Textbook - Entrepreneurship: Concept and Functions, Class 11 | Entrepreneurship Class 11 - Commerce PDF Download

 Page 1


 
1 
UNIT 1 
Entrepreneurship: Concept and Functions 
Learning Objectives: 
After studying this lesson the students should be able to: 
 Understand  the concept of Entrepreneurship 
 Explain the functions of Entrepreneurship 
 Appreciate the need for Entrepreneurship in our economy 
 State the myths, advantages and disadvantages of Entrepreneurship  
 Describe the process of Entrepreneurship 
Case Study 
The Earth at this Innovator’s Feet 
Mansukhbhai Prajapati remoulded his family‘s struggling pottery 
business to produce the Mitticool range of ingenious earthenware, 
including a fridge that works without electricity. 
Reporting on the devastation and thousands of lives lost during the 2001 
earthquake in Gujarat, local newspapers had this intriguing headline 
describing the havoc wreaked at a potters‘ colony: =Garibonna fridge no 
bhookon‘ (pieces of the poor people?s fridge). Among the debris were 
the shards of hundreds of broken clay pitchers. 
That headline proved to be a game-changer for Wakaner- based potter, Mansukhbhai Prajapati, who 
literally picked up the pieces to begin afresh on a remarkably innovative idea — the Mitticool 
refrigerator, which is made of mud/clay and works without electricity. 
Originally from Morbi village in Rajkot, South Gujarat, Prajapati, a tenth-
standard dropout, began working at a tea-stall after his father discouraged him 
from entering the family‘s pottery business as the income was negligible. Later, he 
became a supervisor at a roof-tile manufacturing company and eventually, in 1989, 
returned to his passion for pottery by producing tavdi or tawa (frying pan) from 
clay. 
Although his father-in-law desired him to continue working at the roof-tile 
company, Prajapati‘s wife encouraged him to experiment with the family business all over again. 
It was this abiding interest in innovation that led him to develop the Mitticool water filter, way back 
in 1997. 
A lot of rigorous experimentation went into his work on the Mitticool refrigerator, which he launched 
in 2002. 
Page 2


 
1 
UNIT 1 
Entrepreneurship: Concept and Functions 
Learning Objectives: 
After studying this lesson the students should be able to: 
 Understand  the concept of Entrepreneurship 
 Explain the functions of Entrepreneurship 
 Appreciate the need for Entrepreneurship in our economy 
 State the myths, advantages and disadvantages of Entrepreneurship  
 Describe the process of Entrepreneurship 
Case Study 
The Earth at this Innovator’s Feet 
Mansukhbhai Prajapati remoulded his family‘s struggling pottery 
business to produce the Mitticool range of ingenious earthenware, 
including a fridge that works without electricity. 
Reporting on the devastation and thousands of lives lost during the 2001 
earthquake in Gujarat, local newspapers had this intriguing headline 
describing the havoc wreaked at a potters‘ colony: =Garibonna fridge no 
bhookon‘ (pieces of the poor people?s fridge). Among the debris were 
the shards of hundreds of broken clay pitchers. 
That headline proved to be a game-changer for Wakaner- based potter, Mansukhbhai Prajapati, who 
literally picked up the pieces to begin afresh on a remarkably innovative idea — the Mitticool 
refrigerator, which is made of mud/clay and works without electricity. 
Originally from Morbi village in Rajkot, South Gujarat, Prajapati, a tenth-
standard dropout, began working at a tea-stall after his father discouraged him 
from entering the family‘s pottery business as the income was negligible. Later, he 
became a supervisor at a roof-tile manufacturing company and eventually, in 1989, 
returned to his passion for pottery by producing tavdi or tawa (frying pan) from 
clay. 
Although his father-in-law desired him to continue working at the roof-tile 
company, Prajapati‘s wife encouraged him to experiment with the family business all over again. 
It was this abiding interest in innovation that led him to develop the Mitticool water filter, way back 
in 1997. 
A lot of rigorous experimentation went into his work on the Mitticool refrigerator, which he launched 
in 2002. 
 
