Page 10 - DMGT310_ENTREPRENEURSHIP_AND_SMALL_BUSINESS_MANAGEMENT

Unit 1: Entrepreneurship: A world of Opportunity

1.3 Concepts: Entrepreneur and Entrepreneurship Notes

The concept of entrepreneurship has evolved for a long time but its popularity has not gained so
much for a long while. But through resurrection, the concept has attained so much popularity
that after its observation, a firm idea has been grown up about its sudden discovery.
Entrepreneurship is one of the four mainstream economic factors, viz., land, labor, capital and
entrepreneurship. The word itself has been derived from the French word entrepreneur in the
17th century, which means the person who undertakes the risk of new enterprise. The persons
would undertake the work of a contractor and bear the risk of profit or loss. Early references to
the entrepreneur can be traced out in the 14th century when the term indicated about tax
contractors who paid a fixed sum of money to a government for obtaining the license to collect
taxes in their region.

Thereafter, entrepreneurship was a common topic in economic essays in the 18th and 19th
centuries. The early French, British and Austrian economists were notable in this respect and
wrote impressively about entrepreneurs as the changing agent of progressive economies. A
French economist, Richard Cantillon was the first man to be credited with giving the concept of
entrepreneurship a central role in economics as described in his publication in 1755. In the
opinion of Cantillon, entrepreneurs consciously make decisions about resource allocation. He
identified the entrepreneurs as the agents who purchase means of production in order to combine
them to produce a product to sell at price that are uncertain at the moment at which he commits
himself to his cost.
Adam Smith interpreted the work “enterpriser” in his famous book, Wealth of Nation in 1776 as an
individual undertaking the formation of an organization for commercial purposes. In his view,
entrepreneurs reacted to economic change, thereby becoming the economic agents who
transformed demand into supply. A few decades later from Cantillon, the concept of
entrepreneurship has gained transparency. Another French economist, J.B. Say in his book,
A Treatise on Political Economy originally published in 1803 identified an entrepreneur as a person
who possessed certain arts and skills of creating new economic enterprises and who had also an
exceptional insight into society’s needs and was able to satisfy them. In 1848, the British economist,
John Stuart Mill analyzed the necessity of entrepreneurship in private sector.

Did u know? The term ‘entrepreneur’ subsequently became common as an identification
of business founders and the fourth factor of economic activities was strongly established
in economic literature as encompassing the ultimate ownership of a commercial
undertaking.

In the nineteenth century the entrepreneurs were regarded by new names, as captains of industry.
They were then the risk-takers, decision-makers and as persons desirous of wealth earning.
They would develop new enterprises by means of collection and management of resources.
Some two decades or more from the proclamation of J.S. Mill, an important movement was
noticed in Austria. This movement subsequently influenced the 20th century concept of
entrepreneurship. Carl Menger in his book, Principles of Economics in 1871 established the
subjectivist perspective of economics in which he viewed that economic change does not arise
from circumstances but from an individual’s awareness and understanding of those circumstances.
In his opinion, an entrepreneur is regarded as the change agent who converts the resources into
useful goods and services, thus creating the circumstances leading to industrial growth.
In the 19th century entrepreneurs were recognized as the captains of industry, the risk-takers
and decision-makers. They were the individuals who desired to acquire wealth and who gathered
and managed resources to create new enterprises. The implication of an entrepreneur has changed

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