Lecture 1 Theories & Concepts of Entrepreneurship & Entrepreneurial Competencies

Session Objectives
At the end of the session, students should be able to: Understand the various theories and concepts entrepreneurship Have a deeper understanding of the discipline entrepreneurship Identify the key competencies and characteristics successful entrepreneurs
of of of

Definition of an Entrepreneur
Entrepreneur

comes from the French word of ENTREPRENDE, which refers to a person who undertakes to do a job (Cantillon, 1755).

An entrepreneur Is a factor in production (LandLabourCapitalEnterpreneurship) Who exercises initiative by organising a firm to take benefit of an opportunity The decision maker, who decides on what, how, and how much goods or services will be produced Who supplies risk capital as a risk taker, and monitors and controls the business activities

 Is usually a sole proprietor, a partner, or the one who owns

the majority of shares in a firm. individuals who actively form or lead their own businesses and nurture them for growth and prosperity. According to economist Joseph Alois Schumpeter (18831950), entrepreneurs are not necessarily motivated by profit but regard it as a standard for measuring achievement. They are not gamblers who leave much to chance; in contrast, entrepreneurs calculate their chances.

Entrepreneurial Resource
Assets that are mobilised by entrepreneurs in the process

of building a business. It includes sources of financing, e.g. ISOF/ESOF; or abstract resources such as knowledge, network whichever may contribute to a financial supports, publicity, or other benefits to a growing enterprise.

Types of Entrepreneur
1.

Serial entrepreneur

An entrepreneur who continuously comes up with new ideas and starts new businesses. come up with the idea and get things started, but then give responsibility to someone else and move on to a new idea and a new venture . This can be a good thing if the individual has lots of unique ideas and is the best one suited to get each one started, but can be a bad thing if the individual stops putting time into a company that needs his/her help, to try to move forward with a new idea that may or may not succeed.

2. Lifestyle entrepreneur - An individual that creates a business with the purpose of altering their personal lifestyle and not for the sole purpose of making profits. - Focus more on the life rewards provided to people that enjoy and have a passion for what they are doing. There is a possibility that the business will do particularity well since the individual has a passion for what he/she is doing.
3. Social entrepreneur - Independent business individuals that act as agents of change for the society. - They will work to improve innovative approaches to existing systems by seizing others have missed. - They work to develop sustainable solutions for the purpose of changing society for the better.

4. Corporate entrepreneur - It refers to a creation of or participation in new ventures by the existing corporate entity. - the need for the corporation to continuously refresh itself by using its own entrepreneurial culture. - Corporate entrepreneur= owner - Intra-preneur= manager (an employee who are expected to demonstrate sufficient entrepreneurial qualities)

Definition of Entrepreneurship
Entrepreneurship involves not only the process that leads

to the setting-up of a business entity but also the expansion and development of the business (going concern). Is a process of creating and expanding businesses that collectively form a force for national development and society prosperity. Is about exploiting entrepreneurial opportunity (only entrepreneur is able to see and seek opportunity and the courage to take risks in transforming the opportunity into a successful venture). The study of entrepreneurship is concerned with the entrepreneurial behavior, the dynamics of business set-up and expansion or development of an entrepreneurial organisation.

Development of Entrepreneurship Theories

Adam Smith (1776) An entrepreneur is a person who acts as agent in transforming demand into supply.

Jean Baptiste Say (1803) An entrepreneur is a person who shifts resources from an area of low productivity to higher productivity.

John Stuart Mill (1848) An entrepreneur is a prime mover in the private enterprise. The entrepreneur is the fourth factor of production.

Carl Menger (1871) The entrepreneur acts as an economic agent who transforms resources into products and services. These transformation process gives added value to the output.

Joseph Aloysius Schumpeter (1934) The entrepreneur is an innovator. The economy moves through leaps and bounds because of the innovations. This process is known as creative destruction

Alfred Marshall (1936) The process of entrepreneurship development is evolutionary. The entrepreneur is responsible for the evolution of sole proprietorships into a public company.

