ENTREPRENEURSHIP

5/25/2017NZILANO, K.L.N, 2016 1

 Recently, there has been considerable
interest among scholars and practitioners on
the term entrepreneurs and
entrepreneurship.
 However, it should be recognized that while
there is a growing contemporary interest in
entrepreneurship, it is not new.
 Since the middle of the eighteenth century,
scholars have deliberated on it, and its role
in the economy and society (Kirby, 2003).
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 Defining the term ‘entrepreneur’ has
probably been the most complicated task in
entrepreneurship literature.
 Entrepreneurship should not be equated
solely with the new venture creation, small
business management, owner-management
and self-employment.
 This is because by doing so, over-simplifies
the concept (Kirby, 2003).
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 Entrepreneurship has much broader meaning
than these concepts would suggest.
 Not all owner-managers are entrepreneurs,
nor are all small businesses are
entrepreneurial and not all large businesses
are un-enterprising.
 Entrepreneurship is about ‘making change’
and even those who relate entrepreneurship
with business undertakings have noted that
only those who innovate and develop new
combinations are entrepreneurs (Kao, 1997).
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 Despite its evident importance, there is no
agreed definition of what constitutes either
an entrepreneur or entrepreneurship.
 Often entrepreneurship is equated with the
new venture creation and small business
management and owner-management and
self-employment
 Not all owner-managers can be regarded as
entrepreneurs, nor are all small businesses
entrepreneurial.
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 Just starting a Small business does not mean
ENTREPRENEURSHIP
 The word entrepreneur is derived from the
French word Entreprendre which means to
‘undertake’, i.e., the person who undertakes
to organize, manage, and assume the risks
of new enterprise.
 According to Cantilon (1759)“An
entrepreneur is a person who buys factor
services at certain prices with a view to
selling its product at uncertain prices”
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 Drucker (1986) defined an entrepreneur as
one who always searches for change,
responds to it and exploits it as an
opportunity.
 Gartner (1988) defined entrepreneurship as
the creation of new organizations.
 Lumpkin and Dess (1996) argued that
entrepreneurship is new entry. New entry
can be entering new markets with new or
existing goods and services or can be the
act of launching a new venture.
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 Schumpeter (1934) defined an entrepreneur
as the innovator who implements change
within markets through the carrying out of
new combinations in the following forms;
 The introduction of a new good or quality
thereof,
 The introduction of a new method of
production,
 The opening of a new market,
 The conquest of a new source of supply of
new materials or parts,
 The carrying out of the new organization
of any industry.
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 Kuratko & Hogetts (2004) defined
entrepreneurship as the dynamic process of
creating incremental wealth. The wealth is
created by individuals who assume the
major risks in terms of equity, time, and
career commitment of providing value to
the products and services. The product or
service may or may not be new or unique
but value must be introduced.
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 Kuratko (2007) defined entrepreneurship as
process of creating something new with
value by devoting the necessary time and
effort, assuming the accompanying
financial, psychic (spiritual), and social risks
and receiving the resulting rewards of
monetary and personal satisfaction and
independence.
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 Shane and Venkataraman (2000) defined
entrepreneurship as scholarly examination
of how, by whom, and with what effects
opportunities to create goods and services
are discovered, evaluated, and exploited.
 As field of study, it involves the study of
sources of opportunities, the process of
discovery, evaluation, and exploitation of
opportunities and the set of individuals who
discover, evaluate, and exploit them.
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 Generally, entrepreneurship is the process of
identifying opportunities which exist within a
market place by a person (entrepreneur), who
collects the required resources to pursue
those opportunities through creating new
firm.
 Entrepreneurs are considered to be risk takers
while pursuing these opportunities because
the environment is uncertain and he/she is
not sure of what future will deliver.
 Also entrepreneurs are said to be innovative
and creative in their activities while pursue
these opportunities because they always make
change.
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From the above definitions, we can summarize
the following:
 The creation process. The creation of
something new of value. The creation has to
have value to the entrepreneur and value to
the audience for which it is developed.
 Devoting the necessary time and effort. Only
those who have gone through
entrepreneurial process appreciate the
significant amount of time and effort it takes
to create something new and make it
operational.
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 The rewards of one being an entrepreneur.
The most important of these rewards is
independence, personal satisfaction,
achievement and money for money mongers
entrepreneur.
 Assuming the necessary risks.
Entrepreneurial action takes place over time
and the future is always uncertain and these
actions are inherently uncertain. Thus one
need to have passion in all these.
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Entrepreneurship with different connotations
