Chapter 1

CHAPTER 1INTRODUCTION TO ENTREPRENEURSHIP

“FORMAL EDUCATION WILL MAKE YOU A LIVING; SELF-EDUCATION WILL MAKE YOU A FORTUNE.” –

Jim Rohn

PREPARED BY: MATHIVANNAN JAGANATHANBPME 1013 BASIC ENTREPRENEURSHIP

CHAPTER OBJECTIVE

• Understand the history and origins of entrepreneurship from the various scope.

• Understand the definition of entrepreneurs and entrepreneurship from different perspectives and well-known business leaders.

• Understand the importance of entrepreneurial activity in our daily lives• Provide definition of who is regarded as entrepreneurs with specific

features• Provide definition of who is regarded as entrepreneurs in accordance with

Islamic perspective.


Introduction

• Entrepreneurs and entrepreneurship are among the terms that are often publicize by people since ancient times.

• The term was brought to the meaning or definition based on various areas or understanding by the individual.


IMPORTANCE OF ENTREPRENEURSHIP AND ENTREPRENEURIAL

• In terms of management thoughts, it is more focused on management science and decision making.

• The World Bank began to introduce entrepreneurship as a major boost for the economies of developing countries.

• Contribution to national income.• Creating a new business but also increase employment opportunities leading to

the creation of the modern discovery of resources, technology and innovation.


ENTREPREPRENEURIAL CONCEPT

• None of the standard and universal definition of entrepreneurship.• Derived from the French language, entreprendre, meaning assume duties

or attempt.• The word entrepreneur is popular among the Malaysian society is in the

middle of the 1970s.• Entrepreneurs are individuals who are develop a enterprise and the

businessman is a person who run a business. • Generally, entrepreneurs can be defined as a person who operates a

business that is successful with a profit motive in addition to adopting a strategic practices to succeed



• Richard Cantillon, an economist from France mixed Irish considered by Schumpeter (1934) as the first who introduce the concept of entrepreneurship.

• A person who organizes & manages a business undertaking, assuming the risk for the sake of profit. (Webster’s Dictionary)

• Individuals who purchase or inherit an existing business with the intention of expanding it (Hull, Bosley & Udel ,1980).

• Entrepreneurs are people who have the ability to see & evaluate business opportunities, to gather the necessary resources & take advantage of them, and to initiate appropriate action to ensure success (Meredith, Nelson & Neck,1982)



• Sexton and Bowman-Upton (1991):

The process of identifying market opportunities, develop the resources to achieve its objectives and further action needs to exploit resources for personal gain in the long term.

• Kao (1995)

A process of creating something new (creative) and different (innovative) for the purpose of creating wealth for individuals and add value to the community and the entrepreneurs are people who through the process of wealth creation and value added through the incubation of ideas, coordinating resources and implement.



• Coulter (2000)

A process in which individuals or groups of individuals to use the efforts and intermediaries to look for opportunities to create value and growth through meeting the needs and requirements. It should be through innovative and unique no matter what source control is used. Entrepreneur is someone who creates and operates an active business.

• Hisrich and Peters (2002)

The process of creating something new added value and business needs and time, assuming the financial, and social risks as well as receiving awards in the form of money and personal satisfaction and independence. While entrepreneurs are inventors who revolutionized by the discovery of the source of the latest trend or a new outlet, new industrial organization or acquisition of certain innovative activities



• Kuratko and Hodgetts (2004)

The process of innovation and new business creation through the four dimensions such as individual, organization, environment and processes supported by a network of co-government, and educational institutions.


Characteristics in entrepreneurship definition

E/ship definition

Process

Value creation

Entrepreneur

Innovation

OrganisationcreationProfit/non-profit

Development

Uniqueness


Theory and Model of Entrepreneurship (by economists)

Joseph A. Schumpeter (1934)• Innovation as one of entrepreneurial characteristics. Innovation means

modification, activities or effort that leads to new discovery.• Entrepreneur is an innovator, making sure that economy is vibrant. • Entrepreneur contribute to economic development.

Alfred Marshall• Entrepreneurship as an evolution process (business life cycle starting

from the beginning until the business stop it is operation).• How business emerge from small to big. • Business ends when the founder passed away.• To continue there is a need to have a successor or business will be taken

over by other entrepreneur.


