Entrepreneur: definition and explanation
What is an entrepreneur?
The word entrepreneur actually originates from the 13th century French word ‘entreprendre’ which means to undertake or to do something. By the 16th century this had become the noun entrepreneur, taken to mean someone who undertakes a business project or speculation.
This is an important point to make. We are talking about a person, a human. A programme or AI would not be considered to be an entrepreneur. Humanness is an essential quality of an entrepreneur.
Additionally, the idea of speculation means that there is some level of uncertainty and risk in the enterprise. The key point here is that the undertaking is a venture in which the outcome of the endeavour is not certain. The entrepreneur may make or lose money.
This is in contrast to an employee, who trades their time for money, but is largely certain they will get paid. There is minimal risk as an employee.
The role of risk
The level of risk (and reward) for an entrepreneur depends on many factors such as, for example:
- Whether the venture has been tested before, for example, starting up a business that already has a market and that there are other businesses in the market making money, like starting up a coffee shop. In this case it is known there is a market and which positioning in that market tends to work. A new innovation or invention, however, may not have an existing market and as a result is likely to have a greater risk. However, in this case, if the market can be generated / found then the potential rewards are greater.
- The price point of the goods or services. If the price is too high it is likely to reduce the number of potential customers and if it is too low the business either may not make a profit or may not be able to supply the demand.
- The general market conditions. Starting an enterprise during a financial crash is potentially more risky than in times of growth.
- Fashions and waves. Being in the right market at the right time can have a significant impact on success. Getting into a market as it is just starting to rise gives a business a real advantage, as opposed to getting into a market late as profits are declining and could cause problems. For example, having a good artificial intelligence product right now that fills a need is a better bet than starting a business aimed at selling books, as this market is pretty saturated – unless you can come up with a new business model around selling books that takes market share from the likes of Amazon and the established book vendors.
Risk – necessary but not sufficient condition
Whilst risk is a necessary condition for being an entrepreneur, it is not sufficient on its own. Take for example the difference between an entrepreneur and an investor. They are both taking a risk in the venture. However, the entrepreneur also brings the business idea or innovation, time, passion and leads or steers the business forward, experimenting with ideas, business models, marketing, positioning and strategy as well. In essence, an entrepreneur is a decision-maker.
Different definitions of an entrepreneur
Many researchers and thinkers have arrived at slightly different definitions of an entrepreneur. For example:
The early 19th century French economist, Jean-Baptiste Say, described an entrepreneur as one who “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield” thereby expanding the literal translation from the French, “one who undertakes,” to encompass the concept of value creation.
The famous Austrian economist, Joseph Schumpeter, coined the term ‘Unternehmer’ by which he meant the entrepreneurial spirit. In other words, someone who identifies a commercial opportunity, whether a material, product, service, or business and then organises a venture or system to implement it so that it makes money.
This is closely connected to the idea of entrepreneurship <Link> Entrepreneurship: Definition and explanation
<See this article on the characteristics of successful entrepreneurs.>
<See also this on intrapreneurs>
Tang, J., Kacmar, K. M. M., & Busenitz, L. (2012). Entrepreneurial alertness in the pursuit of new opportunities. Journal of Business Venturing, 27(1), 77-94. https://doi.org/10.1016/j.jbusvent.2010.07.001
Boukamcha, F. (2015). Impact of training on entrepreneurial intention: an interactive cognitive perspective. European Business Review. https://doi.org/10.1108/EBR-12-2014-0090
Sarasvathy, S. D., Dew, N., Velamuri, S. R., & Venkataraman, S. (2010). Three views of entrepreneurial opportunity. In Handbook of entrepreneurship research (pp. 77-96). Springer, New York, NY. https://link.springer.com/chapter/10.1007/978-1-4419-1191-9_4
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