to different people in different context.
 Creation of wealth. It involves assuming the
risks associated with the facilitation of
production in exchange for profit.
 Creation of enterprise. It entails the
founding of a new business venture where
none existed before.
 Creation of innovation. It is about unique
combinations of resources that make
existing methods or products outdated.
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 Creation of change. It involves creating
change by adjusting, adapting and
modifying one's personal stock, approaches,
and skills to meet different opportunities
available in the environment.
 Creation of employment. It is concerned
with employing, managing, and developing
the factors of production, including the
labour force.
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 Creation of value. It is a process of creating
value for customers by exploiting
unexploited opportunities.
 Creation of growth. It is a strong and
positive orientation towards growth in sales,
income, assets and employment.
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 From the economic point of view, an
entrepreneur is a fourth factor of production,
who organizes other factors of production
such as land, labor, and capital.
 He brings resources, labor, materials and
other assets into combinations that make their
value greater than before and introduces
changes, innovations, and new order.
 In a wider perspective, an entrepreneur is one
who makes things happen because factors by
themselves cannot be productive.
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 To psychologists, an entrepreneur is a person
who is driven by a certain forces – the need to
create something, to experiment, to
accomplish, or perhaps to escape the authority
of others.
 In a business circle, an entrepreneur is an
innovator, who undertakes the activities of
generating new ideas and putting them into
tangible goods. He deliberately makes
decision about resource allocation and always
seek the best opportunities so that the
resources are optimally utilized. He is a source
of supply, a customer, or someone who
creates wealth for others.
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 As previously mentioned ‘entrepreneur’
originates from French word “entreprendre”
meaning to ‘undertake’ and literally
translated “go between-taker” or “go
between”.
 The earliest example of entrepreneurs were
called Marco Polo who signed contract with
money providers (venture capitalist) to sell
their goods in Middle East.
 In such contract, Marco Polo were paid 25%
while the venture capitalists settled the
remaining 75% of the sales regardless of the
risks bored.
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 During this period, entrepreneurs were
viewed as an actor or a person who would
manage large government projects or
productions using the resources provided.
 In such projects, entrepreneurs were not
risk taker but merely managed projects
using resources provided by the
government.
 They were viewed as the priest or prophet
in charge of great architectural works like
construction of large building for defensive
purpose, abbeys for monks and nuns and
principal churches of a diocese called
cathedrals.
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 Fixed contract was made between the
government and the entrepreneur to supply a
certain products as directed by the
government.
 It is a period in which entrepreneurship
theories were introduced for the first time by
Richard Cantillon. He argued that
entrepreneurs are risk taker because they buy
goods at a known price and expect to sell
them at unknown prices making them to bear
the risks since they buy products at a known
price and sells at unknown price which
involves risk taking.
.
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 It is during this period whereby the
distinction between a person supplying
capital (lenders) and those in need of
capital (entrepreneurs) were made because
of industrial revolution that were taking
place in the world.
 Venture capitalists are professional money
managers who make risk of investments
from a pool of equity capital to get profits.
 Many inventions were made in response to
changing world.
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 A period where entrepreneurs and
managers were viewed as synonymous as
they both organize and operate a business
for personal gain.
 They both control operational costs of their
business to maximize profit.
 They pay current prices for material
consumed in the business, for the use of
land, for labour and for the capital used.
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 They contribute their initiative, skills, and
creativity in planning, organizing and
administering the enterprise.
 They also assumes the risks to unforeseen
and uncontrollable circumstances.
 The net residual of the annual receipts of
the enterprise after all costs have been paid
is retains for himself.
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 In the middle of the 20th Century, the idea
of an entrepreneurs as innovators was
introduced.
 For one to qualify to be entrepreneur, S/he
must introduce or add something new in
the market.
 Entrepreneurs were viewed as people who
can change the ways of production by
inventing new or untried technological
methods of production.
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 In the modern era, entrepreneurs are viewed
as one who undertakes to recognize,
manage, and assume the risks of a
business.
 They are innovators who recognize and
exploit opportunities; converts those
opportunities into products; adds value
through time, efforts, money, or skills;
assumes the risks of competition to
implement their ideas; and gets rewards
from their efforts.
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 Generally, entrepreneurs are aggressive
catalyst for change in the world business.
