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Historical Background and Definitions of Entrepreneurship

CHAPTER 2 ENTREPRENEURSHIP

2.1. Historical Background and Definitions of Entrepreneurship

CHAPTER 2

and also redefined by famous French economist, Jean-Baptiste Say. According to the definition of Say, which was minted around 1817, entrepreneurship is a goal-oriented activity that comprised of bringing together the necessary elements for production.

Furthermore, Say (1836) clarified the term entrepreneurship as a functional tool that creates a big change in the current economic system by “shifting economic resources from an area of lower and into an area of higher productivity and greater yield” (Dees, 1998:1; Topkaya, 2013). With this assertive definition, Say also emphasized the central role of entrepreneurs within the all stages of production. Chronologically, the word of entrepreneurship was reused again in a different manner in the 20th century by Austrian economist; Joseph Schumpeter. As summarized by Schumpeter in his related study, the meaning of entrepreneurship highly associates with the expression of

“innovativeness”. In other saying, innovation is the basis of entrepreneurial activity.

According to Schumpeter (1934), entrepreneurship can be considered as a process of change which involves the launching of a new product or a new variant for an existing product or service, introducing of a new or unproven method of production, opening a new market, gaining a new source of raw material, and carrying out of a new enterprise.

As expressed in his thoughts, all alterations that emerged in the economy can easily destruct the current economic order. Based on this information, Boyett (1996) argues that Schumpeter only considers completely unique products as entrepreneurial conduct.

Thus, products with incremental change of features or imitation which are derived from other markets were not identified as an entrepreneurial conduct by Schumpeter.

In this regard, Schumpeter summarizes entrepreneurship as a creative-destructive process of capitalism that driven by entrepreneurs. Similar to many previous researchers, Peter Drucker also constructed a definition for the phenomenon of entrepreneurship. According to Drucker (1985), entrepreneurship can be identified as a concept of systematic innovations which encompasses various actions such as the regulated and aimed search for changes in the marketplace. Furthermore, these changes may yield economic and socio-cultural innovative options if a thorough systematic analysis is conducted. In other words, it can be stated that Drucker identified the concept of entrepreneurship as an ever-continuous search of a newly arising opportunity. Similar to the perspective of Drucker, Kirzner (1985) defined entrepreneurship by creating an interrelated bridge between the niche points in a market and an individual’s (entrepreneurs in this case) ability to effectively and efficiently exploit this niche market gaps.

Undoubtedly, these crucial definitions were constituted the building blocks of the entrepreneurship phenomenon. According to Martin and Osberg (2007), the foremost definitions of entrepreneurship were associated with three words; “risk” by Richard Cantillon, “production” by Jean-Baptist Say, and “innovativeness” by Joseph Schumpeter respectively. As mentioned before, the term entrepreneurship has been expanded continuously and meant different meanings to different scholars from past to present. In other words, the concept of entrepreneurship acts as an umbrella term that includes diverse components within itself.

Fundamentally, entrepreneurship is commonly known as creating something new and something different from nothing (Timmons, 1989). Similarly, Gartner (1985) asserted that the core meaning of entrepreneurship associates with the act of creating a new organization or new entity. More precisely, the activity of entrepreneurship refers to establishing an organization from scratch in order to gain profits or commercial benefits (Smith, 1776). From a similar angle, Cole (1968) provided a quite simple and plain definition of entrepreneurship. According to him, entrepreneurship encompasses the activities of launching, maintaining, and improving a business with profit orientation. Likewise, as summarized by Sharma (2016) entrepreneurship is an economic activity that involves not only establishing but also operating a new business with an aim to maximize profit. As it has seen in existing literature, through the inclusion of “risk factor” into these pioneer definitions the meaning of entrepreneurship was expanded and started to be defined as a practice of starting and operating a new business venture by taking considerable risks (Onuoha, 2007; Hisrich et al., 2017). More precisely, entrepreneurship is an activity that include many actions within itself as such; taking initiative, organizing socio-economic mechanisms to make resources available, and accepting the risk of failure (Shapero, 1975). In addition to this, “uncertainty itself” or “working under conditions of uncertainty” is another crucial components of the term entrepreneurship. As stated by Bylund (2019), uncertainty is a challenge that not only entrepreneurs but also managers face within the borders of a competitive business environment. Therefore, the earlier definition of Cantillon (1931) which explained entrepreneurship as a “process of taking some risks and bearing uncertainty” was authenticated and proven once again. On the other hand, the word “opportunity” has been identified as a vital element of entrepreneurial terminology that can easily shape and expand the definition of entrepreneurship. The

word itself and its importance has been debated by many scholars and also mentioned as a backbone for the entrepreneurial activities of entrepreneurs. Similarly, supported by Corner and Ho (2010:635) opportunities are positioned within the heart of entrepreneurial activities as well. In this regard, Kirzner (1985) defined entrepreneurship as an awareness of untapped opportunities which have already emerged in market conditions. Moreover, Kao and Stevenson (1985) asserted that entrepreneurship is a value creation process that is accomplished through the recognition of diverse opportunities in the business environment. In a similar manner, Kaish and Gilad (1991) explained entrepreneurship as two-fold process which identified as a process of discovery followed by exploiting the opportunity of lack of balance.

To sum up, entrepreneurship is the unique process of doing something new or creating something fresh to obtain a commercial benefit or commercial value while assuming risks, working under uncertain circumstances, and seeking opportunities. In addition to this, entrepreneurial activity can be described as an; innovative way of determining the gap which emerged among human needs and goods & services (which are available in the marketplace) to create value not only for individuals (e.g. personal gain) but also for society (e.g. employment generation, economic development, or country development).