“ The entrepreneurial ‘Heffalump ‘ is a varicolored kind of animate being, which appears in different home grounds and in different signifiers… … So it is non surprising that there is disagreement about the nature of the animal ” ( Wilken, 1979 ) .
Indeed, Wilken depicted ‘Entrepreneurs ‘ in concern universe as a ‘Heffalump’- a fabulous animate being character in a popular kids ‘s fiction. Though throughout the history economic experts and concern bookmans managed to cognize about the Entrepreneurs ‘ function in economic development and growing, still a complete sense of understanding the ‘Entrepreneurs ‘ and their behavior is due. Developed nations enjoy a broad inundation of ‘Entrepreneurs ‘ and the good they bring to the economic system, while developing and 3rd universe states still lack this component despite being connected in a globalized universe.
The unequivocal history of Entrepreneurship over the timeline comprises the inputs from the bookmans of multiple subjects of societal scientific disciplines from different point of positions, reading, definitions and decisions to conceive this somehow abstruse construct and still it widely varies in different society and economic system to hold as applicable.
Figure 1: Main subscribers to entrepreneurship in economic theory
Beginning: Idis, R. ( 2003 ) . “ Entrepreneurship and Economic Transition ” , Tinbergen Institute Discussion Paper, Amsterdam, p-5.
It is non until eighteenth century, when the theoretical account began to take form. Richard Cantillon, a Gallic economic expert was the first to coin the phrase ‘Entrepreneur ‘ . The word ‘Entrepreneur ‘ in English is a loanword from French, which means ‘one who under takes ‘ .
Over the following century, many economic experts and bookmans from other societal scientific disciplines provided the theoretical definitions. British economic expert John Stuart Mill, unlike Adam Smith and David Ricardo, stressed the importance of Entrepreneur in economic growing, where as Smith and Ricardo merely bannered ‘Entrepreneurship ‘ under fiddling ‘Business Management ‘ ( Schumpeter, 1951 ) .
From early nineteenth century to the mid twentieth century, Alfred Marshall did much to model the neo-classical economic idea. Marshall, without depicting exactly the maps of enterprisers, instead portrayed the functions such as coordinator, pioneer and arbitrager ( Baretto, 1998 ) .
Joseph Schumpeter, a celebrated Austrian Economist, has significantly and radically contributed with a new penetration on ‘Entrepreneurship ‘ in his book, “ The Theory of Economic Development ” ( 1934 ) . Schumpeter successfully identified the keyword ‘Innovation ‘ that distinguishes an Entrepreneur. He explained in his theory of concern rhythm that, economic roar occurs when rush of pioneers swarm in an economic system, followed by impersonators. So, the Pioneers must be a leader, Schumpeter emphasized. This is good predicted refering the economic systems of this twenty-first century. But, Schumpeter had overlooked the cardinal factor ‘risk-taking ‘ as enterprisers must exert and besides the single function in entrepreneurship.
Frank Knight, in his book “ Risk, Uncertainty and Net income ” ( 1921 ) , introduced ‘uncertainty ‘ in enterpriser ‘s enterprises. Harmonizing to Knight, Entrepreneurs bear the brunt of uncertainness in order to do net income in an economic system. He distinguishes the others from the Entrepreneurs in this respect. Israel Kirzner, a modern neo-classical economic expert, depicted Entrepreneur in his book ‘Competition and Entrepreneurship ‘ ( 1973 ) – as an arbitrager and the 1 who is argus-eyed to profitable chances in the aftermath. The term ‘uncertainty ‘ is left out of the construct along with the function as a director or coordinator in production procedure. Binks and Vale ( 1990 ) summarised three historical classs of entrepreneurial theory: the reactive enterpriser as an agent of accommodation in the market economic system ( by Kirzner ) ; the advanced enterprisers doing economic alteration, ( by Schumpeter ) ; and the enterpriser doing incremental, gradual alteration through direction of endeavor ( by Leibenstein ) .
Hebert and Link ( 1988 ) acknowledged categorization of entrepreneurial theory consisting of 12 discrete features within the literature of economic history, as shown in Table 1.
Inactive Definitions
Dynamic Definitions
The individual who supplies fiscal capital
Risk-taking
A director or overseer
Introducing
The proprietor of an endeavor
Decision-making
An employer ‘s if factors of production
Leading an industry
Organizing economic resources
Contracting
Arbitrage ( market-maker )
Allocating resources
Table 1: Inactive and Dynamic definitions of Entrepreneur.