 They are independent thinkers who dare to
be different from others in the society.
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Successful entrepreneur poses some features
which mainly distinguish them from
ordinary people. These features or
characteristics include the followings
 Creative and Innovative. Successful
entrepreneurs are both innovative and
creative in order to ensure success of the
entrepreneurial ventures. They use their
ability to come up with new ideas and
implement them to ensure growth f their
enterprises.
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 High Need for Achievement. Entrepreneurs
are people who are driven by high need for
achievement in their career. They set high
goals but attainable ones so that they work
hard to achieve them.
 Calculated Risk Taking. Entrepreneurs are
risk taker in their entrepreneurial
behaviour. However, they always make
assessment to ensure that the risks are
within their ability. If it the risk is beyond
their capacity, they leave it quickly.
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 High Need for Independence. Entrepreneurs
are people driven by high need for
independence. Their frustrations with rigid
bureaucratic systems in the previously
worked organizations, motivates them to
work hard.
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 Highly Opportunistic. Entrepreneurs are
people who always searches for and exploit
opportunities regardless of the resources
they currently control. They are always
watchful of what is happening in the market
in order to identify new opportunities.
 Self-Confidence and Optimistic.
Entrepreneurs are self-confidence people
who always believe it is the best time and that
anything is possible. They believe that always
future will be good
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 Commitment, Determination, and
Perseverance. Entrepreneurs are highly
committed and determined to succeed by
overcoming various obstacles and setbacks.
Even when they face obstacles,
entrepreneurs will keep things going.
 Tolerance for Ambiguity. Entrepreneurs are
tolerance for ambiguous and ever-changing
situations in the environment in which they
operate making them successful people.
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 Internal Locus of Control. Successful
entrepreneurs believe in themselves and their
capacity to do things. They believe that their
success or failure are within their control.
 Hard Worker and Energetic. Successful
entrepreneurs are hard worker and energetic.
Experience shows that successful
entrepreneurs work more that 60 hours per
week.
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E - Examine needs, wants, and problems to
see how they can improve the way needs
and wants are met and problems overcome.
N - Narrow the possible opportunities to one
specific "best" opportunity.
T - Think of innovative ideas and narrow
them to one "best" idea.
R - Research the opportunity and idea
carefully.
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E - Enlist the best sources of advice and
assistance that they can find.
P - Plan their ventures and look for possible
problems that might arise.
R - Rank the risks and the possible rewards
E - Evaluate the risks and possible rewards
and make the decision to act or not.
N - Never hang on to an idea, no matter how
much they may love it, if research shows it
won't work.
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E - Employ the resources necessary for the
venture to succeed.
U - Understand that they will have to work
long and hard to make their venture
succeed.
R - Realize a sense of achievement from their
successful ventures and learn from their
failures to help them achieve success in the
future
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This is a process of pursuing a new venture,
whether a new product into existing
markets, existing products into new
markets, and the creation of new
entrepreneurial venture.
 Identify and evaluate the opportunity.
Opportunity does not appear from nowhere,
rather result from an entrepreneur’s
alertness to possibilities. It therefore
important to be watchful for whatever
opportunities that might arise.
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 Develop a business plan. Once
opportunities are identified and evaluated,
entrepreneurs have to develop a business
plan in order to pursue the identified
opportunities. A plan should explicitly
explain in detail a business opportunity,
identify the market to be served, and
provide details how the entrepreneurial
organization plan to pursue it.
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 Determine the resources required
(Marshaling). Entrepreneurs have to
determine the resources needed for
exploiting the opportunity by assessing
what is currently available. They should
avoid to underestimate the amount and
variety of resources needed. Having
identified the resources need, strategies to
acquire them must be made timely while
giving up little control as possible.
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 Creating the Enterprise. Having marshaled
the required resources, entrepreneurs must
use them to implement the business plan.
This involves translating the idea into
tangible goods. It is a physical creation of a
new venture which will deliver a desired
products or goods to the community. At
this stage, a tangible product can be seen
be delivered to the market.
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 Management of the Created enterprise.
Entrepreneur should now look forward to
ensure that the venture is growing,
developing or at least there is a continuity.
This involves examining the operational
problems of the growing enterprise. A
control system must be established so that
any problem areas can be quickly identified
and resolved. Some entrepreneurs
experience a difficulty in managing and
