,Chapter 1: The Nature and Development of Entrepreneurship
Entrepreneurs are the core and essence of any economy. Economic
development can be directly attributed to the level of entrepreneurial
activity, and entrepreneurial business ensure growth in the economy.
Examples of some successful South African entrepreneurs
include Ernest Oppenheimer, Pam Golding, Elon Musk and Sol
Kerzner.
Most entrepreneurial activity takes place in small, medium and micro
enterprises (SMME’s), which form 97.5% of all businesses in South
Africa. SMME’s generate 35% of the GDP, contribute 43% of the total
value of salaries and wages paid in South Africa, and employ 55% of all
formal private-sector employees.
The Development of the Entrepreneurship Theory
While the economists have associated entrepreneurship with innovation,
the behaviourists (which includes psychologists, psychoanalysts,
sociologists and other specialists in human behaviour) have
concentrated on the creative and intuitive characteristics of
entrepreneurship.
The Economists
→ The essence of entrepreneurship lies in the perception and
exploration of new opportunities in the realm of business. It always
has to do with bringing about a different use of national resources in
that they are withdrawn from their traditional employ and subjected
to new combinations.
The Behaviourists
→ An entrepreneur is someone who exercises control over production
that is not just for his personal consumption.
The explosion of the field of entrepreneurship can be illustrated through the
research trends and associated authors of the time period.
Explanation of Authors and
Period Perspective
Period Researchers
What Economic Cantillon,
1700-1950
entrepreneurs Perspective Say,
do Schumpeter
Who Behaviouri Weber,
1960-1980
entrepren st McClelland,
eurs are Perspectiv Rotter, De Vries
e
What Management
1980- Drucker,
entrepreneurs Science
Present do Perspective Mintzberg
Supports needed Social Science Gartner, Welsh,
1985-
by Perspective Bygrave, Reynold
Present
2
, entrepreneurs
Entrepreneurial
Entrepreneurs Timmons,
1990- activities and
hip Vesper,
Present competencies
Perspective Brockhaus
3
, Entrepreneur
→ An entrepreneur is a person who sees and opportunity in the
market, gathers resources and creates and grows a business
venture to meet these needs.
He or she bears the risk of the venture and is rewarded with profit
if it succeeds.
Entrepreneurship
→ Entrepreneurship is the emergence and growth of new businesses.
→ Entrepreneurship is also the process that causes changes in the
economic system through innovations of individuals who respond to
opportunities in the market, creating value for themselves and
society.
Small Business
→ A small business is any business that is independently owned and
operated, but is not dominant in its field and does not engage in
any new marketing or innovative practices.
→ The Small Business Amendment Act 26 of 2003 offers an official
definition of small business in South Africa, including qualitative
and quantitative criteria.
→ Qualitative criteria that relate to the ownership structure of the business
must:
▪ Be a separate and distinct business entity
▪ Not be part of a group of companies
▪ Include any subsidiaries and branches when measuring the
size
▪ Be managed by its owners
▪ Be a natural person, sole proprietorship, partnership
or a legal person, such as a close corporation or
company
→ Quantitative criteria classify small businesses into micro, small and
medium in respect of different sectors of the economy, by the following
guidelines:
▪ Total full-time paid employees
▪ Total annual turnover
▪ Total gross asset value (excluding fixed property)
→ Owners of small businesses are not necessarily interested in growth
as an objective, and often see themselves as successful when their
businesses are profitable.
Entrepreneurial Ventures
→ Entrepreneurial ventures are businesses in which the principal objectives
are profitability and growth.
→ Three characteristics distinguish the entrepreneurial venture from
small businesses:
• Innovation
• Potential for growth
• Strategic objectives (objectives in relation to market focuses)
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