Bolton and Thompson ( 2003 ) supply what is perchance the most complete definition: “ A individual who habitually creates and innovates to construct something of recognized value about perceived chances. ”
All the definitions presented by the economic experts and bookmans have somehow arguably failed to set a recognizable coloring material on ‘Entrepreneur ‘ or ‘Entrepreneurship ‘ to day of the month. Entrepreneurs are non really economic Heffalump, instead Homo-sapiens who traverse lands on this Earth for luck. But, Entrepreneurs have certain traits that other people from different subjects of concern deficiency. Schumpeter ( 1934 ) justly recognized one of the cardinal traits, ‘Innovation ‘ . He predicted every bit good ; new invention, new thought, new method of production and new signifier of Organization do ‘Creative-destruction ‘ , which makes old attacks, methods and norms obsolete. This twenty-first century truly echoes that by adding ‘fierce hazard taker ‘ , ‘techno-enabled ‘ , ‘opportunist ‘ – along with other traits to the enterprisers.
However, this research worker recognizes a new division in the definition of ‘Entrepreneurship ” apart from the theoretically bing types. Entrepreneurs can be defined in two groups_
1. Low-profile Entrepreneurs: are those who follow the modern-day paths of concern, taking absorbable hazard and have appropriate perceptual experience of impact of such projects in future class. Best illustration can be put as – one opening a retail store in local country after measuring the market needs, competitions and deploy resources to maximise net income, or a director of an established organisation looking for market growing by exerting expertness.
2. High-Profile Entrepreneurs: are those who innovate and radicalize an thought ( s ) , take tremendous hazard, discharge and harness necessary bing resources to interpret the thought ( s ) into action without measuring in-depth the impact ( Return on Investment, market growing rate etc. ) of such discourse in future. They are perfectly the agents of Creative Destruction. Most of the off shoots from ‘Silicon Valley ‘ autumn in this class.
As this century base on ballss by, the definitions of Entrepreneurship will much writhe and turn, responding to the influential forces – of all time altering Technology and Geo-political and concern environment.
1.3 Traits of an Entrepreneur
“ How can we cognize the terpsichorean from the dances? ” ( Yeats, 1956 )
Gartner ( 1988 ) posited the same inquiry as poet Yeats, sing the true nature of Entrepreneur among others. In his book, “ Who is an Entrepreneur? Is the incorrect inquiry ” , Gartner expressed that ; definitions of Entrepreneur can non take us to understand the Entrepreneurship phenomenon. Rather the trait attack and behavioral attack, as he proposed, be used to unveil the true features of an Entrepreneur. Gartner besides argued the impression that, Entrepreneurship is a creative activity of Organization, proposed by Vesper ( 1982 ) that leads to a really cardinal job of logical thinking, “ How does an Organization semen into being ” ? ( Herbert and Link, 1988 ; Shapero and Shokol, 1987 ) . Empirical research shows that ( Brockhaus, 1980 ; Sexton and Kent, 1981 ) , it is non possible to distinguish Entrepreneur from general population or certain profession by measuring certain psychological traits.
Certain traits of an Entrepreneur prescribed by the assorted ‘Entrepreneurship ‘ theoreticians as – Confident, Innovative, Hardworking, Leadership, Opportunist, Uncertainty Bearer, Risk taker and so on, reflect on other profession as good. An employed director of a big Investment Bank possesses the same traits more or less. Jenks ( 1950 ) and Kilby ( 1971 ) realized this debatable attack and strongly criticized the research on personality profiles of the enterprisers, instead suggested the survey of behavior and psychological science of Entrepreneurs.
In this context, it is imperative to cognize, ‘What drives Entrepreneur to be an Entrepreneur? ‘- the reply wo n’t be an easy one. If we take so many drivers, it will instead stay equivocal. Granovetter ( 1985 ) realised that one ‘s web relationship and entree to external cognition may be an of import determiner of the capableness to make value and achieve personal ends ; The exposure to knowledgeable others may be peculiarly of import for ‘would be entrepreneurs ‘ ( Davidsson and Honig 2003 ) .
A recent research has found positive consequence of one ‘s educational degree on the likeliness to comprehend entrepreneurial chances in footings of make up one’s minding to get down a venture ( Arenius and De Clercq 2005 ) . Another research suggested that the likeliness of being an emerging enterpriser additions steadily when person has higher degree of instruction ( Arenius and Minniti 2005 ) .
Furthermore, Entrepreneurial traits vary in geographical location, social construction, cognition foundation and citizenship autonomy. Developed states ( USA and Western European states ) have a long bequest of Entrepreneurs and have successfully managed to incorporate this phenomenon in to their civilization, political relations and economic sciences throughout an unbroken span of clip. A canvass conducted by IFOP in 2005 nowadayss that, Around 76 % of Gallic young person prefer Government service, where every bit in a study of ‘Junior Achievement ‘ in the undermentioned twelvemonth, 2006, showed that, in USA, hot bed for Entrepreneurs, 70 % of the adolescents prefer to get down their ain concern in hereafter.[ 1 ]
To separate the Traits of Entrepreneur from others, this research worker has identified the following Traits following the trails of other pedants in this topic. It can be best described –
An Entrepreneur is a Prudent individual with the commonsense of Business universe.
