP: An Overview Presented by: Sarah O.

Cabahit
Objectives:

• Define the entrepreneur, entrepreneurship and its

philosophy
• Understand the role of entrepreneurship in
economic development
INTRODUCTION:

• Entrepreneurs are the major powerhouse of a business or

the social sectors, who play a vital role in the economic
development of a country.
• Entrepreneurs are the ones who identify the gaps in the
market and then turn these gaps into business
opportunities.
• Entrepreneurship is the symbol of business strength and
achievement.
• Entrepreneurship is one of the four mainstreaming
economic factors: Land, Human power, Capital, and
Entrepreneurship.
A positive economic and legal environment will
encourage and motivate people to become
entrepreneurs and own and operate their
businesses. Entrepreneurship is a dynamic
activity, which helps the entrepreneur to bring
changes in:
• The process of production
• Innovation in production
• New usage of materials
• Creator of market
DEFINITIONS OF
ENTREPRENEURSHIP AND
PHILOSOPHY
Entrepreneurship – a human creative act, involved in building a
team of people with complementary skills and talents.
Entrepreneur – a person of very high aptitude who pioneers
change possessing characteristics which is found in only a very
small fraction of the population.
Mostly involved in the following:
Initiative taking
Organizing and reorganizing social/economic resources
Acceptance of risk and failure.
Entrepreneurship is the process of creating incremental wealth.
The wealth is created by those individuals who assume the major
risk in terms of equity and time or providing value to others.
Robert Hisrich (1985) defined entrepreneurship in a relatively comprehensive
as:
“A process of creating something different with value by devoting the
necessary time, and effort assuming the accompanying financial,
psychological, and social risks, and receiving the resulting rewards of
monetary and personal
Hisrich satisfaction.”
definition stresses on four (4) basic aspects of
being an entrepreneur regardless of the field:
1. Entrepreneurship involves a creation process
2. Entrepreneurship requires the devotion of the necessary time
and effort
3. Entrepreneurship is assuming the necessary risks
4. Rewards of being an entrepreneur
Figure 2.1. Process of Entrepreneurship

Process of
Entrepreneursh
ip

Devotion of the Assuming the

Creation Gains or
Necessary Necessary
Process rewards
Time and Effort Risks
DEFINITIONS OF AN ENTREPRENEUR

 An entrepreneur is one who always searches for change,

responds to it and exploits it as an opportunity. Innovation is
the basic tool of entrepreneurs, the means by which they
exploit change as an opportunity for a different business or
service (Peter F. Drucker).
 Entrepreneurs are those people who have the ability to
see and evaluate business opportunities, together with the
necessary resources to take advantage of them and initiate
appropriate action to ensure success (International
Labour Organization).
 A decision maker whose entire role arises out of his
alertness to hitherto unnoticed opportunities (Kirzner,
 Entrepreneurship is one who is endowed with more than average
capacities in the task of organizing and coordinating the factors of
production, i.e., land, labour capital and enterprises (F.A. Walker)
 Entrepreneur involves doing things in a new way and better way.
Entrepreneurial role calls for decision making under uncertainty
(McClelland)
 An entrepreneur is a change agent (Frank Young)
 An entrepreneur is an economic man who tries to maximize his
profits by innovation, involve problem solving and get satisfaction
from using his capabilities on attacking problems (E.E. Hagen)
Relationship between Entrepreneur and
Entrepreneurship
Entrepreneur Entrepreneurship

Person Process

Organizer Organization

Innovator Innovation

Risk-bearer Risk-bearing

Creator Creation

Visualizer Vision
ENTREPRENEURSHIP – HISTORICAL
PERSPECTIVES
• The term entrepreneur comes from the French word and translated means ‘to undertake’
or ‘go between’. Meaning, those who undertook the risk of new enterprise.

14th Century:
• Tax contractors: Individuals who paid a fixed sum of money to the
government for the license to collect taxes in their region.
In the Earliest
Period:
• An entrepreneur were viewed as a ‘go-between’, who attempts to establish
trade routes and sign contracts with many persons to sell goods; while the
capitalist was a passive risk bearer, the merchant adventurer who took the
active role in trading, bearing all the physical and emotional risks.
ENTREPRENEURSHIP – HISTORICAL
PERSPECTIVES
In the Middle Ages:
• The term ‘entrepreneur’ was used to describe a person managing large
production projects. In this case, the person would not take any risks but
would merely manage the project using the resource provided.

17th Century:
• Richard Cantillon, a noted economist of the 1700s, developed theories of the
entrepreneur and is regarded as the founder of the term. He viewed the entrepreneur
as a risk taker who ‘buys at certain price and sells at an uncertain price, therefore
operating at risk.’ He used the term ‘entrepreneur’ in the business context.

