ENTREPRENEURSHIP

TOPIC 1A: E-01-01

INTRODUCTION TO
ENTREPRENEURSHIP

PREPARED BY:
MR. LAI YENG CHAI
DEFINITION OF ENTREPRENEURSHIP
 “A way of thinking, reasoning, and acting
that is opportunity obsesses, holistic in
approach, and leadership balance”
 (Timmons, 1999)
 “Creation of an innovative economic
organisation (or network of
organisations) for the purpose of gain or
growth under conditions of risk and
uncertainty.”
(Marc J. Dollinger,1999)
 The attempt to create value through
recognition of business opportunity, the
management of risk taking appropriate to
the opportunity, and through the
communicative and management skills to
mobilise human, financial and material
resources necessary to bring a project to
fruition.
Kao (1991)
 The process of creating something
different with value by devoting the
necessary time and effort; assuming the
accompanying financial, psychological,
and social risks; receiving the resulting
rewards of monetary and personal
satisfaction.
Hisrich and Peters (2002)
 Profits from bearing uncertainty and
risk.
 Knight (1921)

 Uncertainty bearing…coordination of
productive resources…introduction of
innovations and the provision of
capital.
 Hoselitz (1952)

 Purposeful activity to initiate and

develop a profit-orientated business.
 Cole (1959)
 Moderate risk taking.
McClelland (1961)
 Decisions and judgments about the
coordination of scarce resources.
Casson (1982)
 Creation of new organizations.
Gartner (1985)
 The pursuit of opportunity without
regard to resources currently controlled.
Stevenson, Roberts & Grousberk (1989)
ENTREPRENEURSHIP AND
ECONOMIC DEVELOPMENT
1. Job creation
2. New venture formation
3. Formation of new industry
4. Innovation – technological development
5. Venture and growth capital – venture
capitalist
6. Disperse economic activities through out
the country
7. Revenues to Government
8. Mobilise domestic saving
9. Explore and harness locally available
materials
MODES OF ENTREPRENEURSHIP
Two Distinct Modes:
• Schumpeterian Entrepreneurship
• Kirzerian Entrepreneurship
1. Schumpeterian Entrepreneurship
• Exert a disturbing force on an economy
i.e. “Creative Destruction”.
• Economic agent who performs the
service of innovating, of introducing
changes that radically change the
framework of economic system.
• Innovate by create new or quality
products, new production methods, new
delivery channels, opening of new
market and sought about to destroy the
traditional way of doing business.
Characteristics of Schumpeterian
a. Cannot be predicted by applying the
ordinary rules of inference from pre-
existing facts.
b. Change the social and economic
situation for good.
c. Something to do with availability and
quality of individual personnel
available in the society in terms of
decision, action and pattern of
behaviours.
2. Kirznerian Entrepreneurship
• Exert a equilibrium force on an
economy i.e. “Adaptive Response”.
• Based upon the foundation of Mises’
action theory i.e. action and alertness.
• Alertness to discover and exploit
opportunities i.e. monetary profit in
arbitrage activities due to market
disequilibrium.
• Endeavours to exploit this opportunity,
eleminate errors, and move the
economy toward equilibrium.
WHO IS AN ENTREPRENEUR?
• JB SAY(1800)
The entrepreneur shift economic
resources out of an area of lower and
into an area of higher productivity and
greater yield.
WHO IS THE ENTREPRENEUR?
It is useful to distinguish among the
following three terms.
1. Inventors
2. Promoters
3. Entrepreneurs
 High Inventor
Inventiveness

Medium

Entrepreneur
Promoter
Low

Low Medium High

Financial motivation
Creativity and Innovation High

Inventor Entrepreneur

Manager,
Promoter administrator

Low

Low High

General management Skills, Business

Know-How, and Networks
1. Inventors
• Inventors want to invent and conceive,
either new things or new ways of doing
old things. They are usually very
creative, single-minded and not too
concerned about financial rewards.
2. Promoters
• Promoters want to make money. They
are not particular about which business
they make money in, but they want to
take what they can, wherever they can.
3. Entrepreneur
• Entrepreneur like to take risks; they
want to a challenge to create something
new. They want to build an enterprise
and solve problems. The entrepreneur
is an assembler of resources, a builder,
a change agent.
TYPES OF ENTREPRENEURS
1. Solo self-employed individual
2. Deal-to-dealers
3. Team builder
4. Independent innovators
5. Pattern multipliers
6. Economy of scale exploiters
7. Capital aggregators

Source: Vesper, 1990

 THE ESSENCES OF SUCCESSFUL
ENTREPRENEURSHIP IN
INDEPENDENT BUSINESS
ownership Independence
Control

Holistic Incrementality
BUSINESS
SUCCESS
Market linked
Commitment

Learning Form Flexibility

Personal strategic and
Environment awareness
METHOD OF GOING INTO
BUSINESS
1. Buying An Existing Business
2. Buying A Franchise
3. Starting A New Business
1. BUYING AN EXISTING BUSINESS
• Buying someone’s creation
• Easier and quicker
• Pay goodwill (value of premium needs to
be assessed)
Critical factors
• Understand of the reasons for selling by
the current owner
• Accurate information on: 1. past
performance and 2. physical condition of
the business and assets
• Legal restraint of trade from the seller
• Intensity of competition that will affect
future profitability
• Negotiate for reasonable purchase price
and terms.
2. BUYING A FRANCHISE
• Pre-package business
• Buying a right in exchange for a specific
amount of money for fixed period or
territory
• Involved:
- buying a right to sell a particular product
- use a unique business method
- manufacture a specific product
Types of Franchise
a. PRODUCT FRANCHISE - Receive
goods and sell through wholesale or
retail chain
b. SERVICE FRANCHISE – Receive a
licence for the trade name and services
to be sold. Franchisee is responsible for
daily business operations.
c. ENTIRE BUSINESS ENTERPRISE –
Operate the business un the franchisor’s
trade name following the “Standard
Operating procedures”.
3. STARTING A NEW BUSINESS
• Result from the opportunity discovery in
the market place: Gap in the supply
• New business:
- Produce a new product Not Currently
available
- Provide a new service
• High risk due to lack of information
• Provide high return