An enterpriser is fundamentally Futurist, who can anticipate the tendency of concern ; he intends to travel for.
An Entrepreneur is the Anticipator of demands and Creator of demands that are left unorganised.
An Entrepreneur is an Pioneer of thoughts, program, merchandise and service.
An Entrepreneur is a Passionate Risk taker, who deploys all his resources at his disposal for maximal output.
An Entrepreneur possesses certain tools at his disposal to derive ain competitory advantage, i.e. – engineering, cognition, acute observation, rich web, wise mans, venture capitalist etc.
An enterpriser is a Rational Opportunist, who can work when he finds such.
An Entrepreneur Monetizes his chance, invention, thoughts and all the processs he/she takes hazard for. This is the cardinal trait of an enterpriser.
1.4 Economic and Social maps and function of Entrepreneurs
Much of the developed states have been overwhelmed by the Entrepreneurship phenomenon, contributed in the kingdom of their economic system and society. In a study published by the U.S. Small Business Administration ‘s Office of Advocacy in Sep, 2009 shows the undermentioned informations about Small Business[ 2 ],
SME Represent 99.7 % of all employer houses.
Employ merely over half of all private sector employees.
Pay 44 % of entire U.S. private paysheet.
Generate 64 % ( net ) of new occupations over the past 15 old ages.
Create more than 50 % of the nonfarm private gross domestic merchandise ( GDP ) .
Hire 40 % of high tech workers, such as scientists, applied scientists, and computing machine coders.
Are 52 % home-based and 2 per centum franchises.
Produce 13 times more patents per employee than big patenting houses.
Furthermore, every twelvemonth entrepreneurs start more than 600,000 in the United States on an norm in malice of being the epicentre of recent Financial Crisis, the study showed.
Sluis and Pragg ( 2007 ) believe that the relationship between entrepreneurship and the degrees of value added ( unlike growing of value added ) has been small studied and is non really insightful since value added is type of size step. Therefore, the part of entrepreneurial houses ( frequently little ) to value added will be lower than other houses. However, Robbins et Al. ( 2000 ) provide direct support of the comparatively big part of entrepreneurial houses to value added growing. Brouwer et Al. ( 2005 ) back up the consequence that the productiveness of little houses increases faster than of big houses.
The economic expert Schumpeter ( 1934 ) saw invention as cardinal to the entrepreneurial procedure while Drucker ( 1985 ) took the thought farther by adding that invention was the cardinal undertaking of the enterpriser. Policy shapers, concern leaders and faculty members have long been convinced of the gravitation of enterprisers to economic luxury based on wealth creative activity and invention ( Harding, 2006 ) . “ It seems to be taken for granted in the literature that, even if enterprisers are non in complete control of our economic fate, they influence its way as few, if any, others are able to make ” ( Baumol 1993 ) .
There are assorted inter-related grounds why there is this concern in the function of enterprisers. Entrepreneurs have certain features and motives that make them agents of alteration and development in an economic system ( Kirzner, 1973 ) . While the contexts in which enterprisers can be found differ and while entrepreneurial activity is diverse and complex, it is however the instance that the “ genus ” enterpriser is different to the general population. In add-on, entrepreneurship has a function in bring forthing endogenous economic growing ( Romer 1990 ; Aghion & A ; Howitt 1992 ) . While enterprisers are themselves non engines of economic growing, the procedure of entrepreneurship, i.e. the procedure by which know-how and thoughts are translated into commercial merchandises and procedures, acts as a accelerator to wealth creative activity through invention. This has clear policy deductions since, by agencies of investing in the invention procedure or system ; this catalytic function can be maximized. Finally, there are several pretenses of enterpriser that extend their function as alteration agents beyond economic wealth creative activity to societal and environmental alteration.
1.5 Franchise and Start-up: two sides of the coin
Franchise and Start-up are the chief propellors of the ‘Entrepreneurship ‘ engine. It ‘s rather imperative to cognize about these two manners of Business.
1.5.1 Franchise:
Different authors have defined Franchising in different ways the ground for making so is that Franchising screens different facets of concern which are different in nature. So everyone has their ain position point. “ Franchising can best be described as a system of distribution whereby one party ( the franchisor ) grants to a 2nd party ( the franchisee ) the right to administer merchandises, or execute services, and to run a concern in conformity with an established selling system. ” ( Hall and Dixon, 1991 )
Franchising has led progressively to its presence in arguments crossing a figure of disciplinary Fieldss including direction, selling, economic sciences, sociology, psychological science, jurisprudence and entrepreneurship ( Stanworth and Curran, 1983 ) . As a signifier of concern, franchising continues to derive credence and importance in the proviso of services, occupations and self employment ; harmonizing to British Franchise Association/Nat West ( 2004 ) and PricewaterhouseCoopers ( 2004 ) .