growing the venture they create.
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 Shane & Venkataramani (2000) raises three
set of academic questions about
entrepreneurship:
1. Why, when, and how do entrepreneurial
opportunities for the creation of goods and
services come into existence?
2. Why, when, and how do some people and not
others discover entrepreneurial opportunities?
3. Why, when, and how do some people and not
others exploit entrepreneurial opportunities
discovered?
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Entrepreneurship exist essentially because
entrepreneurial opportunities exist. Why,
when, and how do entrepreneurial
opportunities for the creation of goods and
services come into existence?
 Different Beliefs. Opportunities exist
primarily because people have different
belief about the relative value of resources,
given the potential of transforming them
into different state.
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 This makes them to make different
speculation about the prices of what
possible new market could offer in future.
 An entrepreneurial discovery occurs when
someone predict that a set of resources is
not put to its ‘best use’
 When the speculations are correctly made, one
earns profit and vice versa. The ability to make
correct speculation determine future profit
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 Disequilibrium. The economy operate in a
constant state of disequilibrium due to
changes brought by technologies, political,
social, regulatory and others.
 These changes provides a continuous supply
of new information about different ways of
using the available resources to create new
wealth.
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 By changing the resources into more valuable
form, the new information changes the value
of resources, hence, the resources gets proper
equilibrium price. Unfortunately, information
are unequally distributed and people do not
receive new information at the same time.
 Some people will get new information ahead of
others hence purchases resources below
equilibrium price and generate entrepreneurial
profits by recombining them and then reselling
them in the market.
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 Although opportunities for making profit
exist, individuals can only get this profit if
they discovers the existing opportunities.
Unfortunately, all opportunities are not and
must not be obvious to everyone all the
time. At any point in time, only a certain
segment of people in a society will discover
a given opportunity. Some people will
discover existing opportunities but they will
never exploit them. The question to ask is:
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 Why, when, and how do some people and
not others discover a particular
entrepreneurial opportunities?
 Information corridor. People have different
stock of information which influence their
ability to discover a given opportunities.
 The stocks of information possessed help
them to create a mental plan which provide
a framework for recognizing new
information.
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 To discover opportunity, entrepreneurs
need to have a prior information that
corresponds with new information which
causes entrepreneurial guess.
 Cognitive abilities. People differ in terms of
their ability to see and perceive things,
making them to differ in their ability to
discovery opportunities.
 To discover opportunities, people must be
able to identify the new means–end
relationship generated by a given a change.
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 Even if one possess prior information that
is necessary for opportunity discovery,
s/he may fail to do so because of inability
to see means–end relationship.
 Only those individuals in the society with
high cognitive ability coupled with ability
to identify means–end relationship caused
by a given change will discover a given
entrepreneurial opportunities.
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 Although opportunity discovery is a necessary
condition, it is not a sufficient condition. In
line with opportunity discovery, a potential
entrepreneur must decide to exploit the
discovered opportunities.
 Indeed, it is a mere fact that not all
discovered opportunities are exploited to
create new products, services or new
business. Some people are gifted to discover
opportunities but they will not exploit them.
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 The question is: Why, when, and how do
some people and not others, exploit
entrepreneurial opportunities discovered?
 Nature of the Opportunities. The
characteristics of opportunities discovered
can significantly influence peoples’
willingness to exploit the discovered
opportunities.
 Opportunities exploitation will be high when
one believe that the opportunity cost for the
loss of leisure, lack of capital, and the
reward for uncertainty will be higher.
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 Many people will exploit entrepreneurial
opportunities when demand is high,
industry profit margins are high, technology
life cycle is young, the state of competition
is neither too high nor too low, the cost of
capital is low and the possibility of learning
from other entrants is available.
 Under normal circumstances, an average
entrepreneur would exploit opportunities
with higher expected value.
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 Individual differences. Not all potential
entrepreneurs will exploit opportunities
with the same expected value.
 The decision to exploit the discovered
opportunities involves weighing the value of
the opportunities against the costs to
generate that value.
 People consider the opportunity cost of
pursuing alternative activities in deciding to
exploit a given opportunities..
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 If opportunity cost of exploiting that