18th Century:
• The person with capital was differentiated from the one who needed capital.
In other words, the entrepreneur was distinguished from the capital provider.
ENTREPRENEURSHIP – HISTORICAL
PERSPECTIVES
19th and 20th Century:
• The notions of an entrepreneur as an innovator was established. Innovation, the act
of introducing something new, is one of the most difficult tasks for the entrepreneur.
According to Schumpeter, the entrepreneur is someone, who carries out new
combination by such things as: (1) introducing new products and processes, (2)
identifying new export market or source of supply, (3) creating new type of
organization.
Edward Harriman and John Pierpont
Morgan
• Examples of entrepreneurs as described by Schumpeter. Edward reorganized the
Ontario and southern railroad through the northern pacific trust and John developed his
large banking house by reorganizing and financing the nation’s industries.

The ability to innovate is an instinct that distinguishes human beings

from other creatures and can be observed throughout history.
IMPORTANCE OF ENTREPRENEURSHIP
CHARACTERISTICS OF A SUCCESSFUL
ENTREPRENEUR

A need for achievement.

Self-starting.
Willingness to take risk.
Self-confidence.
Innovation and creativity.
CHARACTERISTICS OF A SUCCESSFUL
ENTREPRENEUR

Total Commitment
Receptiveness to new ideas.
Effective time management.
An ability of decision-making.
Desire for independency.
 CLASSIFICATION OF ENTREPRENEURS

• Entrepreneurs are classified according to the type of

business, use of professional skill, motivation, growth and
stages of development.

Entrepreneurs According to the Types of Business

a) Business Entrepreneur. Individuals who conceive an idea for a new
product or service and then creates a business to materialize their
idea into reality by tapping both production and marketing resources.
Entrepreneurs According to the Types of
Business
b) Trading Entrepreneur. One who undertakes trading activities and is
not concerned with the manufacturing work.
c) Industrial Entrepreneur. One who is essentially a manufacturer,
who identifies the potential needs of customers and modifies a
product of service to meet the marketing needs.
d) Corporate Entrepreneur. A person who demonstrates his innovative
skill in organizing and managing corporate undertaking.
e) Agricultural Entrepreneur. Entrepreneurs who undertake
agricultural activities such as raising and marketing of crops,
fertilizers and other inputs of agriculture.
ENTREPRENEURIAL MOTIVATION

• Why people decide to set up their own business?

• In demand theory, anyone could be recruited by
circumstance or opportunity to become an entrepreneur.
• A more general theory is that entrepreneurs emerge from
the population on demand, from the combination of
opportunities and people well-positioned to take
advantages of them.
Differentiate between ‘Pull’ and ‘Push’
Influences

‘PULL’ Influence: some individuals are attracted

towards business ownership by positive motives such
as:
• Independence
• Market Opportunity
• Financial Incentives
• Community service
Differentiate between ‘Pull’ and ‘Push’
Influences

‘PUSH’ Influence: Many people are pushed into

founding a new enterprise by variety of factors
including:
• Unemployment
• Disagreement with previous employer
• Challenge
ENTREPRENEURIAL SKILLS
Turning an idea into a reality calls upon two sorts of skills:
1. General Management 2. People Management
Skills Skills
• Strategy Skills • Leadership Skills
• Planning Skills • Motivation Skills
• Marketing Skills • Delegation Skills
• Financial Skills • Communication Skills
• Project Management Skills • Negotiation Skills
• Time Management Skills
BENEFITS AND LIMITATIONS OF
ENTREPRENEURSHIP

Benefits of Entrepreneurship:
Opportunity to gain control over your destiny.
Opportunity to reach your full potential.
Opportunity to reap unlimited profits.
Opportunity to contribute to society and recognized
for your effort.
Opportunity to do what you enjoy.
BENEFITS AND LIMITATIONS OF
ENTREPRENEURSHIP

The Potential Limitations of Entrepreneurship

Uncertainty of income.
Risk (Financial, Career, Family and Social,
Psychological)
Long hours and hard work.
Lower quality of life until the business gets
established.
High level of stress.
Complete responsibility.
ENTREPRENEURSHIP, CREATIVITY AND
INNOVATION

Entrepreneurship = Creativity + Innovation

ENTREPRENEURSHIP, CREATIVITY AND
INNOVATION
• Creativity – the ability to develop new ideas and to
discover new ways of looking at problems and
opportunities.
• Innovation – the ability to apply creative solutions to
these problems and opportunities in order to enhance
people’s lives or to enrich society.
Entrepreneurs
Creativity Innovation
hip (Creating
(Thinking new (Doing new
value in the
things) things)
marketplace)
ENTREPRENEURSHIP, CREATIVITY AND
INNOVATION

There are four (4) distinct types of innovation,

these are as follows:
1. Invention: described as the creation of a new
product, service or process.
2. Extension: the expansion of a product, service or
process.
3. Duplication: defined as replication of an already
existing product, service or process.
4. Synthesis: the combination of existing concepts and
factors into a new formulation.
 Any questions?

Activity:
1. Make your own research on the wide classification of
entrepreneurs and cite the authors.