The concept of entrepreneurship is multifaceted. There are varied, diverse and somewhat contradictory sets of definitions of the term. As a way out of the definitional dilemma, this article aims to explain the economic perspective on entrepreneurship.
The economic perspective rests on certain economic variables which include innovation, risk bearing, and resource mobilization.
Innovation/Creativity In this approach, entrepreneurs are individuals who carry out new combination of productive resources. The key ingredient, the carrying out of new combination (or innovation) distinguishes entrepreneurs from non-entrepreneurs. While new venture creation appears as the most prevalent form of entrepreneurship, there exist other forms. Entrepreneurship also involves the initiation of changes in the form of subsequent expansion in the amount of goods produced, and in existing form or structure of organisational relationships.
In the entrepreneurship literature, some scholars have questioned the use of organization creation as a criterion for entrepreneurship. It has been argued that organizations such as political parties, associations, and social groups are always created by people who are not “entrepreneurs.” Interesting as it might sound, the terms entrepreneurship and entrepreneur have been adopted by varied scholars to meet the innovation and spirit of the time. This is evidenced by attempts to apply entrepreneurial thinking to contemporary team-oriented workplace strategies. Members of such groups – political parties, associations, and social groups – therefore, could be called entrepreneurial teams. Besides, activities inherent in such groups have flourished in recent years, and are increasingly being described as social entrepreneurship.
Risk Taking This is another economic variable upon which the economic perspective revolves. Risk-taking distinguishes entrepreneurs from non-entrepreneurs. Generally, entrepreneurs are calculated risk takers. They bear the uncertainty in market dynamics. This notion has its critics and advocates. Entrepreneurs may not necessarily risk her own funds but risk other personal capital such as reputation and the possibility of being more gainfully employed elsewhere.
Resource Mobilization here, entrepreneurship is reflected in alertness to perceived profit opportunities in the economy. This implies the allocation of resources in pursuit of opportunities with the entrepreneur playing the role of an opportunity identifier. This way, entrepreneurs are distinguished by their ability to identify persistent shocks or challenges (of long-term opportunities) to the environment, and then synthesize the information and take decisive actions based upon it.
This article has conceptualized entrepreneurship based on resource mobilization, risk-taking, and innovation. Beyond the above-mentioned economic variables, entrepreneurship can also be viewed based on a set of personal characteristics, motives and incentives of the actor in the entrepreneurship act. This is the psychological perspective, the subject of a future article. In addition to the psychological perspective, we shall also examine the process and small business perspectives.