Ibnu Khaldun (Abdul Rahman Mohamed Khaldun) The entrepreneur is seen as a knowledgeable individual and is instrumental in the development of a city-state where enterprises emerge.

David C. McLelland (1951) The entrepreneur is a person with a high need for achievement. This need for achievement is the foundation of the entrepreneurship process.

Islamic Entrepreneurship
Discussion on Islamic entrepreneurship is based on the following main topics:
1. Integration 2. Human nature 3. Motivation

4. Islamic business and

entrepreneurs 5. Islamic economic system 6. Guidelines 7. Exemplary conducts

The Concept of Integration

Muslims are encouraged to get involve in business activities. (9/10 rezeki adalah dalam perniagaan Hadis Nabi)

Islam is a complete way of life. There is no separation between business and religion.

Islamic entrepreneurship is part of the way of life.

Human Nature
It is part of human In Islamic

nature to follow the teachings of their religion. In Islam, Muslims are required to fulfill two important duties, ibadah and khalifah.

entrepreneurship, Muslims are able to perform both duties. Maximizing profit is not the ultimate aim of Muslim entrepreneurs. Islamic Man versus Economic Man

Motivation
Following the sunnah of ambiya and the

companion of Rasulullah saw. Islamic entrepreneurship leads to the path of success both in this world and the hereafter. Success in Islam is not measured by the end result but also the means and ways of achieving them.

The type of success according to Al-Qurtubi

Halal (Rightful means of living) Jannah (Heaven) Qanaah (Satisfying)

Saadah (Tranquility/ harmony)

Taufiq (Guidance)

The level of success according to Al-Ghazali

Level of knowledge Level of repentance Level of challenges Level of obstacles Level of motivation Level of handicap Level of praise and thankfulness

Depends on the following:

Possession of Wealth
In Islam, possession of wealth is allowed based on the following principles:
Allah s.w.t. is the absolute owner of wealth Allah s.w.t. has created wealth in abundance

and sufficient for all Allah s.w.t. has created wealth for mankind Wealth is entrusted to mankind

Entrepreneurship as Ibadah
Muslim entrepreneurs involvement in business is

to fulfill an obligation known as fardhu kifayah Muslim entrepreneurs bear the responsibility to provide goods and services primarily to the Muslim community and to others

Islamic Entrepreneurship Model

Islam Propagates (Business Venture) Allah Prepared (Facilities) Islam Provides (Guidelines & Procedures)

Allah Promised (Rewards)

Islamic Economic System

Islamic entrepreneurship is part of the framework

of the Islamic Economic System. Islamic economic system involves:

Islamic banking Islamic insurance (takaful) Islamic capital markets

Islamic economic system is based on Islamic

jurisprudence.

Guidelines and Procedures

Islam has provided an extensive guidelines for

Islamic entrepreneurship activities. Among others:

The principle of buying and selling The permissible types of business The principle of zakat in business Business ethics and so on

Entrepreneurial Ethics
Prevent laziness Eradicate fear/shyness Search for legitimate ventures
Avoid unlawful sources of income Show gratitude and thankfulness Grow and develop wealth Diversify business ventures Avoid greediness

Entrepreneurial Ethics
Avoid malicious behavior Avoid squandering Avoid stinginess

Pay zakat and alms

Be trustworthy Pray consistently Tawakkal Patience Qanaah

Exemplary Conducts of Muslim Entrepreneurs

Business is secondary to the call of jihad (crusade) Never use power or influence for self-interest

Afraid of accumulated wealth

Leadership qualities in all aspects

Entrepreneurial process
The man

The business
The environment

* ENTREPRENEURSHIP PROCESS.docx - The more munificent (generous) the environment, the more the opportunities. The more the opportunities, the more the entrepreneurs and therefore the business. - Many people are able to see, but few are able to seize opportunities.

