What Is Entrepreneurship?
By Danny Holtschke from StartupGeist
The Entrepreneurship phenomenon is based on four key insights most laymen are not aware of. Learn now why —
- Managers are not entrepreneurs, but entrepreneurs can be managers.
- Inventors (scientists) are not innovators (entrepreneurs).
- Entrepreneurial skills can be learned
- There are five entrepreneurial principles — at least that’s what science thinks so far, till otherwise proven wrong…
80/20 Summary
Entrepreneurship Definition
When learning about startups, you will quickly note the close association with the term “Entrepreneurship”.
Startup founders really enjoy calling themselves “entrepreneurs” and they often use the term Entrepreneurship to refer to the things they’re doing all day. Therefore, it makes sense for you to develop an understanding of this term and ask: What is Entrepreneurship?
Let’s take a brief look at the etymology of the word first!
The first part of ‘entrepreneur’ originates from the thirteenth-century French verb ‘entreprendre’ which generally means ‘to undertake’ or ‘to do something’. The subsequent suffix ‘–ship’ relates to ‘creating something of value’ and is derived from the ancient Gothic verb ‘schappen’ (Curveball 2013).
In brief, the word originally meant something like the ‘process of discovering new ways of combining resources’ (Sobel, 2008).
In the academic world, Entrepreneurship has been an object of research for decades and examined by various disciplines like anthropology, economics, social and management sciences.
Managers are not entrepreneurs
As you might imagine, lots of different working definitions have been used for this term.
Some argue, for example, that ‘entrepreneurship merely reflects the creation of a new organization and that any individual who starts a new business venture is an entrepreneur’ (Peter Drucker 1985).
However, many refer to ‘Entrepreneurship’ in a more empathic sense and think that it must be disassociated from the concept of ‘business administration’.
This differentiation was originally created by one of the most famous entrepreneurship researchers, Joseph Schumpeter. According to him, a “business administrator” or “manager” keeps preserving existing structures, while a true entrepreneur creates new and fundamentally better structures.
Steve Jobs can be considered a true entrepreneur because his company, Apple revolutionized mobile communications and much more when they created the iPhone.
Moreover, Schumpeter coined the term ‘Creative Destruction’ — a process in which old structures are destroyed by new ones. For example, no one uses the old phones anymore that were cool before the iPhone came out. Companies that did not manage to produce something competitive are not doing so well. Think about Nokia.
Inventors (scientists) are not innovators (entrepreneurs)
Invention is different from innovation.
Simply speaking, scientists are great at inventing stuff. Entrepreneurs are great at bringing inventions to market. Only the adoption of something new by customers is called innovation.
Beyond that, a new stream of entrepreneurship research stresses that entrepreneurship is highly associated with risk and uncertainty. In addition, an entrepreneur always breaks new grounds, and it can hardly be estimated how his venture will turn out.
Researchers like Fueglistaller (et al. 2008) stress that entrepreneurship cannot be understood properly if we just consider what entrepreneurs are doing. Their actions are embedded in a multifaceted social background which has a notable impact on the opportunities and challenges an entrepreneur faces.
Business ideas are thus rarely spontaneous. Activities outside your professional work environment lead to 50% of ideas, but are heavily based on your prior work experience (Fueglistaller et al., 2008).
Entrepreneurship is a social phenomenon
Therefore, keep in mind that entrepreneurship is a social phenomenon which is dependent on factors like cultural beliefs, the access to employment and the availability of funding in an area!
Specifically cultural beliefs and personal self-limiting beliefs cause most people to avoid starting a business and starting a startup (read about the difference here). However, social welfare plays a big role, too!
The Global Entrepreneurship Monitor (GEM) measures entrepreneurial activities in different countries and so different cultural, religious and economic environments. Countries with the most entrepreneurial intention are Malawi, Botswana, Libya, Uganda, Ghana and Zambia. The reason is that less developed countries don’t offer social safety nets. The only option for people to ‘survive’ is to start a business.
Not surprisingly, countries with stark social safety nets, like Germany and Japan, are last in the ranking.
StartupGeist Knowledge Base
StartupGeist summarizes insights and experiences from digital entrepreneurs, startup experts and founders. This article is based on …
- The Global Entrepreneurship Monitor (GEM)
- Joseph Schumpeter’s ‘Act of Creative Destruction
- Guy Kawasaki’s TED talk: ‘The Art of Innovation’
- Saras Sarasvathy: ‘What makes entrepreneurs entrepreneurial?’
- Entrepreneurship research: Are entrepreneurs born or made?
- Entrepreneurship research: Effectuation (Entrepreneur) vs Causation (Manager)
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I am looking forward to hearing from you.
I am Danny and started StartupGeist to help students and recent graduates build a business — and have a good life. Why? To be free, financially independent and healthy. How? Build a growth mindset and deliberately practice skills that turn your ideas into something bigger.
Originally published at startupgeist.com on January 19, 2016.