opportunity is lower, they will exploit it; if it
is higher they will not.
 Under normal circumstances entrepreneurs
would exploit opportunities when the
opportunity cost is lower.
 Further it is observed that opportunity
exploitation occurs more when financial
capital is readily available.
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 The development of entrepreneurship in the
world is affected by myths. In general term, the
term ‘myth’ refers to the popular mistakenly
belief about something.
 For example, in Tanzania, it is popularly
believed that if a baby boy is born in Mara
Region, automatically he becomes a policeman.
 In entrepreneurship context, it is common to
hear that chagga and Kinga tribes are
entrepreneurs. Recently, the waha from Kigoma
are popularly becoming very good
entrepreneurs
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 Entrepreneurs are born not Made. People
believe that entrepreneurs are born with
innate characteristics that prepare them for
new venture creation. They strongly believe
that entrepreneurship cannot be learned and
studying it, is a wastage of time and
resources. However, entrepreneurial traits are
learnable and indeed, they are not a genetic
trait; rather they are skills that people can
learn in class.
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 Entrepreneurs are Doers not Thinkers.
People believe that entrepreneurs are
action-oriented therefore they should not
waste their time thinking. However, both
thinking and actions are important for any
entrepreneurial endeavor. Although
entrepreneurs are action-oriented, they are
also thinkers endowed with knowledge and
skills to recognize the existing environment
and exploit the prevailing opportunities.
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 Entrepreneurs are Always Inventors. People
believe that one must discover something
new in order to qualify to be entrepreneur.
Although many inventors are also
entrepreneurs, many entrepreneurs cover
all sorts of innovative behaviours but not
limited to inventors. Entrepreneurs use
inventions to change a product in a new
way. They are creative and innovative
people but not always inventors.
Entrepreneurs therefore do more than just
inventions.
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 Entrepreneurs are Academic and Social Misfits.
People believe that effective entrepreneurs are
academically and socially ineffective. This is
because some business owners started
successful enterprises after dropping out of
school or quitting a job or failed to cope with the
situation at the workplace which force them to
create their own business to cope with the
situation. However, successful entrepreneurs are
professionals with good academic qualifications
and sound social relationship, for example Dr.
Reginald Mengi.
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 All you Need is Money to be Entrepreneurs.
Proponents of this myth suggests that one
only needs money in order to become
successful entrepreneurs. It is true that a
venture needs capital to survive and grow
but money alone does not guarantee a
business from failure. Money is a resource
but not an end in itself.
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 Entrepreneurs Must Fit an Ideal Profile.
People believe that entrepreneurs must
possess ‘fit for all’ characteristic. That one
need to have all characteristics to be an
entrepreneur. However, a standard
entrepreneurial profile is hard to compile.
The environment, the type of venture itself
and the entrepreneurs experience and
education have interactive effects, which
results in many different types of profiles
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 All you Need is Luck to be Entrepreneurs.
People believe that the success of
entrepreneurs is determined by luck or
similar forces. Entrepreneur get prepared
to exploit opportunities with both hands
whenever they arises. Luck happens when
preparations meets an opportunity. They
were at the right place and right time to
exploit opportunities. Prepared
entrepreneurs who seizes opportunities
when arises often seems luck, but they are
better prepared to deal with difficulty
situations and turn them into success.
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 Ignorance is a Bliss (enjoyment) for
Entrepreneurs. People believe that
entrepreneurs are ignorant that’s why they
keep on planning and making evaluations.
However, identifying venture’s strengths
and weaknesses, setting up clear timetables
with contingencies and minimizing such
problems through careful strategy
formulation, are keys to successful
entrepreneurship. Thus careful planning is
not ignorant of it, is the mark of an
accomplished entrepreneur.
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 Entrepreneurs Seek Success but Experience
High Failure Rates. The myth suggests that
entrepreneurs fail miserably with the first
venture. It is true that many entrepreneurs
suffer a number of failures before they
succeed. However, entrepreneurship is a
learning process coupled with ability to
cope with problems and learning from
those problems. Failure teaches many
lessons to those willing to learn and often
leads to future success. Entrepreneurs are
guided by the adage that “if at first you
don’t succeed, try and try again”
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Entrepreneurs are Extreme Risk Takers
(Gamblers). People believe that
entrepreneurs are high risk takers. However,
the fact is that entrepreneurs work in
moderate or calculated risk environments.
They do not deliberately seek to take more
risks or take unnecessary risks and more
importantly they avoid from working in
unnecessary risk environments. To achieve
this end, many successful entrepreneurs
work hard by planning and preparations to
minimize the associated risks in order to
better control the destiny of their vision.

