1.1.1 Definition of Entrepreneurship and Entrepreneurs
Definition an entrepreneur
An entrepreneur is basically a person who identifies a business opportunity, harshness and obtains the resources necessary to initiate a successful basis activity. The entrepreneur implements the idea Undertakes to operate the business An entrepreneur is therefore a central key individual in the society who makes things happens for economic development.
In the broader sense entrepreneurship refers to the means of stimulating innovative and creative undertakings for a better business community or world. Entrepreneurship if French world meaning to undertake and focuses on a business enterprise
Entrepreneurship can exist in any situation – therefore it is the creation of values through establishing a business enterprise. Entrepreneurship means having an idea of ones own and trying to implement the idea to create values on it. Entrepreneurship is a term which encompasses what entrepreneurs do i.e
- Identifying a business opportunity of a particular demand
- Look at the opportunity as a process of creating, something that did not exist.
- Constantly searching/ harnessing ones environment and resources to implement the activities.
- Creating a totally new product and using it in as new.
Entrepreneurship there is the practice at starting of a new business or revitalizing existing businesses in response to identifying opportunities.
1.1.2 Types of Entrepreneurs
1. Craft entrepreneurs
Exploits and utilizes personal skills to start a business without thinking of its growth or the expansion objectives Often times than in this type of entrepreneurship
- There is no expanding even after along time
- It is not business expansion oriented.
- The skills can be technical skills, professional skill e.t.c
2. Opportunistic entrepreneurs
This is a person who starts a business, acts as a manager and with a view to expand the business to maximum.
He might not have the sill to profession but he has the opportunity to start and direct others.
He sees beyond and has abilities to initiate and venture into business that will expand and grow.
He is innovative I,e somebody able to delegate activities to others , ready and able to see, scan the environment.
- Entrepreneurship looks at particular individuals in a business set-up. It operates in large business or organization which is business minded to make profit.
- Entrapreneurs operate autonomously for the welfare of the organization.
- The term Intra – refers to within – therefore Entrapreneurship is a process whereby an individual or group within a large organization creates something new or different to maximize on the available opportunities to that organization.
- Intra can therefore be equated to entra within the context of a large organization where the workers are a leeway to be creative or innovative on their own.
- They become competitive, socially and economically the idea is to allow individuals within the organization to act and think independently.
1.1.4 Entrepreneurial Behavior
- Several theories have been developed to explain why entrepreneurs behave the way they do.
- There has been debate on whether entrepreneurs are born or made
- Born-hereditary, entrepreneurs are environmental influenced by where they are born.
The theory explains entrepreneurial behavior as influenced by economic factors through which.
- It is possible to introduce new methods
- It is possible to find new sources of materials
- It is possible to open new markets
The economic prospective is important since they create enabling environment for the entrepreneur to combine the factors of production.
2. Psychological factors
- The theory states that entrepreneurs have unique values, attitudes and needs within which drive them.
- It is mostly concerned with personality traits as the main determinants of entrepreneurial behavior
- People are likely to become entrepreneurs because of high liking of say.
- Need to satisfy certain needs.
3. Sociological factors
Maintains that environmental factors such as beliefs, culture, social structures determine entrepreneurial behavior.
4. Management factors
- Emphasizes on the organization of resources in a specific way to attain profits
- Leadership impacts on behavior and facilitates pioneership, achieving of goals and provides vision.
1.1.5 The Functions of an Entrepreneur
- The bearing of uncertainty is the primary function of the entrepreneur i.e losses or profits.
- The management of the business enterprise can delegate
- Provision of risk capital and invention.
- Identifying gaps in the market and turning such gaps to business opportunities i.e to initiate a business.
- Financing the businesses, through raising and mobilizing the necessary resources to exploit opportunity.
- Searching for business opportunities through environmental scans.
- Mobilization of resources needed to start and run a business e.g. from Personal savings, Friends & relatives and Financial institutions e.t.c
- Evaluation of business opportunities to access viability and any other benefits that might accrue to the business.
- Provide the necessary leadership for the business and those working in it.
