It seems rather odd that after over 1,000 posts at this site I finally get around to a direct discussion on the definition of entrepreneurship. I have written about the definition of a small business, which is more of a bureaucratic designation than anything else, but I've never really tackled the term that is the basis of this blog site.
At first glance this should be straight forward. I teach entrepreneurship and I have been an entrepreneur. I can just look to the text books we use and my own experience and that should be that.
If we go way back to the French root of the word, entrepreneurship means "to undertake, to attempt, to try in hand, to contract for or to adventure."
Here is the definition that my co-author and I used in one of our academic papers recently:
A commonly accepted description of entrepreneurship is a process of identifying, evaluating, seizing an opportunity and bringing together the resources necessary for success.
In essence entrepreneurship describes a process of pursuing opportunity in the market.
For years we got stuck thinking about entrepreneurship as a type of person or even type of personality. But this really got us no where, because in reality entrepreneurs come in all types, particularly when we start to look at them around the world.
So once we focus on what entrepreneurs do it should be easy. But, there are two issues that creep in that cause confusion.
Entrepreneurship Becomes Generic.
Entrepreneurship has become sort of a generic term that describes all sorts of behaviors that involve being creative, being mischievous, being sneaky, breaking rules, not wanting to follow rules, and so forth. An example involving rules can be heard every day in large corporations. "I wish they would leave me alone. I am just being entrepreneurial." These people are not starting any businesses; they just use the term as cover for not wanting to follow corporate policy. I actually heard a criminal described on a newscast as being entrepreneurial because he was somewhat clever and creative in his crime. At least in American culture, the term entrepreneurship has become blurred into any one of a large collection of basically anti-social behaviors. But, I suspect from conversations I have had with friends and colleagues from around the world that is not uniquely an American issue. In some cultures they avoid the use of entrepreneur, because it has developed the connotation of a sleazy, cunning con-man.
This is what can happen when terms take on a more generic meaning. The term loses specificity and really begins to have no clear definition. Entrepreneurship has become a trendy term that can mean almost anything you want it to in many contexts.
No Clear Boundaries.
A real problem that even the definition that we used in our recent paper is that it does not help us, in a practical sense, tell us what entrepreneurship is not. It does not set any exclusionary boundaries. When I have tried to offer some suggestions for boundaries around what is and what it not an entrepreneur, I have ruffled some feathers. But that is what a blog is all about, so here we go.
1. The process of innovation that goes on in large companies is not entrepreneurship.
This flies in the face of what I wrote about in my first book, Organizational Entrepreneurship, in 1990. But, I have come to believe that entrepreneurship should be about what individuals do, not the collective strategy of corporations. This leads to me second boundary.
2. Entrepreneurship includes only privately held businesses.
An IPO is an event that takes a business out the realm of being an entrepreneurial venture. Once a business "goes public," everything changes. The culture will begin to change. The objectives will change. Once a business uses public funding, it begins to become a public good. It is no longer about an owner/operator running her business. The founding entrepreneur becomes a corporate executive following the wishes of the public shareholders of the business. As many entrepreneurs quickly learn, once their business went through an IPO it was no longer their business to be run based on their aspirations, their values and their goals. They became administrators of a business owned by others.
3. Not all privately held businesses are entrepreneurial ventures.
Succession to the next generation in a family business, an ESOP, or other internal ownership transfers from the founding entrepreneur to other internal owners takes these businesses out of the boundaries of entrepreneurship. On the other hand, I think that someone who buys an existing business as an outsider is an entrepreneur in that act. I know that creates a little fuzziness in my boundary at this point, but I have enough gray hair in my beard to get away with subtle inconsistencies. I am still sorting out the exact distinction here, but I know there is one.
Maybe I have been in an academic setting for too many years now. When I was an entrepreneur, I know that I couldn't have cared less about such issues. We were too busy trying to make payroll and get ahead in the market. But now that I am in my Ivory Tower, I find this kind of pondering rather interesting and even a little entertaining.