Theory and Model of Entrepreneurship (According to sociologists)

• Max Weber (1958)– ‘Protestant Ethic and the Spirit of Capitalism’• Max Weber relates the element of religion as a foundation to succeed in

economic activities. • Weber said that the success of Protestant people in economic activities is

because of the Protestant ethics.• Relates religion with success in economic activities.• Everett Hagen• Proposes a theory- entrepreneurs exist among lower level class people

that are not satisfied within a community.• Unsatisfied with the treatment that they received contribute to their

venture into economic activities. • This study was based on research carried out in Japan, Columbia, UK

and Russia.


Theory and Model of Entrepreneurship (According to sociologists)

• Gibb and Ritchie (1981):• British academic scholar which introduce entrepreneurship through the

approach of social development model. • The role of socialization that push individual towards taking up

entrepreneurship. • (Interaction with entrepreneurs leads to entrepreneurial start-ups.


Theory and Model of Entrepreneurship (According to the psychologist)

• Heredity (Traits) Model (McClelland, Lynn & Schrage)• Psychologists concentrate on the characteristics & personality of an

individual that form a business.• Entrepreneurs are different from non-entrepreneurs. • Among characteristics being associated with entrepreneurs are; taking

initiative, able to plan, risk taker & opportunity seeker. • McClelland (1961) • Has identified the personality of “need for achievement” as an important

characteristic of an entrepreneur.• McClelland (1961) ‘The Achieving Society’• “Individuals that have high need for achievement tends to try hard to

achieve goals with their own effort. They are more incline to be an entrepreneur”

Historical Development of Entrepreneurship

• Early in 18th century, French Economist, Richard Cantillon, developed one of the early theory of an entrepreneur.

• His work ‘Essai sur la de commerce en general’ published in 1755; observed merchants, farmers, craftsmen and other sole proprietors ‘ buy at a certain price & sell at uncertain, therefore operating at a risk.


• French Economist, Baudeau (1730-1790):

– A sense an entrepreneur as an innovator. Entrepreneur as a person who invents, modify and applies new techniques in order to reduce cost and raise profit. He also identified ability & intelligence as qualities needed to achieve success.

• Jean Baptiste Say (1767-1832)

– Entrepreneur must have judgement, perseverance & knowledge, possess the art of supervision, administration & problem solving skills, otherwise venture would probably fail.


• Schumpeter- entrepreneur’s role is to change econ. status quo through innovation.

• Innovation is the key to entrepreneurship,• The key role of the entrepreneur’s is to

bring innovation in the marketplace. • In doing so, they create new demand,

destroying existing market & creating new ones.

Historical Development of Entrepreneurship: Schumpeter

• Innovation may result in:-• The creation of a new product or

alteration in its quality• The development of a new method of

production• The opening of a new market• The capturing of a new source of supply• Formation of new biz organizations


• McClelland (1961):– The key to entrepreneurial behavior lies in

achievement motivation. – The need to achieve is a drive to excel, to

achieve a goal in relation to a set of standards.

– A person endowed with a need to achieve, will spend time considering how to do a job better or how to accomplish something important to them

Historical Development of Ent/ship

• Characteristics of high achievers:• Like situation where they can take personal responsibility

to find a solution;• Like rapid feedback;• Avoid what they perceive to be very easy or very difficult

task

• Prefer to strive to achieve target, which is challenging &

is not beyond their capabilities.


• Rotter (1966):– Introduced the notion ‘locus of control’.– Internal LOC: individuals who believes in

themselves. – External LOC: Fate, chance, events outside

their control or powerful people has a dominating influence over their lives.


• Peter Drucker (1964):– Entrepreneur as someone who maximizes

opportunity. Ent/ship arises in response to what the entrepreneur sees an untapped or untaken opportunities.

– Underlined the importance of mgt and leadership, and able to respond to change.

Continue…• Schultz (1980): ( a pioneer of human capital theory)

– In a dynamic economy, human attitudes, behaviours, skills & knowledge are important elements to create wealth & good values.

• Carson (1982): – Entrepreneur is someone who is good at making decisions, good

at utilising scarce resources & not everyone can be entrepreneur. – Entrepreneur must proficient in all aspects of decision making. – The possession of imagination and foresight as an added

ADVANTAGE.

Continue….

• Kets de Vries (1996) :• Entrepreneur as creator of risk than a taker, since

he often use someone else’s capital.• However, even if the entrepreneur does not bear

most of financial risk in business, at an early stage exposed to a considerable amount of social and psychological risks (when the risk of failure is high at start-up stage).

• Bolton & Thompson: See entrepreneur as an individual who habitually creates & innovates to build s/thing of values from opportunity he has identified.


Entrepreneurship Education in Malaysia

• The role of government and private agencies in the advancement of education and entrepreneurship training in formal schools, colleges and universities.