5/25/2017NZILANO, K.L.N, 2015 67

Another challenge associated with defining
entrepreneurship and their derivatives is how
to classify entrepreneurs. Today there many
categories of entrepreneurs who are
engaged in different types of activities in
different sectors of the economy. There are
different ways of classifying them however
for the purpose of this course, we shall just
discuss few types:
5/25/2017NZILANO, K.L.N, 2015 68

 Opportunity entrepreneurs. Individuals who
start businesses because they are capable
of spotting (seeing) opportunity in the
marketplace. They are watchful of
opportunities so that they capitalise on
them.
 Innovative entrepreneurs. Individuals who
invent new products in the market through
discovering and exploiting entrepreneurial
opportunities in the market place. They are
capable of introducing new ideas, new
technology, new market, and creating new
ventures.
5/25/2017NZILANO, K.L.N, 2015 69

 Adaptive or imitative entrepreneur. These are
also referred to as ‘copy cats’. They are
individuals who observe an existing system
and replicate it in a better manner. They
could improve on an existing product,
production process, technology and through
their vision create something similar but
better.
 Necessity entrepreneurs. Individuals who
start businesses or enter into
entrepreneurship because they cannot find
work any other way.
5/25/2017NZILANO, K.L.N, 2015 70

Necessity entrepreneurs are very common in
developing countries like Tanzania, where
many people enter into entrepreneurship
out of willingness to fulfill their basic needs
or sampliment t.
 Corporate entrepreneurs (intrapreneurs).
Those who pursue entrepreneurial
behaviour while employed in an
organization. These individuals are
entrepreneurs in their own right because
they pursue the exploitation of business
opportunities as they emerge and are
also visionaries within a given
organization.
5/25/2017NZILANO, K.L.N, 2015 71

 Technopreneurs. Individuals whose
business is in the realm of high technology,
who at the same time has the spirit of an
entrepreneur. A technopreneur’s business
involves high technology or to put it more
clearly a technopreneur is a technological
innovator and a business man all combined
in one individual
5/25/2017NZILANO, K.L.N, 2015 72

 Novice entrepreneurs. These are first
time entrepreneurs who have no prior
business experience. They are one-shot
entrepreneurs. This means that they try
entrepreneurial behaviour once in their
lifetime.
5/25/2017NZILANO, K.L.N, 2015 73

 Habitual entrepreneurs. Individuals who
repeatedly engage in entrepreneurial
behavior and are therefore experienced
entrepreneurs. They are individuals who
have established, inherited or purchased
more than one business. There are
essentially of two types:
 Serial entrepreneurs. individuals who own
one business after another but only one
business at a time. They are individuals
who have sold or closed their original
business but at a later date have inherited,
established or purchased another business.
5/25/2017NZILANO, K.L.N, 2015 74

Portfolio entrepreneurs. Individuals
who own more than one business at
a time. They are individuals who own
two or more businesses at the same
time.
5/25/2017NZILANO, K.L.N, 2015 75

 Social Entrepreneurs. Individuals who
engage in entrepreneurial activities with
social mission in their mind. They use their
skills not only to create profitable business
ventures but also to achieve social and
environmental goals for society as a whole.
 Fabian entrepreneurs. Individual
entrepreneur who are very careful and
cautious in adopting any changes. In
addition to being careful and cautious, they
are lazy and shy away from innovations.
5/25/2017NZILANO, K.L.N, 2015 76

 Drone entrepreneurs. Individuals who are
resistant to change. They are considered as
‘old school’. They prefer to stick to their
traditional or orthodox methods of
production and systems. Entrepreneurs
occupy three roles, namely as agent of (1)
economic change (2) social change and (3)
technological change.
5/25/2017NZILANO, K.L.N, 2015 77

