Entrepreneurship and innovative business have become very fashionable terms over the past decade. When we use words so frequently and in such varying contexts, “semantic satiation” occurs – causing the words’ meanings to fade like an inflating currency.
The reason terms such as entrepreneur, start-up, and innovative business get so vaguely applied is that their definition is so inclusive; they account for a variety of business models that need only a loose relation to innovation.
So, in order to understand the essence of entrepreneurship, this article discusses the literature on the practice of entrepreneurship and what it takes to be a true entrepreneur.
What is the current definition of Entrepreneurship?
Ever since 1990, the definition of entrepreneurship has been “The combining of resources in novel ways, so as to create something of value” (Aldrich & Waldinger). A definition like this leaves plenty of wiggle room for inclusivity. All it requires is an innovative idea that creates a new commodity or leads to a new business solution.
How does Novelty relate to modern Entrepreneurship?
Take Foru-Solution for example (the hint is even in the name!). This group of Dutch entrepreneurs focuses on the environmental issue of oil spills, usually caused by large cargo ships. Such environment- and impact-based entrepreneurship is now increasingly common in modern business. Yet, the choice of Foru-Solutions to focus on oil spill issues and their application of unique technologies gives them a novel angle.
Leaning on the Dutch maritime legacy, Foru-Solution has utilized the existing approaches from sea-based knowledge hubs like Rotterdam to develop their new technology. This intelligence and technology Foru-Solution combines with a clear problem, namely the ever-increasing pollution of the oceans. The outcome is an environmental solution to oil spills, using existing resources in a novel way.
What used to be the definition of Entrepreneurship?
Before 1990, entrepreneurship was defined as “Someone who specializes in taking responsibility for, or making judgmental decisions that affect the location, form and the use of goods, resources and institutions” (Herbert et al. 1984).
In this definition of entrepreneurship, there’s no connection with the notion of innovation or novelty. Rather, we’re faced with a more practical definition – someone who manages resources in any fashion that relates to business and commerce. However, one key determinant that we can deduce from both definitions of entrepreneurship is that it demands specialization.
Why do Entrepreneurs have to Specialize?
In order to be successful in capitalism, entrepreneurs have to satisfy a need in the market. They can do this in two ways:
- 1. Specializing in providing the best solution for a need and hence excel above others who are trying the same thing.
- 2. Be the first one to provide a solution for a market need, which automatically makes them the (only) specialist.
Regardless of whether you’re refining an existing process or creating a new one, there has to be some tailored specialization. Otherwise, you will never earn the watermark of being an expert in your field, meaning that you’ll always be regarded as a hobbyist instead of a professional entrepreneur.
What responsibilities does entrepreneurship imply?
Entrepreneurship entails responsibility for the specialization process. One who follows under the management of others does not bestow the title of entrepreneur. Thus, a key characteristic is that entrepreneurs lead, manage others, and allocate resources with a plan for how to develop and progress. As we will see in the next section, this requires certain traits of character, favorable environmental factors, and key determinants.
Before pursuing this increasingly favorable career path, ask yourself honestly: Do you want the responsibility of managing valuable assets, human skillsets, and potentially risk the loss of your own resources? If so, you are well suited for the reward that is running your own business, managing your time as you choose, and carving out your own meaning and purpose in the business world.
What are the key determinants of successful entrepreneurship?
According to Verhuel et al. 2001, the following key factors influence the chances of success in the field of entrepreneurship.
- Psychological determinants
These include factors like motivation, character traits, and intelligence such as interpersonal intelligence. For a more detailed outline of how personal characteristics can influence entrepreneurial success, take a look at this piece that we wrote a few months ago.
- Sociological determinants
The background of entrepreneurs has been shown to make a great difference in their potential for success. Curious factors such as how many siblings one has, the religion one may or may not follow, and the culture a person is raised in have direct effects on the nature of someone’s entrepreneurial journey and the chances of success.
- Economic determinants
The impact of the economic climate and technological development, though obvious, has clear links to success. It is important to consider how the contemporary economic environment, the past, and the foreseeable future will influence your business venture.
- Demographic determinants
For entrepreneurs, it is highly important to consider the demographic composition of their market. When focusing on your market needs, the age, education, wealth, income and interests of your target audience largely determine what motivates them and whether or not they will want to align with your brand.
How does a niche entrepreneurship develop?
As Entrepreneurship has steadily gained worldwide appeal over the last fifty years, entrepreneurial studies have received more funding and the culture of entrepreneurship has become increasingly diverse. Take for example the novel field of Migrant Entrepreneurship (ME).
Humans are a migratory species and have a consistent propensity towards changing geographical locations as they are driven by a diverse range of motives (Massey et al. 1998).
What is Migrant Entrepreneurship (ME)?
ME refers to the self-regulated commerce activities of migrant people. Migrant entrepreneurship specializes in migrant products, migrant market customers, and indigenous migrant business strategies. In effect, ME functions as an empowering self-organizing field that improves the often weak socio-economic positions of migrant groups.
As ME demonstrates, entrepreneurship not only affects the person considered the “entrepreneur” but also has the power to impact whole societies and change them for the better. Moreover, as this business field develops it diversifies even further, which leads to even further specialization and causes new entrepreneurship sub-cultures to develop. This is an interesting secondary effect that comes with the increase in practicing entrepreneurs.
The importance of knowing yourself and your capabilities cannot be understated. Someone who rushes into a business venture without carefully considering whether it compliments their talents, the existing market and the predictions for the future will not have much chance of success.
This analysis sought to clear up some old myths about starting your own business by explaining what the research tells us about entrepreneurship. Along the way, we hope to have inspired some new angles that evolve this mode of business to the next level.