• In Malaysia in particular, interest to policy makers in providing small and medium enterprises (SMEs) has increased since the establishment of the Ministry of Entrepreneur and Cooperative Development (MECD), Ministry of Science, Technology and Innovation (MOSTI), Majlis Amanah Rakyat (MARA), Ministry of Youth and Sports , Production Association of Malaysia (FMM), Malaysia Business Council (DPM), SIRIM, Entrepreneur capital Nasional Berhad (PUNB), Bank Pembangunan Malaysia and various other parties.

• Cultivate entrepreneurship is through the introduction of entrepreneurship programs at both levels of schools and universities.

• Many universities have been offering courses on entrepreneurship or small and medium businesses.



• To promote effective entrepreneurship education at institutions of higher education, several challenges need to be implemented.

1. Encourage entrepreneurs or small and medium businesses in the entrepreneurial process in educational institutions to become role models and provide opportunities for students and lecturers to see the real situation.

2. Provide opportunities for lecturers and staff involved in entrepreneurship, making mistakes, through experiments, given the time and schedule flexibility and creates an uncertain situation (uncertainty).

3. Establish a mechanism for students who have no entrepreneurial background to assist entrepreneurs or small and medium businesses around the place of learning for action learning.



4. Encouraging learning environment that is less rigid structure as well as use of informal channels of communication.

5. Establish a higher education institution that provides awards to students and lecturers by the decision, creativity and individual initiative.

Entrepreneurship from Islamic Perspectives:

• Definition• Entrepreneurship can be defined as “any business activities carried out

by the individual in order to produce product or services in accordance to syariah (Islamic law)”

• The concept of syumul (integrated; achieving success in this world as well as achieving success thereafter).

• Business activity is also a religious activity. This means entrepreneurship is not separated or isolated from the life thereafter (akhirat) where people will be judged rewarded or punished.

• Therefore, entrepreneurship falls within the system of Islam (Islamic faith, law, moral & ethics).

Entrepreneurship from Islamic Perspectives

• Islam encourages entrepreneurship activities as the way to derive an income.

• Prophet Muhammad (saw) mentioned that 9/10 of sources of rezeki (incomes) can be derived or generated from business activities.

• With good intention, entrepreneurial activity is considered as an IBADAT, will be rewarded by Allah because business activities generate incomes that can be used by entrepreneur himself & his family.

• By offering products or services to the community (customers), an entrepreneur is also considered to fulfill a fardhu kifayah (fulfilling one’s obligations to the community)


An entrepreneurial as a branch of Jihad and Amal Soleh

• Considered as jihad fi sabilillah. • Through entrepreneurship, entrepreneurs has

opportunity to increase good deeds. Among the things that can be deemed as good deeds in the field of entrepreneurship are:

1. Creating products that can be enjoyed long lives so hereditary. For instance, the creation of vehicles, machinery and equipment

2. Market products more efficiently and at full effectiveness, and cost by facilitating the extension of benefits to as many users as possible. For instance, retail outlets and supermarkets.

3. Generate employment and livelihood to its members and their dependents.

4. Opportunities for career development and continuing to increase revenue for those involved.


An entrepreneurial as a branch of Jihad and Amal Soleh

5. Improving quality of life so life becomes more perfect. 6. Strengthen the social and economic status and enhance the dignity of their

race, religion and country. 7. Strengthen national economy. 8. Build Khairun Ummah..


Guidelines of Entrepreneurship in the Islamic

1) Doing what he was told

Entrepreneurs still have to perform the obligatory practices such as prayer, fasting and so forth. Despite the busy in business, the practice must not be abandoned.

2. Avoiding what is prohibited

The practice is forbidden by Islam such as riba and gharar be avoided because these practices cause harm and oppress others.

3. Applying the properties of good • Someone who wants to make the entrepreneurial nature of worship

should adopt "attributes" and away from nature "mahmudah" in all matters.

4. Planning and business strategy • Entrepreneurs must have a thorough strategic planning and a strategy

that is not contrary to the principles of Islam.


Guidelines of Entrepreneurship in the Islamic

5. Understand the tenets of business

• Entrepreneurs need to equip themselves with knowledge relating to muamalah law for entrepreneurial activity is carried out not in conflict with the muamalah rules of Islam.


Conclusion

• The concept of entrepreneur and entrepreneurship to bring a definition and a very broad perspective.

• The concept of entrepreneurship and entrepreneurs are a vast field of interpretation according to different perspectives and views of business leaders.

Chapter 1

Documents

entreprepreneurial

mathivannan

achieving

medium businesses

economic activities

provide opportunities

historical

entrepreneurial