Entrepreneurs Managers
 Owner (own boss)
 Assumes risks and uncertainty
 Profits which are highly
uncertain and not fixed
 Think over what and how to
produce goods to meet
changing needs of customers.
He thus act as change
agent/innovator
 Possess various qualities and
qualifications like high need
for achievement, original
thinking, risk taking, self
confidence, etc,
 Render services in a new
venture established by
someone else (entrepreneur)
 Servant (employee)
 Does not assume any risks
involved in a venture
 Salary and other rewards
which are certain and fixed
 Simply executes plans
prepared by owners
(entrepreneurs).
 Possess distinct qualifications
in terms of sound knowledge
in management theory and
practices
5/25/2017NZILANO, K.L.N, 2015 78

There are three primary reasons why people
become entrepreneurs and establish their
own entrepreneurial ventures:
 Be their own Boss. Many people become
entrepreneurs and establish their own firms
in order to avoid or escape the authority of
others. This does not mean that they are
difficult to work with them but rather they
either had a long term ambition to own their
own firm or because they have become
frustrated by working in traditional jobs.
5/25/2017NZILANO, K.L.N, 2015 79

 Pursue their own ideas. Some people are
naturally alert, and when they recognize ideas
for new product or services, they have a
desire to see that those ideas are realized.
Many established firms often tend to resist
innovation. When this happen, determined
employees, leave the employment and find
ways of pursuing their ideas by establishing
their own firm. For example, Daryn Kagan, a
CNN former reporter, left a job after being
discouraged by her career path and created a
Web cast that streams video on a website that
features good news.
5/25/2017NZILANO, K.L.N, 2015 80

 Pursue financial rewards. The secondary
objectives why people engage in
entrepreneurial behaviour is to pursue
financial rewards. An average entrepreneur
does not make more money than someone
with a similar amount of responsibility in a
tradition job. People such Michael Dell of Dell
Inc., Jerry Yang of Yahoo, Larry Page and
Sergey Brin of Google, made hundreds of
dollars from their firms. However, they
frequently insists that money was not their
primary motivation and even the measure for
their success. The desire to control and be
independent is their primary motivation.
5/25/2017NZILANO, K.L.N, 2015 81

Although entrepreneurship is a
source of power in terms of benefits
and opportunities it provide, yet like
force, entrepreneurship does have a
dark side. There are certain negative
factors that surround entrepreneurs
and dominate their behavior which
can make people fear to opt for
entrepreneurship as their career.
These factors include:
5/25/2017NZILANO, K.L.N, 2015 82

a) Risks. Starting or buying a new business
involves risks and the higher the rewards
the greater the risk entrepreneurs usually
face. Entrepreneurs face a number of risks
that can be grouped into five basic areas:
 Financial risk. The risk of bankruptcy
associated with loss of invested capital.
Starting a business always carries some risk
of failure and puts personal capital at risk.
These resources will entirely be lost if the
venture fails.
5/25/2017NZILANO, K.L.N, 2015 83

 Career risk. This is the risk that occurs as
result of business failure the implication of
which is difficult to find another job. A
question frequently raised by would be an
entrepreneur is whether they will be able to
find a job or go back to their old job if their
venture should fail. This is a concern to
managers who have secured organizational
job with a high salary and a good benefit
package.
5/25/2017NZILANO, K.L.N, 2015 84

 Family and social risk. This is the risks that
result when entrepreneurs excessively
devote his time to the venture which in turn
weakens his family ties and even old friend
may be lost. Starting a new venture uses
much of the entrepreneurs’ energy and time
at the expense of other commitments. For
example, those who are married and with
children, expose their families to the risk of
an incomplete family experience and the
possibility of permanent emotional scars.
Also old friend may varnish slowly because
of missed get together.
5/25/2017NZILANO, K.L.N, 2015 85

 Psychic risk. The mental stress or
breakdown associated with financial
disaster after business failure. Money can
be replaced; a new house can be built,
spouse children, and friends can usually
adapt. However, entrepreneurs who suffer
financial catastrophes may be unable to
bounce back, affecting them severely
psychologically.
5/25/2017NZILANO, K.L.N, 2015 86

 Economic security risk. The risk that occurs as
result of unpredictable entrepreneurial
earnings due to fluctuation in business
performance. They find themselves living
lower quality life full of misunderstanding in
their family particularly at the start of their
venture.
5/25/2017NZILANO, K.L.N, 2015 87

b) Stress. Starting and managing a business
can be an incredible rewarding experience,
yet a highly stressful one. Many
entrepreneurs have fully invested in their
business thus any failure may mean a total
financial damage, which creates an intense
levels of stress and worry. One may
experience stress due to the following:
5/25/2017NZILANO, K.L.N, 2015 88