1.1.6 The Characteristic of a Potential Entrepreneur.
1. Initiative and risks taken by;
- Doing things before being asked or forced by events
- Acts to extend business in to new areas products etc
- Sees and acts on opportunities
- Looks for and takes action on opportunities.
- Sees and acts on new business opportunities
2. Persistence and patience through
- Taking repeated action to overcome obstacles
- Taking action to overcome obstacles
- Taking action in the face of significant obstacles.
3. Information and property seeking
- Takes action on his own to get information to help reach business objectives
- Does personal research on how to provide a product or service
- Consultation of experts on business and technical advice
- Asks questions to clarify information
- Undertakes market research analysis and investigation.
4. Concern for high quality work by
- Acting to do things that meet or beat existing standards
- A desire to produce and sell top and better quality products or services
- Compares own work favorable to other.
5. Commitment to work contract by
- Placing the highest priority on getting the job completed.
- Accepts full responsibility for problems that may arise in getting the job done
- Expresses concern on customers satisfaction.
6. Efficiency orientation by;
- Finding ways of doing things faster and cost effectively
- Uses information to improve efficiently.
- Express concern on costs improvements change etc.
7. Systematic planning
- by developing and using logical plans to meet goals
- breaking tasks down to sub-tasks
- developing plans which anticipate obstacles
- evaluates alternatives
- takes logical and systematic approach to activities
- identifies new and potential unique ideas to reach goals
- Switches to alternative strategies to reach goals.
8. Self –confidence
- has a strong belief in self and own abilities
- expresses confidence in own ability to complete task or meet challenges
- sticks with own judgment in the face of opposition or early lack of success
- confronts problems and issues directly
- Tells others what they have to do.
- convinces people to buy the products or service
- convinces people on providing funds
- Asserts own competence reliability and the company product.
10. Uses strategic influence and networking
- To develop business contact
- Uses influential people as agent to accomplish objectives
1.1.7 Advantages of Entrepreneurship
- Financial gains
- Self-employment which leads to job satisfaction and flexibility
- Provide job opportunities to the unemployed or those seeking better jobs.
- A means of opening up new industries especially in the rural areasfacilitating globalization
- A source of generating income and increased economic growth.
- facilitates competition encouraging high quality products
- facilitates production of more goods and services
- Leads to the development of newer markets
- Promotes use of modern technology in especially small- scale manufacturing to enhance higher productivity
1.18 Drawbacks of entrepreneurship
1. Challenges of a bidding entrepreneur
- long working hours
- poor pay
- unclear future
- fear of loosing all that has been invested
- bankruptcies and closure
2. Other challenges
- Fear of delegating
- the problem do it your self and know it all
- competition by established business
- lack of funds especially before break even
- Mis- management by employees
1.1.9 Promotion of Entrepreneurship
- Integrating entrepreneurship into the education system
- Registration to encourage risk taking
- National companies to promote entrepreneurship
- Support of entrepreneurs through friendly loans at the appropriate time.
1.2. Entrepreneurship and Innovation
- Innovation or creativity or novetty refers to the process of devising a new idea, or thing or improving an existing idea or thing.
- Innovation like all human activities has a cost as well as benefits
- Innovation turns new concepts into realities, creating wealth and power.
- Innovation can also disrupt the status quo. E.g computerization i.e Creative destruction.
- Creative destruction occurs when innovations make long-standing arrangement obsolute and frees resources to be employed else where leading to greater economic efficiency.
1.2.2 Reasons for Opposing Innovation
- The entrepreneurs tend to have a practical concern that unforeseen innovation may cause a disaster e.g side effects e.g of a drug.
- Fear of loosing profits in the event innovation does not translate to the expectations.
- Where the entrepreneur held a monopoly position in the market, there is fear of losing authority and control.
- Fear of upsetting the moral and social value of demand for the product.
- Desire to preserve the existing market confidence.
- Fear of upsetting tradition in production management and market scope.
- Fear of opening a loophole to competition hence lose of business grip.
1.2.3 Reasons for Innovation
- Innovation is essential for the entrepreneur in solving the inefficiency problems.
