Entrepreneurship – Meaning, Elements, Determinants, and Importance

Introduction to Entrepreneurship

The popularity of entrepreneurship is completely on the rise. Men and women of all sexes are adopting entrepreneurship as their way of life. It is essential to the expansion of our economy. Entrepreneurship may address pressing issues like unemployment, the concentration of economic power in the hands of a few people, uneven regional development, the rising use of youth power in harmful activities, etc., in addition to being the engine of industrial progress. In recent years, economists’ attention has shifted away from capital growth and toward the rise of high-level occupations, such as entrepreneurship, as a major influence on a country’s rate of economic expansion. By creating or selling goods and services to meet consumer demand, entrepreneurs launch their businesses in an effort to increase profits.

Meaning of Entrepreneurship

Entrepreneurship is the capacity to spot a business opportunity and set up a company to promote genuine economic progress. Entrepreneurship incorporates a variety of traits, including creativity, risk-taking, merging production variables, etc. The key is to use production factors as little as possible while maximizing their benefits. It heavily depends on individual traits like willingness to take risks and embrace challenges. Because of this, entrepreneurship is a complicated topic. Its duties include managing economic activity, taking on risks, coming up with something new, and planning and coordinating the use of both human and non-human resources.

Elements of Entrepreneurship

The elements of entrepreneurship are as follows:

• Motivation and Commitment
• Abilities and Skills
• Resources
• Strategy and Vision
• Planning and Organization
• The idea about the market and
• Legalities.

1. Motivation and Commitment: Motivation is the ‘why’ of behavior. It refers to the state of mind that moves or activates our energies and directs our behavior toward goals. The basic function of an entrepreneur is to secure maximum performance to attain the organization’s goals. The performance of the entrepreneur depends on his or her ability and willingness to perform the task. Ability to perform depends on the entrepreneur’s level of education, experience, and skill, whereas willingness to perform is related to his level of motivation.
2. Abilities and Skills: Entrepreneurship provides the abilities and skills of entrepreneurs for the success of the enterprise. The requirement for specialist skills depends on the type of industry. Businesses require technical skills, management skills, negotiating skills, selling skills, administrative skills, and marketing skills for setting up and running a business. These specialized skills and abilities of entrepreneurs enable them to choose a profit-making idea.
3. Resources: The third element of entrepreneurship is resources. These include human and non-human resources. Entrepreneurship enables the identification of the resources required by the organization. It enables the identification of the type of people required, the jobs that are going to be undertaken, the equipment required, the finances, the customers, and other resources particular to the business or assessed conveniently by the organization. Hence, the enterprise will be able to assess appropriate resources at the right time and place.
4. Strategy and Vision: Entrepreneurship provides a strategy and vision in terms of thinking short-term and long-term ahead, having some idea of where that business might be in the future, and preparing an action plan to achieve that goal. Entrepreneurship provides the strategy and vision for developing the existing market or product, new products or markets, and a particular aim for the business.
5. Planning and Organization: The entrepreneur must provide a logical and scientific basis for planning the business operations, including the need for raw materials and men, production schedules, sales, inventory, advertising, budgetary allocation, customer needs, competitor strengths and weaknesses, etc. If the entrepreneur properly discharges this function, the firm will be able to avoid chaos in production, marketing, purchasing, recruiting, and selection.
6. Choosing a Profit-Making Idea: Entrepreneurship helps in choosing a profit-making idea. A business idea is the key to success. The idea may come from internal and external sources. Following the discovery and validation of the idea, entrepreneurship also considers profitability, which will generate income and make the business a successful unit.
7. Legalities: Entrepreneurship pays attention to legal formalities. The business unit is to be registered with the state and local governments. It has to obtain permits, licenses, and tax ID numbers. It has to ensure insurance against the risks involved in the business. All these legal formalities are properly executed through qualitative entrepreneurship.

Thus, the basic elements of entrepreneurship are generating a business idea, understanding market conditions, developing abilities and skills, mobilizing resources, planning and organizing the business, formulating strategy and vision, and adhering to the legalities of incorporation.

