What is an Entrepreneur?

As a general rule, the term 'entrepreneur' is applied to someone who creates a product or service (not necessarily new) by exploiting a niche in the market that may not, at that time, exist. One definition of entrepreneurship places an emphasis on innovation, such as:

•   new products
•   new production methods
•   new markets
•   new forms of organisation

Thought by many to be a modern idea, in fact the concept of entrepreneurship dates back to the 18th century and originates in the work of Richard Cantillon in his work Essai sur la Nature du Commerce en General 1755. An even earlier example of entrepreneurship were the English merchant adventurers of the 16th and 17th centuries. The intrepid captains of the merchants’ ships loaded them up with trade goods, purchased usually by money loaned to them by private investors, and sailed away to frequently unknown and sometimes dangerous destinations. 

Business entrepreneurs are viewed as fundamentally important in the capitalistic society, while social entrepreneurs' principal objectives include the creation of a net social benefit.

Social entrepreneurs act within a market aiming to create social value through the improvement of goods and services offered to the community. Their main aim is to help offer a better service improving the community as a whole and are predominately run as non profit schemes. To support this point Zahra (2009) said that “social entrepreneurs make significant and diverse contributions to their communities and societies, adopting business models to offer creative solutions to complex and persistent social problems”. Examples of socially run businesses include the NHS.

A more generally held theory is that entrepreneurs emerge from the population on demand, from the combination of opportunities and people well-positioned to take advantage of them. An entrepreneur may perceive that they are among the few to recognise or be able to solve a problem. In this view, one studies on one side the distribution of information available to would-be entrepreneurs, due largely to the work of Joseph Schumpeter and on the other, how environmental factors (access to capital, competition, etc.), change the rate of a society's production of entrepreneurs.

The research of entrepreneurship owes a lot to Schumpeter’s contributions. He was probably the first scholar to develop its theories. He gave two theories. In the early one, Schumpeter argued that the innovation and technological change of a nation comes from the entrepreneurs, or wild spirits. He coined the word Unternehmergeist, German for entrepreneur-spirit. He believed that these individuals are the ones who make things work in the economy of the country.

Many people use the terms 'entrepreneur' and 'small business owner' synonymously. While they may have much in common, there are significant differences between the entrepreneurial venture and the small business. Entrepreneurial ventures differ from small businesses in these ways:

1. Amount of wealth creation - rather than simply generating an income stream that replaces traditional employment, a successful entrepreneurial venture creates substantial wealth.
2. Speed of wealth creation - while a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid; for example, within five years.
3. Risk - the risk of an entrepreneurial venture must be high; otherwise, with the incentive of sure profits many entrepreneurs would be pursuing the idea and the opportunity would no longer exist.
4. Innovation - entrepreneurship often involves substantial innovation beyond what a small business might exhibit. This innovation gives the venture the competitive advantage that results in wealth creation. The innovation may be in the product or service itself, or in the business processes used to deliver it.

Another important distinction is that between entrepreneurs and inventors. Put simply, a small number of entrepreneurs are inventive and create genuinely new products or services. Conversely, very few inventors are true entrepreneurs. A well know example of a modern entrepreneur is Richard Branson who has created many new businesses without making significant new inventions. A rare example of someone who has made a great success in combining both roles is James Dyson. Both functions have important parts to play in a business society, but they are very different in nature.

Perhaps Niccolo Machiavelli had the last word on the subject.
“There is nothing more difficult to take in hand, more perilous to conduct or more uncertain in its success than to take the lead in the introduction of a new order of things.”