- As a means of cost reduction and imposing significance social and market grip.
- Profit improvements are looked at from the innovation point of view though newer technology in management and production.
- To encounter competition by already established businesses.
- To facilitate opening up of new markets both locally and internationally.
- To facilitate diversification of products risks and losses.
- To protect current position of monopoly or success.
1.2.4 Requirements of Innovation
1. Economic demand
People engage in innovation out of belief that the economic returns will be greater than its costs.
2. Surplus capital
Provides the necessary time and startup costs for implementing a new idea.
3. Ability to assemble and invest capital.
4. Mobile capital which is stable.
Capital cannot serve unless it can move to potential innovator unless it can move to allow the various types of wealth to be created e.g title deeds – stability is provided by a rule of law.
5. Availability of growth- fostering social institutions which facilitate the speed of technological advancement.
6. Ability and willingness to think and act creativity (Entrepreneurs) I,e the philosophical and psychological requirements.
7. Geographical and other circumstantial causes such as ethical issues.
Societies in which innovation is seen as a sinful or people are punished or are shunned to think differently than others are unlikely to experience innovation.
8. The size of the firm.
Large firms have the advantage of introducing innovation since they can afford it. They tend to attract more talents employees to advice on new ideas.
1.3 The Evolution of Entrepreneurship in Kenya
Interest in the development of entrepreneurship and small enterprise in Kenya gained momentum as a possible remedy to the stagnation of economic development and the escalating unemployment problem between the early 1960 and 1970s Although there were attempts by the government to develop entrepreneurship, the main impetus came form the international labour organization (ILO) report. The report centered on the potential of the informal sector and suggested that the bulk of Kenya’s urban workers were self –employed in small enterprises. The report proposed that the development of this sector could;
- promote employment
- facilitate development
- facilitate equitable distribution of resources.
Based on this report the government responded with a seasonal paper in 1973 – which recognized the role of entrepreneurship in employment creation not just in the formal sector but also in the formal sector. Subsequent development plans have devoted time to the development of strategies and to promote small-scale enterprises and entrepreneurs which include.
- The industrial estate programme
- Establishment of development agents e.g ICDC and KIE
- Policy and institutional framework to promote entrepreneurs.
- Promoting indigenous Kenyan enterprises.
1.3.1 How the government planned to promote entrepreneurship
The development plan laid down proposed to
- implement small scale industrial policy
- Review the central and local government regulations that a hindrance to entrepreneurial development.
- Provision of direct assistance to the small scale businesses all over Kenya.
- Establishment of an organization that would give extension services to the small scale enterprises.
- Creating and strengthening institutions and schemes for the assistance of the small enterprise sector
- Establishment of credit guarantee schemes for loans given by commercial banks
- Establish procedures to improve small scale training through the ministry of technical training and Applied Technology.
- Overhaul the education system i.e introduction of the 8.4.4 system.
- Establish a full fledged small industrial division in the ministry of commerce and industry – which gave rise to the District focus for rural development.
- Introduction of entrepreneurship education is all levels of training.
1.3.2 Economic, Social and Political Factors Affecting Entrepreneurial Development
High taxation levels. For business and personal incomes Which in effect reduce profits earned making it un attractive to engage in
business Taxation of raw materials and other inputs raise production costs.
1. Corruption and official harassment
Occurs where entrepreneurs are forced to bribe officials in various government departments to allow operation or start up.
Raids under one pretext or another which tends to be very harassing.
2. Unregulated competition from the outside world due.
Liberalization which opened importation competing locally produced goods.
3. Declining personal incomes of people due to
Over-increasing cost of living
Arise in unemployment
4. The high cost of finance
The cost of borrowing is high
Business collapses because they lack ability to repay loans.
5. Lack of necessary skills and knowledge due to
- lack of training opportunities
- high education costs
6. Poor transport and communication network
- making business difficult
- Inconveniencing consumers
- High energy costs
- Lack of entrepreneurial culture
1.4 The Entrepreneurship Culture
1.4.1 Culture Definition
- Culture is defined as asset of values, perceptions wants and behaviour learned by a member of a society from family and other institutions
- Culture is a tool of leaned behavior patterns of living. It is a powerful human tool for survival constantly changing and easily lost.
