Entrepreneurship Misconceptions, Salient Features and Theories

Entrepreneurship Entails Opening and Managing the Self-owned Enterprise

- A business is considered as self-owned when the person managing its daily activities is also its owner - Intrapreneurship: a system that allows an employee to act like an entrepreneur within a company or other organization; hire an employee to run the business (not considered as entrepreneurship; the owner is not an entrepreneur but an ordinary business person and the employee also is not an entrepreneur but a manager) - Planning is an important principle in management

Theory

- A generalization that explains a set of facts or phenomena - It is not an absolute truth; can be supported by another observation or proven to be otherwise

Salient Features of Entrepreneurship

- Act as the point of reference in determining whether a particular business endeavor is operating within the realm of entrepreneurship - Consists of 5: 1. It is an art of correct practices 2. It is a wealth-creating venture 3. It provides valuable goods and services 4. It entails opening and managing the self-owned enterprise 5. It is a risk-taking venture

Entrepreneurship

- Comes from the word entrepreneur - An art of observing correct practices in managing and operating a self-owned wealth-creating business enterprise by providing goods and services that are valuable to the customers

Innovation Theory

- Contributed by Joseph Schumpeter - It regards economic development as the product of structural change or innovation - Unless innovation takes place, economic equilibrium will remain - It becomes the primary role of the entrepreneur to introduce innovation in any of the following forms: 1. new product 2. new production method 3. new market 4. new supplier 5. new industry structure

Entrepreneurship provides valuable goods and services

- Creates economic wealth by providing goods and services to the consumers; these goods must have value or else they become wasted - Goals must be clearly set to provide valuable goods to the market - Value is measured from the perspective of consumers; it becomes valuable when the consumers benefit from using the products or availing the services

Alfred Marshall Theory

- Developed by Alfred Marshall - He stated that there are 4 factors in production -- land, labor, capital and organization -- of goods and services in the economy and he considered organization as the coordinating element - Entrepreneurs are the prime movers in the organization; they are expected to create new commodities (products) or improve existing ones

Risk and Uncertainty-Bearing Theory

- Developed by Frank Hyneman Knight - An entrepreneur should possess the risk-taking skill - An entrepreneur is an agent of the production process where he/she connects the producers and consumers - He stated that uncertainty is an important factor in the production of goods and services; entrepreneur must anticipate possible random events while shouldering risk at the same time -- eventually he/she will be rewarded with high profits

Henry Leibenstein's Gap-filling Theory

- Developed by Henry Leibenstein - The primary role of entrepreneurship in any economic activity is to fill the exiting gap - Entrepreneurship is responsible in recognizing trends in the market; entrepreneur is expected to possess the abilities to be able to connect with different markets - Entrepreneurs must extend assistance to entrepreneurial ventures experiencing failures and deficiencies

Israel Kirzner's Learning-alertness Theory

- Developed by Israel Kirzner - The entrepreneurs must be alert in recognizing entrepreneurial opportunities and the ignorance of consumers; he/she must find the appropriate remedy to correct the error or wrong perception

Keynesian Theory

- Developed by John Maynard Keynes - Puts so much emphasis on the role of government in entrepreneurial and economic development - It suggests that entrepreneurial activities may not be favorable in the future unless the short term problem of economic disequilibrium is finally resolved through the government's active participation

Max Weber's Sociological Theory

- Developed by Max Weber - Social cultures are the primary driving elements of entrepreneurship; good customs, traditions, religious beliefs and morals must be present in entrepreneurial activities

Nicholas Kaldor's Technological Theory

- Developed by Nicholas Kaldor - He considered that modern technology is an essential factor in production

Entrepreneur

- French word "entrepredre" which means "to undertake" - American Heritage Desk Dictionary: a person who organizes, operates, and assumes the risk of business ventures (or enterprise) - A person who strongly advocates and correctly practices the concepts and principles of entrepreneurship in operating and managing the self-owned business venture

Ordinary Small Business

- It pertains to a business enterprise managed and operated by an owner who is not an advocate of and does not practice the concepts and principles of entrepreneurship - Ex: Sari-sari stores

Small Business

- It refers to a business or enterprise that correctly adopts and practices the principles of entrepreneurship - It is owned by one person with a limited workforce not more than 20 persons - Ex: SMEs or Small and Medium Enterprises - has the desire to improve the lives of the Filipino people through entrepreneurship

Entrepreneurship is a wealth-creating venture

- Random House Webster's Dictionary: wealth is defined as the abundance of money, property or possession - It must improve the life of the owner and cascade to the development of the local economy - Enterprise should be both wealth-creating and income-generating

Entrepreneurship is an act of correct practices

- There is a constant change which denotes movement and innovation - Not stagnant; it continuously grows, develops, improves and expands; as an art, it is dynamic and is related to creativity that leads to new ideas, thus, enhancement of the enterprise - Proves that it evolves and responds to the changing needs of people

Entrepreneurship is a risk-taking venture

- There is always uncertainty or the possibility of loss or failure - An entrepreneur should face business risks intelligently and must find ways to minimize its effects

Misconceptions on Entrepreneurship

Entrepreneurship: 1. It only applies to manufacturing business 2. It only applies to small business 3. It applies mostly to persons with good educational background in business courses 4. It only applies to a good economy 5. It is simply opening a small business