What Is Entrepreneurship?
The word entrepreneur derives from the French words entre, meaning “between,” and prendre, meaning “to take.” The word was originally used to describe people who “take on the risk” between buyers and sellers or who “undertake” a task such as starting a new venture. Inventors and entrepreneurs differ from each other. An inventor creates something new. An entrepreneur assembles and then integrates all the resources needed the money, the people, the business model, the strategy, and the risk-bearing ability to transform the invention into a viable business. Entrepreneurship is defined as the process by which individuals pursue opportunities without regard to resources they currently control. Others such as venture capitalist Fred Wilson define it more simply, seeing entrepreneurship as the art of turning an idea into a business.
In essence, an entrepreneur’s behavior finds him or her trying to identify opportunities and putting useful ideas into practice. The tasks called for by this behavior can be accomplished by either an individual or a group and typically require creativity, drive, and a willingness to take risks. Sam Hogg, the co-founder of GiftZip.com, exemplifies all these qualities. Hogg saw an opportunity to create a single place for people to shop for electronic gift cards, he risked his career by passing up alternatives to work on GiftZip.com full-time, and he’s now working hard to put GiftZip.com in a position to deliver a creative and useful service to its customers. In this book, we focus on entrepreneurship in the context of an entrepreneur or team of entrepreneurs launching a new business.
However, ongoing firms can also behave entrepreneurially. Typically, established firms with an entrepreneurial emphasis are proactive, innovative, and risk-taking. For example, Apple Inc. is widely recognized as a firm in which entrepreneurial behaviors are clearly evident. Steve Jobs is at the heart of Apple’s entrepreneurial culture. With his ability to persuade and motivate others’ imaginations, Jobs continues to inspire Apple’s employees as they develop innovative product after innovative product.
To consider the penetration Apple has with some of its innovations, think of how many of your friends own an iPhone, iPad, or Macintosh computer. Similarly, studying Facebook or Zynga’s ability to grow and succeed reveals a history of entrepreneurial behavior at multiple levels within the firms. In addition, many of the firms traded on the NASDAQ, such as Intuit, Amazon, Google, and Research In Motion are commonly thought of as entrepreneurial firms. The NASDAQ is the largest U.S. electronic stock market, with over 2,850 companies listed on the exchange. We want to note here that established firms with an orientation to acting entrepreneurially practice corporate entrepreneurship. All firms fall along a conceptual continuum that ranges from highly conservative to highly entrepreneurial.
The position of a firm on this continuum is referred to as its entrepreneurial intensity. As we mentioned previously, entrepreneurial firms are typically proactive innovators and are not averse to taking calculated risks. In contrast, conservative firms take a more “wait and see” posture, are less innovative, and are risk averse.
One of the most persuasive indications of entrepreneurship’s importance to an individual or to a firm is the degree of effort undertaken to behave in an entrepreneurial manner. Firms with higher entrepreneurial intensity regularly look for ways to cut bureaucracy. For example, Virgin Group, the large British conglomerate, works hard to keep its units small and instill in them an entrepreneurial spirit. Virgin is one of the most recognized brands in Britain and is involved in businesses as diverse as airlines and music. In the following quote, Sir Richard Branson, the founder, and CEO of Virgin describes how his company operates in an entrepreneurial manner:
Convention . . . dictates that “big is beautiful,” but every time one of our ventures gets too big we divide it up into smaller units. I go to the deputy managing director, the deputy sales director, and the deputy marketing director and say, “Congratulations. You’re now MD [managing director], sales director and marketing director of a new company.” Each time we’ve done this, the people involved haven’t had much more work to do, but necessarily they have a greater incentive to perform and a greater zeal for their work. The results for us have been terrific. By the time we sold Virgin Music, we had as many as 50 subsidiary record companies, and not one of them had more than 60 employees.