Entrepreneurship

Entrepreneurship can be defined as the practice of starting a business or “breathing life” into an existing business. One can do so by exploring and pursuing new business initiatives that have the potential to make the organization grow.

Basic Categories

Although many do not attempt to distinguish the different types of entrepreneurs, Webster (1977) classified the title into five different categories. He believed that the distinctions between the different categories allowed one to understand the different terminology in the field and practice. His five different categories of entrepreneur included the following:

• The Cantillon Entrepreneur. Richard Cantillon introduced the term entrepreneur in the early 18th century to denote a person who is treated as one of the four factors of production (i.e., land, labor, capital, and the entrepreneur). The entrepreneur is considered the catalyst in the role of innovator, and is responsible for fueling growth in a capitalist economy. Entrepreneurs can be successful and make a profit when they have the ability to create an opportunity where they have a temporary monopoly to change market products and processes before the competition has an opportunity to dilute industry profits. Many economists do not view the entrepreneur as a real person. Rather, the entrepreneur is seen as a “silent theoretical entity that makes rational [Page 600]decisions, strives for profit maximization as defined by the economists, and assumes managerial and other uninsurable risks in exchange for profits.”
• The Industry Maker. Traditional management research views the entrepreneur as an industry maker, or someone who builds the nation's economic system, is hard-working and willing to take risks, and invests personal assets. According to this school of thought, the entrepreneur establishes the foundation for an organization, and then builds it into an industry leader.
• The Administrative Entrepreneur. The entrepreneur role is viewed as an executive who establishes a new company, or a reorganization of an existing corporation, and becomes a permanent leader of the management team. Although there are similarities, there is a distinct difference between an industry maker and an administrative entrepreneur. Administrative entrepreneurs are usually associated with an individual organization (e.g., Henry Ford); whereas industry makers are usually considered as manipulators (e.g., Jack Welch) of an entire industry or of a large segment of an industry.
• The Small Business Owner/Operator. During Webster's time, small business owners were perceived to be the local merchants, and tied predominantly to the retail and wholesale industry. Many scholars believed that these vendors were limited in scope in regard to sales, geographical outreach, and profit potential. However, technology, such as the internet, has allowed service businesses as well as retail businesses to reach an international market.
• The Independent Entrepreneur. An individual who creates ventures from scratch, and does not generally commit to long-term managerial responsibilities to one venture. These individuals tend to be very creative and get a thrill with developing the business, and they tend to be loners.

Current Categories

All five types can be seen in the system, but they have different roles. Webster's work was written in the 1970s and times have changed. As noted with the small business owner category, the increase in technology and globalization have changed the way that business is conducted as well as how entrepreneurs are categorized. Allen's categories (2006) are reflective of how business is conducted in the 21st century, and the new categories include:

• The Home-Based Entrepreneur. According to the American Association of Home Based Businesses, more than 24 million people operate home based businesses. Although many of these businesses start out as sole proprietors, many have grown to the point that they can compete against large, well-known businesses. Technology has made it possible for businesses to operate from any location, and home-based businesses are able to tap into resources via the internet. Home-based businesses are usually the starting point for many businesses.
• The Cyber Entrepreneur. This type of entrepreneur enjoys the fact that he or she is able to run a full fledged business without a brick-and-mor-tar location. Cyber entrepreneurs are able to process all of their business transactions with customers, suppliers, and strategic partners over the internet. In addition, their businesses tend to be digital products and services that do not require a physical infrastructure such as a warehouse.
• The Serial Entrepreneur. These entrepreneurs enjoy creating businesses, but have a desire to move on when the business is up and running. They are motivated by the hype of the prelaunch and start-up phases of the business, but do not have a desire to handle management responsibilities.
• The Traditional Entrepreneur. Traditional entrepreneurs are classic entrepreneurs. They start brick-and-mortar businesses and stick with them as they begin to prosper. Traditional entrepreneurs will be around as long as there is a need to build sustainable businesses, especially in industries such as food services, manufacturing, and retail.
• The Nonprofit Entrepreneur. Nonprofit entrepreneurs have a passion for work that involves socially responsible themes such as education, religious, and charitable initiatives. Many seek their 501(c) status so that they can solicit funding [Page 601]and donations from organizations and individuals who believe in the mission. Their businesses are allowed to make a profit as long as the profits are used for business purposes and not distributed to the owners of the company.
• The Corporate Venturer. Corporate venturers are individuals who seek out new ventures while working within established large organizations. Organizations create skunk works so that they have a unit to explore potential opportunities. Skunk works are autonomous groups that are given the mandate to find and develop new products for a company that may be outside of the organization's core competencies. However, many have found this a difficult task due to the bureaucratic structure of many large organizations. In order to be a successful corporate venturer, it is important that the following factors are present: senior management commitment; corporate interoperability, meaning that the work environment must support collaboration and provide resources; clearly defined stages and metrics so that the organization can decide whether or not to continue to pursue the initiatives; a high-performance work team; and finally, a spirit of entrepreneurship. Although success is the goal, failures may occur. Organizations must support the team as they explore the opportunities, even when efforts are failures.

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