Franchise has some good advantage over Start-up. Because, a Franchisee does n’t happen himself in the whirl of Uncertainty, Consumer ‘s intuition, Extensive Marketing Campaign, High hazard on investing and so on, when backed by the Franchisor ‘s Good will, Brand image, Knowledge of the market, Marketing run, Ready set of knowing consumers and direction aid along with other expediences.
But, there are some doubting positions every bit good. Price ( 1996 ) identified 16 UK franchise companies as holding been operational between 1984 and 1995 of merely 36 % of which remained in being at the terminal of that period. Stanworth and Purdy ( 1999 ) tracked entries from the two chief UK Franchise directories in 1995 and found that 66.3 % of an initial 704 separate entries survived the undermentioned 2 old ages.
Again, optimistic study, like this one negates the concerns, “ You are five times more likely to win as franchisee than if you start a comparable concern independently ” ( The British Franchise Association 1996 ) . Harmonizing to Hoy ( 1994 ) , the dark side of the franchising is non a fable. It exists for really legitimate grounds. Entrepreneurship theories make such a dark side predictable. Harmonizing to Business Franchise Magazine ‘s April 2008 issue, the nutrient and drink sector in the UK is deserving about ?30 billion a twelvemonth, holding growing rate around 4.3 % . A fine-looking part of this growing is contributed by the franchise sector[ 3 ].
Celebrated International Franchise trade names in UK are- McDonalds, Subway, KFC, Pizza-hut, Cartridge universe, Starbucks, Costa with many local successful franchise.
1.5.2 Start-up
The word ‘Start-up ‘ resonance ‘Silicon vale ‘ , California and the dot-com-bubble in late 90 ‘s. Any concern from abrasion and out of originative encephalon can be called ‘Start-up ‘ . But it instead means with sleight, any technological houses or hi-tech houses holding exceeding growing rate.
“ Investors are by and large more attracted to these new houses, as they are distinguished by their hazard / wages profile and scalability. In other words, they have lower seed costs, higher hazard and more return on investing chances. The successes of new houses tend to be more scalable than an established company that can potentially turn quickly with limited capital investing, labor or land ” as the profitableness of hi-tech start-ups is described in the Wikipedia[ 4 ].
Majority support in hi-tech start-ups comes from venture capitalist and other keen and experient investors. Most of the successful hi-tech start-ups end up in ‘merger and acquisition ‘ . But the most inspiring thing is, normally the former laminitis ( s ) of this type of hi-tech start-ups leaps to originate another start-up with new thoughts. Those are called ‘Serial- Entrepreneurs ‘ . “ Consecutive enterprisers thrive on the exhilaration of get downing a concern from abrasion, taking an thought to market and doing it go on[ 5 ]“ . ( European Venture Capital Journal )
The ‘Economist ‘ reported that, up to 75 % of the value of US public companies based on their ‘intellectual belongings ‘ , up from 40 % in 1980[ 6 ]. ‘Patenting ‘ of thoughts is truly critical for all the dot-com enterprisers and hi-tech start-ups for rational belongings protection.
Some really good known hi-tech start-ups, even to the far corners of the universe, are – Google, Microsoft, Apple, Sun Micro system, Oracle, Dell, e-bay, Amazon along with new names – Netflix, Lovefilms, Lastfm, Gumtree and many more. Moneywise, hi-tech start-ups are more moneymaking than Franchise. Last Fm- a UK based High-tech start-up, supplying cyberspace based wireless site, was sold at $ 280 million to another house in 2007, shortly after induction in 2002.
1.6 Decision
The above reappraisal on literature on Entrepreneurship and the two manners of concern for the enterprisers obviously shed a visible radiation on the nature of Entrepreneur and the possibilities to take among the two manners – Franchise and Start-up. Though, entrepreneurship is someway a distinguishable quality of personality of an enterpriser ; other external factors such as – beginning of capital support, experience, economic status of a state, consumer society, bing substructure and easiness of making concern etc. influence an Entrepreneur to take whether to get down with a ‘Franchise ‘ thought or to construct up concern from abrasion with new thought ( s ) . But, as this Globalized universe is traveling at really fast gait and Technology about controls every major public and private involvements, the scholastic and academic stance towards Entrepreneur and Entrepreneurship is likely to switch over clip in future. The research aim is to strike a perfect balance, if possible ; sing the issues in the past and nowadays of Entrepreneurship, therefore someway lighting the way to the hereafter Entrepreneurs in UK.