 Loneliness. Entrepreneurs spend a lot of
hours at work which prohibit them from
seeking comfort and counsel from their
friends and family members.
 High Concentration in Business.
Entrepreneurs are married to their business.
They work long hours making them have
little hours for social activities. Many people
start their business with expectation that
they will own it but contrary to their
expectations, the business owns them.
5/25/2017NZILANO, K.L.N, 2015 89

 People problems. Entrepreneurs depend on
other people such as employees, customers,
bankers and other business associates. Many
entrepreneurs experience frustration and
disappointment when these people fail to
meet their expectations.
 High need for achievement. Entrepreneurs are
driven by high need for achievement which
makes them attempt to achieve everything.
When they fail to achieve what they intended
may lead to stress.
5/25/2017NZILANO, K.L.N, 2015 90

 Entrepreneurial Ego. In addition to risks and
stress, entrepreneurs also may experience
the negative effect of an inflated ego. An
inflated ego means a behaviour of feeling
so important and respected people.
Entrepreneurial ego is a personal
characteristics that make them successful
may sometimes be a source of their failure
if not well treated. The following are four
factors that have negative implications for
entrepreneurs:
5/25/2017NZILANO, K.L.N, 2015 91

 Excessive need for control. Entrepreneurs
have strong desire to control both their
venture and their destiny. They have the
desire to control everything and are not
willing to delegate authority to others. The
need for autonomy and control may lead to
work in a structured environment eventually
affect their networking in entrepreneurial
team because they view networking as
threat to them. This may be a cause of their
destructive implication side.
5/25/2017NZILANO, K.L.N, 2015 92

 A sense of mistrust. Entrepreneurs are
always in a state of doubt for others. To
remain informed on competition, customers
and government regulations they
continuously scan the environment. This
state of mistrust sometimes lead them try
on less important issues making them loose
focus of reality, distort their reasoning and
logic which may result to failure.
5/25/2017NZILANO, K.L.N, 2015 93

 Unrealistic Optimism. Entrepreneurs are
always too optimistic which misleads
themselves and ignore trends, facts and
reports and deceive themselves that
everything will move smoothly. This may be
a source of their failure.
5/25/2017NZILANO, K.L.N, 2015 94

 Overriding Desire for Success. The
entrepreneur’s ego is involve the desire for
success. They feel proud of their success
and arrogantly demonstrate that success
and by so doing develop the seed of
possible destruction. If entrepreneurs
proudly demonstrate his success through
building a huge and luxury office, there is
potential danger that he will feel so
important than his venture which can be a
source of destructive side of the desire to
succeed.
5/25/2017NZILANO, K.L.N, 2015 95

Entrepreneurship is a very important
component in socio-economic development
of any country in the following ways:
 Resource mobilization. Entrepreneurs
mobilize resources as their basic work.
 Product evolution. The process of
innovating and commercializing new
products. This increases products
availability, diversification and wealth
creation – a typical feature of economic
development
5/25/2017NZILANO, K.L.N, 2015 96

 Development of new markets. As
entrepreneurs keeps seeking new markets
for the products he/she produces.
 Creation of new economic venture. This in
turn creates employment opportunities and
pays tax to the government – which is
inherent feature of economic development.
5/25/2017NZILANO, K.L.N, 2015 97

 Creation of new employment opportunities
Through creation of new venture,
entrepreneurs creates employment for them
and for others thus improves their living
standards of people.
 Income generation. Through creation of
new economic ventures, people get
employed in such ventures eventually
generates income for themselves and to the
government through tax.
5/25/2017NZILANO, K.L.N, 2015 98

 Government revenues. Entrepreneurs create
new ventures which in turn pay tax to the
government through income tax, VAT,
corporate tax, etc.
 Economic competition. Entrepreneurs
always invents new products which
increases economic competition. Economic
competition is an inherent feature of
economic development.
5/25/2017NZILANO, K.L.N, 2015 99

 Backward and forward linkages. Enterprises
set up by entrepreneurs triggers the
formation of other firms which can be either
raw material producers, users or distributors
of products and services produced.
 Balance regional development. By setting up
industries in backward areas entrepreneurs
help to remove regional disparities in both
economic and social development.
5/25/2017NZILANO, K.L.N, 2015
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ENTREPRENEURSHIP

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