- Weber argues that “Protestantism encourages a culture which emphasizes individualism, achievement motivation, legislation of entrepreneurial vocations, rationality and self – reliance.
- Hosted – defines culture as a collective programming of the mind which distinguishes the member of one group or category of people from another.
1.4.2 Entrepreneurial Culture
Refers to the way of embracing the concept of finding new opportunities in business and gathering the necessary resources to fill the opportunity.
- Many governments around the world want to promote entrepreneurship because they have recognized the importance of entrepreneurship.
- In other words entrepreneurial culture is away of people embarrassing life by participating in activities that enable then create new business enterprises.
- A country can develop the entrepreneurial culture by forming policies that constitute the following ;
- Integration of entrepreneurship training in the overall education sys tem to tap on youths
- Exposure of entrepreneurship those look potential to actual business practices and activities through the networks and business contacts of rule models.
- Creation of a conducive and enabling that permits new business to immerge and flourish.
The creation of entrepreneurial culture has to come from deep social convictions based on strong values and systems of the locals
- It should be created in away that it welcomes entrepreneurship and respects the investor and also reflecting the core values
1.4.3 What Constitutes Entrepreneurial Culture?
- Growth in concentration of firms networks and linkages
- Growth in intermediary organizations to which some tasks are delegated and it different form of entrepreneurship
- High levels of education skills and learning.
1.4.4 Importance of Entrepreneurship Culture
- Enhances economic growth and building of social capital.
- Enhances job creation
- Acts as a primary source of innovation
- Helps in the devolution of government power for policy implementation.
- Direct influence development in tech. H/R capital formation e.t.c.
1.4.5 The cultural habits that promote entrepreneurial development
1. Money orientation
Money oriented people know the value of money and has the intention of making it. The money oriented people use the need of money as a motivating factor pushing then to being entrepreneurs.
2. Future orientation
A society that has foresight to know about the future business environment is likely to have more entrepreneurs. This is because they are likely to visualize key changes that are likely to create opportunity.
3. Time consciousness
- Knowledge that time exists and its importance
- Knowing the right time to start an entrepreneurial activity.
- Utilization of time
- The correct timing of the market conditions
4. Trust and honesty
- Through trust consumer demand is gained on the products and services available.
- Entrepreneurs should reciprocate this by ensuring honesty by providing the expected standards.
5. Hard work i.e
Willingness to work hard distinguishes between successful and unsuccessful persons.
1.4.6 The cultural factors inhibiting entrepreneurial development.
- Religion – religious believes may deter entrepreneurial investments in items such as night clubs and pubs.
- Language – establishing businesses in areas where language barrier may allow poor communication or fear of invation.
- Personal relationship – Married people may avoid getting involved in business activities since no time is spared for the family.
- Attitude towards innovation
Especially in cultures which oppose innovation due to fear of change
- Networks – poor networking and ability to meet people limit new
- Technology – lack of technical skills and knowledge may slow growth and dev. Of entrepreneurial Lock one out of being competitive.
1.4.7 Ways of managing Factors which Inhibits Development of Entrepreneurial Culture.
1. Working in related business to gather the necessary skills required before one starts his own business.
2. Setting policies t hat ensure that entrepreneurship training is established in the school syllabus.
3. Your people to be encouraged to read articles from newspaper, watch television and business contacts to enable them choose products in demand with a bright future.
4. Young youths as wll as aspiring adults entrepreneurs should be encouraged to get better and faster access to
- Information or business
- Internet e.t.c
5. Aspiring entrepreneurs to seek guidance in selection of machines and other facilities.
1.5 Entrepreneurial Cultural Practices in Kenya
The cultural practices of entrepreneurs varies from country depending on the
- The material resources
- The industrial climate
- The social & political systems
The undeveloped regions especially Kenya due to the policing of funds lacks
- Skilled labour
- Existence of minimum social and economic overheads to curb emergencies of innovative entrepreneurs.