Determinants of Entrepreneurship

Classical viewers such as Cantillon, Marshall, Schumpeter Knight, and Kirzner discussed many determinants of successful entrepreneurship. These are mentioned as follows:

1. Alterity and foresight
2. Bearing the risk
3. Leadership qualities
4. Family background and education
5. Ability to deal with uncertainties
6. Creativity
7. Knowledge of trade
8. Technical knowledge and willingness to change
9. Total commitment
10. Drive to achieve and grow
11. Innovative mind
12. Organizing abilities
13. Motivation
14. Taking initiative and personal responsibility
15. Persistent problem solving
16. Seeking and using feedback
17. Integrity and reliability
18. Dynamism of Entrepreneurs
19. Aptitude and willpower
20. Self-confidence and control!
21. Realism and a sense of humor
22. Mental ability
23. Maintaining human and public relations
24. Effective communication
25. High degree of ambition
26. Flexibility and sociability
27. Ability to make use of the resources effectively and efficiently
28. Willingness to prove the caliber to superiors

The above factors will determine the qualities required to exhibit entrepreneurial skills in the effective management of the enterprise.

Importance of Entrepreneurship

Entrepreneurship has become significant given that it is key to economic development. To a greater extent, the objectives of industrial development, regional growth, and employment generation depend on entrepreneurship development alone. Hence, the importance of entrepreneurship is summarized as follows:

• Develops managerial capabilities
• Creates organizations
• Improves the standard of living
• Leads to economic development
• Generates employment
• Leads to balance regional development
• Improves Per capita income
• Provides backward and forward linkages
• Leads to the dispersal of Economic power

1. It develops managerial capabilities: The most important feature of entrepreneurship is that it aids in recognizing and strengthening an entrepreneur’s managerial skills. An entrepreneur investigates a problem, develops potential solutions, contrasts the solutions in terms of their implications for costs and benefits, and then selects the best solution. It means that, right from generating an idea for a business to its implementation, all the managerial tasks are effectively undertaken with the entrepreneurial qualities of the entrepreneur.
2. It creates organizations: Entrepreneurship guides entrepreneurs to assemble and coordinate physical, human, and non-human resources and directs them toward the achievement of enterprise objectives through specialized managerial skills. It helps to start the right type of organization with the right people at the right time to develop entrepreneurial activities.
3. It improves the standard of living: Society needs products and services created by entrepreneurs. With the setting up of productive organizations, entrepreneurship helps in making a wide variety of goods and services available to society, which results in higher standards of living for the people.
4. It leads to economic development: Entrepreneurship involves the creation and use of innovative ideas, the maximization of output from given resources, the development of managerial skills, leadership skills, communicative skills, creative and innovative skills, etc., and all these factors are essential for the economic development of a country.
5. It generates employment: Entrepreneurship helps generate employment directly and indirectly. It helps the entrepreneurs become self-employed and self-sufficient and gives them an honorable life. They do not depend on government jobs or private jobs and directly employ themselves by starting their own enterprises. Indirectly, they also provide jobs to many unemployed people by setting up large, medium, small-scale, or micro-enterprises.
6. It leads to balanced regional development: The entrepreneurial traits of entrepreneurs help remove regional disparities by setting up industries in backward areas. Entrepreneurship develops the managerial skills of entrepreneurs, which enable them to make use of the central and state governments’ offers of concessions and subsidies. All these efforts led to the balanced regional development of the different parts of the country.
7. It improves Per capita income: Entrepreneurship enables entrepreneurs to develop the skills of locating and identifying opportunities to establish their own enterprises. They possess the capacity to convert latent and idle resources like land, labor, and capital into goods and services. This will increase the national income and wealth of a nation. The increase in national income is an indication of an increase in the net national product and per capita income of the people and nation.
8. It provides backward and forward linkages: Entrepreneurship encourages entrepreneurs to initiate change to maximize profits through innovations. Setting up an enterprise with changing technology creates several backward and forward linkages. For example, the establishment of a textile unit generates several ancillary units and expands demand for cotton, chemicals, dyes, spinning mills, etc. These are considered backward linkages. By increasing the supply of textiles, the textile unit facilitates the growth of ginning, spinning, machine building, and other units, which is considered forward linkage.
9. It leads to the dispersal of Economic power: Economic power dominates the modern world. Industrial development may lead to the concentration of economic power in a few hands, which results in the growth of monopolies. However, entrepreneurial traits help entrepreneurs establish enterprises in many parts of the country, which leads to the dispersal of economic power into the hands of many efficient managers of new enterprises.

Thus, entrepreneurship is the key to the creation of new enterprises. It energizes the economy and rejuvenates the established enterprises that make up the economic structure.