Definition of Entrepreneurial Competencies

The term entrepreneurial competencies refers to the key characteristics that should be possessed by successful entrepreneurs in order to perform entrepreneurial functions 7. Efficiency orientation effectively. 1. Initiative 8. Systematic planning 2. Sees and acts on 9. Problem solving opportunities 10. Self confidence 3. Persistence 11. Assertiveness 4. Information seeking /forcefulness 5. Concern for high 12. Persuasion quality of work 13. Use of influence 6. Commitment to work strategies contract

1. Initiative
The entrepreneur should be able to take actions

that go beyond his job requirements and to act faster. He is always ahead of others and able to lead the business or industry. Examples:
Does things before being asked or compelled by the

situation Acts to extend the business into new areas, products or services

2. Sees and acts on opportunities

An entrepreneur always searches for and takes

action on opportunities Examples:

Sees and acts on new business opportunities Seizes unusual opportunities to obtain financing,

equipment, land, workspace or assistance

3. Persistence
An entrepreneur is able to make repeated efforts

or to take different actions to overcome an obstacle that gets in the way of reaching his/her goals. Examples:
Takes repeated or different course of action to

overcome a problem or obstacle Never gives-up easily

4. Information seeking
An entrepreneur is able to take action on how

to get information in order to help the business to achieve its objectives or to solve business problems Examples:
Conducts personal research on a product or service Consults experts or relevant authorities to get

relevant information Personally undertakes market research, analysis or investigation Uses contacts or information networks to obtain useful information

5. Concern for high quality of work

An entrepreneur acts to do things that meet a

certain standard of excellence which gives him greater satisfaction Examples:

States a desire to produce or sell a top or better

quality product or service Compares own work or own companys work favorably to that of competitors High quality would ensure repeated purchase from existing customers and also an opportunity to get new customers

6. Commitment to work contract

An entrepreneur places the highest priority on

getting a job completed according to the deadline. Examples:

Makes personal sacrifices or expends extra

ordinary effort to complete a job Accepts full responsibility for problems in completing a job for customers Expresses a concern for satisfying the customer

7. Efficiency orientation
A successful entrepreneur always finds ways

to do things faster, using fewer resources, and keeps cost low. Examples:
Looks for or finds ways to do things faster or at

lesser cost Uses information or business management tools to improve efficiency Expresses concern about costs vs. benefits derives from any improvement, change or course of action

8. Systematic planning
An entrepreneur develops and uses logical,

step-by-step plans to reach his/her business goals Examples:

Plans by breaking a large task down into smaller

tasks Develops alternative plans which anticipate obstacles Evaluates among available alternatives Takes a logical and systematic approach in the planning activities

9. Problem solving
A successful entrepreneur identifies new and

potentially unique solution to solve business problems which could affect the business objectives. Examples:
Switches to an alternative strategy to overcome

problems Always generates new ideas or innovative solutions

10. Self-confidence
A successful entrepreneur has a strong belief in

oneself and own abilities. Examples:

Expresses confidence in own ability to complete a

task or meet a challenge Sticks with own judgment in the face of opposition or lack of success

11. Assertiveness
An entrepreneur confronts problems and

issues with others directly. Examples:

Confronts problems with others directly Tells subordinates what is expected of them Reprimands or disciplines those who failed to

perform as expected

12. Persuasion
An entrepreneur should be able to persuade

or influence others for mobilising resources, obtaining inputs, organizing productions and selling of his products or services. Examples:
Convince someone to buy a product Convince someone to provide financing Asserts own competence, reliability or other

personal or company qualities (testimony) Asserts strong confidence in own companys products or services

13. Use of influence strategies

An entrepreneur is able to make use of

influential people to reach his business goals. Examples:

Acts to develop business contacts Uses influential people as agents to accomplish

own objectives (getting contracts) Selectively limits the information given to others Uses permissible strategy to influence or persuade others

 Revision Questions.docx