- Entrepreneurship does not emerge out of industrial background with developed institutions to support and encourage it.
- Kenya has imitators entrepreneurs lacking enough innovators unlike other countries like South Africa.
However Kenya has established institutions that provide assistance to aspiring entrepreneurs in terms of
- Establishing a fund to disburse loans to especially youths in the hope of promoting entrepreneurship
- Some of the entrepreneurial activities that have emerged in our country include.
1.5.1 Steps towards Promoting Entrepreneurship by the Government.
1. Increase small scale industrial sector.
- These are small tiny cottage industries e,.g the Tabaka soap stones
- They have increased and the governments in developing schemes to help entrepreneurs
2. Increase investments in the service sector by Increased investments in quality services especially in the
- Transport sector
- Repairs services
- Entertainment sector
- Hospitality sectors
3. Increased in rural entrepreneurship dev. Promoting rural entrepreneurship by
- Promoting Agro exports e.g eggs , meat e.tc
- Development of brick making
4. Promoting women entrepreneurs in;
- Encoring women to a variety of ventures
- Education programmes.
1.5.2 Other Steps
The future of entrepreneurship in Kenya is great- we now live in the age of entrepreneurial development.
- Through educational development in institutions, government participation would greatly promote entrepreneurship
- Introduction of the study of entrepreneurships as a core subject in not only universities curriculum but also tertiary institutions.
- Tax holidays for initial periods of 5 to 10 years of a new venture
- Help by government organizations which have facilitated building new infrastructure e.g roads, loans, training institutions e.t.c.
- Collaborations and joint ventures between the government and private sector e.g in technology.
1.6 The Theories of Entrepreneurship
1. Richard Cantilon
An entrepreneur as a person with foresight and competence to operate in conditions on uncertainty. Richard was a particular about an entrepreneur being a person who performed in uncertain environments because the market demand is not perfectly predictable not necessarily that his products are untested an untried Cantilon contributed to the contention that an entrepreneur is somebody who has foresight and confidence to operate under conditions of uncertainty. He associated risks and uncertainties with administrative decisions of entrepreneurs. He identified the facto that profit to the entrepreneur arises out of decision making and risk taking.
2. John Baptise
Entrepreneurs coordinate and combine the factors of production John described the entrepreneur as a rare phenomenon who is able to coordinate and combine the factors of production. He places emphasis on the variety of markers and inputs which the entrepreneur has to deal with “ successfully” in effect, the entrepreneur is expected to “ perceive and realize potential arbitrage” in addition to
taking risks associated with uncertainty. According to say, the entrepreneur must surmount abundant obstacles, suppress anxieties, repair misfortunes and devise expedients. As a result, the entrepreneur accommodates the unexpected and overcome problems successfully in dealing both the input and consumer market. A possible conclusion form this contention is that the entrepreneur is a locator of resources in the adjustment process during equilibrium, during equilibrium, towards equilibrium.
3. Carl Menger,(1950) and the Austrian School
Carl Menger and what is known as the Autrian school in economics emphasizes the locative role in directing that entrepreneurs role is that of risk taker in an uncertain environment. They added that the entrepreneur needs information and has to have the ability to analyze and use this information to make the correct decision in allocating resources. Other followers of the Austrian school of Thought went on to add that the alertness, superior perception and leadership of the entrepreneur cause factors of production to
be allocated and continuously allocated.
4. Joseph Schumpeter (Innovation)
He in the early 20th century provided perhaps one of the most comprehensive analyses of entrepreneurship within the context of economic development. He introduced the notion that the entrepreneur is not just an allocate or director of resources, but combines
inputs in untried combinations (innovator). Schumpeter asserted that the entrepreneur only remained an entrepreneur for as long as he is innovative, and losses that characteristics as soon as he falls into the routine management of the business. Schumpeter described this process as discrete rather than constituting a gradualist change or evolution.
