Entrepreneurship is an important driver of economic growth and innovation. Entrepreneurship is high-risk, but also can be high-reward as it serves to generate economic wealth, growth, and innovation. An entrepreneur creates a firm, which aggregates capital and labor in order to produce goods or services for profit. The world media portrays the entrepreneur as a successful person within our society.
Basic concepts of entrepreneurship in business
Interest and Vision
The first factor for entrepreneurial success is interest. Since entrepreneurship pays off according to performance rather than time spent on a particular effort, an entrepreneur must work in an area that interests her. Otherwise, she will not be able to maintain a high level of work ethic, and she will most likely fail. This interest must also translate into a vision for the business growth. This vision must be strong enough that she can communicate it to investors and employees.
Many Areas of Skill
All of the interest and vision cannot make up for a total lack of applicable skill. As the head of a company, an entrepreneur must be able to wear many hats and do so effectively. For instance, if he wants to start a business that creates mobile games, he should have specialized knowledge in mobile technology.
Financial and Emotional Investment
An entrepreneur must invest in her company. This investment may be something less tangible, such as the time she spends or the skills or reputation she brings with her, but it also tends to involve a significant investment of assets with a clear value, whether they be cash, real estate or intellectual property.
Organization and Delegation
While many new businesses start as a one-man show, successful entrepreneurship is characterized by quick and stable growth. This means hiring other people to do specialized jobs. For this reason, entrepreneurship requires extensive organization and delegation of tasks.
Risk and Rewards
Entrepreneurship requires risk. The measurement of this risk equates to the amount of time and money you invest into your business. However, this risk also tends to relate directly to the rewards involved.
Entrepreneurship theories
Theories of entrepreneurship are very essential as they help to explain what entrepreneurship entails.
1. Economic theories of entrepreneurship
The economic theory is among the main economic theories of entrepreneurship. This theory asserts that the economy and entrepreneurship are closely linked together. Entrepreneurship and economic growth can only work when the economic conditions are favorable. As such, it is usually hard for entrepreneurs to realize growth when the economy is doing poorly. This theory further states that entrepreneurs find motivation in the presence of economic incentives which include industrial policy, policies of taxation, financial and resource sources, availability of infrastructure, investment opportunities, marketing opportunities, availability of information regarding the conditions of the market and technology among others . An entrepreneur is therefore a risk taker because he can never fully predict about the favorability of the economic conditions in future.
2. Sociological theories of entrepreneurship
This is also among the contemporary theories of entrepreneurship. It argues that the success of an entrepreneur is affected by their social culture. They are more likely to achieve growth in particular social settings. Among the social aspects that affect an entrepreneur include the social values, customs, taboos, religious beliefs and other cultural activities. He or she has to conform to the social expectations when carrying out their business.
3. Entrepreneurship Innovation theory
This is also the top theories of entrepreneurship in Kenya. An entrepreneur does not merely conduct business to better their lives alone. Rather, through their activities, they are able to cause development in the economy and the society at large. The inventor of this theory, Joseph Schumpeter, argued that an entrepreneur grows by being creative and having a foresight.
4. Psychological theory
According to this theory, an entrepreneur experiences growth when the society has several individuals with the necessary psychological characteristics. These characteristics include having a vision, being able to face opposition and having the need to achieve highly. A person can only possess these traits during their upbringing, when they excel, when they are self-reliant and when there is low father dominance.
5. Theory of high achievement/Theory of achievement motivation
Not all people are born to be entrepreneurs. But David McClelland argued that people who aim to become entrepreneurs must have a need for achievement, a need for affiliation and a need for power. These act as the basis upon which an entrepreneurial personality is established. Achievement motivation has a lot of significance in entrepreneurship because it is the one that leads to economic and social development. Entrepreneurs always want to achieve success in their endeavors. The need for power comes from the urge to gain dominance in a certain field and thus cause influence among other people. The need for affiliation comes from the urge to motive of maintain friendships with other people.
6. Resource based theories
According to these theories, entrepreneurs require resources to go about their businesses. Entrepreneurs efforts must be combined with resources such as time, money and labor. Failure to access resources can cause their efforts to become futile. Capital, for instance, enables an entrepreneur to growth their business. Other aspects that can be as essential resources include access to information, education and leadership. Getting sufficient resources can be quite hectic at times and that is why entrepreneurs are considered to be people who require to work hard and smart.
7. Opportunity based theory
With the aim of being successful, entrepreneurs grab any opportunity they come across. These opportunities are available through the changes in technology, society or culture. Notably, as these changes occur, consumers change their preferences. An entrepreneur must therefore take those changes as opportunities of succeeding in their businesses. Also, technology sets a basis upon which innovation is created and facilitated. Therefore, this theory suggests that entrepreneurs are always on the lookout for opportunities that will enable them increase the growth of their ventures.
8. Status withdrawal theory
This theory argues that entrepreneurial aggressiveness can arise when people of a certain class lose the prestige they initially had or when they belong to a minority group. Entrepreneurship, if done correctly, can help a person live a satisfactory and content life. Therefore, individuals will attempt by all means to become as prestigious as they were in the past. If they come from a minority group, they must better their lives by working hard at being entrepreneurs. Also, being a successful entrepreneur evokes respect from the society. Producing an innovative product or service that will help solve various societal concerns can make a person to be highly valued and admired by the community. As such, some people aim at achieving this admiration, fame or popularity through entrepreneurship.
Characteristics of an entrepreneur
No matter the size or industry, starting a business requires a set of skills and attributes not all workers possess. Although levels of education and experience may vary, successful entrepreneurs often share the same set of characteristics.
Self-Motivated and Enjoy a Challenge
An entrepreneur is intrinsically motivated as there is typically no financial reward in the beginning stages of starting a business. Rather than wait for progress and success, an entrepreneur takes whatever action is necessary to facilitate these things. Much of this self-motivation is because entrepreneurs enjoy a challenge and are naturally competitive.
Motivation and Leadership Skills
Whether overseeing a team of two or 200, entrepreneurs must have strong leadership qualities. All companies experience ups and downs, and an entrepreneur must have the ability to motivate his employees to work together toward their goals, which requires earning their trust and respect. Entrepreneurs must also have excellent communication skills as they will work with a variety of types of personalities in dealing with employees, clients and investors.
Risk-Taking and Decision Making
Risk is inherent when starting a business. Entrepreneurs must be able to operate effectively in an environment filled with risk. This requires possessing well-developed decision-making skills, even in the face of failure, as well as being flexible enough to alter methods when things do not go as planned.
Innovative and Always Looking for Ways to Improve
All businesses begin with an idea. The ability to not only come up with new ideas but develop and improve them as the business grows is an essential characteristic of a good entrepreneur.
Ethics and Integrity
Entrepreneurs often answer only to themselves and must therefore possess a strong sense of basic ethics and integrity. Although some new business owners may experience immediate success through cheating or lying, in the long run, clients and investors will lose interest in doing business with an entrepreneur who lacks credibility.