5. MC Cleland (a function of High Achievement)
According to MC Cleland, the characteristics of entrepreneur have two features- first doing things in a new better way and second making under uncertainty. He emphasizes achievement orientation as most important factor for entrepreneurs. Individuals with high achievements orientation are not influenced by considerations of money or any other external incentives. He argues that profit
and incentives are merely yardsticks of measurement of success of entrepreneurs with high achievement orientation. The achievement orientation can be taught and increased by deliberate efforts. He finally observed that the individual with high achievement orientation take calculated risks and can make decisions where there are incomplete information or have tolerance for ambiguity Psychologists call this behavior a type –Abehaviour.
1.7 Role of Entrepreneurship in Economic Development
Economic development is the process of structural transformation of an economy towards a modern technologically advanced economy based on services and manufacturing. This process involves not only qualitative changes but also accompanied by
quantitative changes to improve welfare.Entrepreneurship contribute greatly to economic development both;
1.7.1 The Positive Role of Entrepreneurship
1. Entrepreneurship facilitates structural transformation, innovation – driven growth by
- Facilitating transformation from traditional agricultural based economy to modern industrial economy.
- And production for the market.
2. Entrepreneurs are seen as capitalists with more to save than salaried people and therefore facilitate increased savings through which capital accumulation is stimulated for investment
- Entrepreneurs save to start up businesses
- Entrepreneurs save to expand their businesses
- Entrepreneurs to reduce need for expensive borrowings
- Entrepreneurs save for precautionary reasons.
3. Entrepreneurs provide an environment where human capital is accumulated in the form of;
- workers specialized and non-specialized
- Managers of all levels.
4. The entrepreneurial ability determines the sizes of firms and the general growth of an economy by;
- The limitative role and ability to take risks
- Ability to trigger investments.
5. Entrepreneurship facilitates re-allocation of production factors from less productive areas to productive areas.
- They cause an increase in the demand for education of labour
- Facilitates adoption of improved technology.
6. Through entrepreneurship creation of new firms through, which
- Increased production
- Production for expert market
- Employments are achievable.
7. Through entrepreneurship need to knowledge accumulation generalization and commercialization has had to cooperation between researchers and institutions, private firms (sector) and the government.
8. Through entrepreneurship development and production of;
- variety of consumer goods
- producers goods or intermediate goods has greatly increased hence
- new products are bought to the market
- Application of new technology and profit multiplication.
9. Through entrepreneurship information if provided on what an economy can be good at producing which in the context of LDCS information is lacking.
10. Thorough entrepreneurship a vast growth of the private sectors tends to automatically check the large government sector facilitating to development a greater free market economy.
1.7.2 The Negative Impact of Entrepreneurship to Economic Development.
1. Perverse allocation towards activities which are for private profitability and socially destructive or un productive due to;
- absence of good institutions
- Slow economic growth which will result to unemployment hence low levels of entrepreneurship ability.
2. Misallocation of entrepreneurial talents during low development levels affecting Resource utilizations especially human capital.
1.7.3 Entrepreneur Contribution to Economic Development.
1. Job creation
Through establishment of businesses of all level which lead to distribution chain of;
- Producers, warehousing, transport, insurance e.t.c Which are basically levels of employment,
- Facilitates use of local resources through which
1. local and international transactions are established
2. production of more goods and services
- Rural development which in effect.
1. Promotes change to the formal sector from informal sector
2. Equitable development
3. Reduced rural-urban migrations.
- Development of technology through
1. establishment of research institutions
2. education systems
- government revenue
1. through taxes
2. from domestic borrowing (TBs)
- Facilitating community development through
1. Establishment of small businesses
2. Participation in community dev. Projects
- Providing a positive role model and facilitating.
1. Competition between domestic entrepreneurship and imported 2. Stimulating dev. Of entrepreneurship.
- Reducing dependence on imported goods and services.
- Stimulates competition through
1. Quality production methods are adopted
2. Quality products are produced
3. Variety goods and services are produced.
- Facilitated development of the financial sector through which;
1. Capital accumulation is possible through savings
2. Loaning is facilitated
3. Development of the capital market.