2 
Besides a tank for cooling and storing 10 litres of water, the earthenware refrigerator has two 
compartments for storing 5 kg of vegetables, fruits and other food. 
It takes about seven days to make one Mitticool fridge. The special terracotta clay used is baked at 
1,200 degree Celsius to harden it. Like any clay pot used to cool water, the fridge too works by keeping 
the inside temperature 10 degrees lower than the outside. 
The natural cooling process keeps vegetables and fruits fresh for up to five days, and milk products for 
up to three days. 
Measuring 27 inches high and 15 inches wide, the fridge costs between Rs.3,000 to Rs.3,500. As it 
works without electricity, it is especially useful in villages that experience frequent power cuts. 
 
Entrepreneurship 
Entrepreneurship is a ship on a voyage that has on board, innovative and creative men and 
women, who like to do all those constructive things which nobody could lay his/her hands on 
before. They make a fortune out of ideas. Success never goes to their heads and each set back 
makes them bold enough to carve their future, aiming for excellence. Entrepreneurship is the 
freedom to do what one likes to do, with all its attendant profits and risks. Entrepreneurship is 
defined by results and not by attributes. It is a passion and all about commercial risks. A true 
entrepreneur uses not only his/her senses one to five, but six, seven, eight and nine. Six to nine 
do not really exist, but he/she develops them through his/her exposure, experience, failures 
and following the concept of listening to understanding.  
Are these people Entrepreneurs? 
Vegetable vendor, Newspaper distributor, Laundry service. 
To a large extent they are also risk takers. They may not be innovative, but they take risks up to their own 
potential and level. 
Entrepreneurship has evolved through the centuries and it has been viewed differently 
according to conditions prevailing in the world economy. The new-age business ventures are 
more idea–centric and not just product-based. The key to success in business is not just 
inheritance; it is creation of more wealth and the constant innovation, from the prevailing to the 
next best practices. Accordingly, a wide range of small and mid-sized businesses have emerged 
and gained popularity with the affluent middle class, determined to spend more, as well as 
derive value out of every rupee spent.  
Earlier, any business venture was product based – manufacturing of cars, production of dress material, 
watches etc. If we analyse carefully we find that there are many entrepreneurs found in these ventures, 
and there was a monopoly in certain areas. But as the economy grew, and companies started competing 
with one and another globally, we see a lot of idea-centric and need-based companies mushrooming all 
over the country. For instance, Mumbai‘s Dabbahwalaah, crèches, ready to eat food, instant noodles etc. 
Page 3


 
1 
UNIT 1 
Entrepreneurship: Concept and Functions 
Learning Objectives: 
After studying this lesson the students should be able to: 
 Understand  the concept of Entrepreneurship 
 Explain the functions of Entrepreneurship 
 Appreciate the need for Entrepreneurship in our economy 
 State the myths, advantages and disadvantages of Entrepreneurship  
 Describe the process of Entrepreneurship 
Case Study 
The Earth at this Innovator’s Feet 
Mansukhbhai Prajapati remoulded his family‘s struggling pottery 
business to produce the Mitticool range of ingenious earthenware, 
including a fridge that works without electricity. 
Reporting on the devastation and thousands of lives lost during the 2001 
earthquake in Gujarat, local newspapers had this intriguing headline 
describing the havoc wreaked at a potters‘ colony: =Garibonna fridge no 
bhookon‘ (pieces of the poor people?s fridge). Among the debris were 
the shards of hundreds of broken clay pitchers. 
That headline proved to be a game-changer for Wakaner- based potter, Mansukhbhai Prajapati, who 
literally picked up the pieces to begin afresh on a remarkably innovative idea — the Mitticool 
refrigerator, which is made of mud/clay and works without electricity. 
Originally from Morbi village in Rajkot, South Gujarat, Prajapati, a tenth-
standard dropout, began working at a tea-stall after his father discouraged him 
from entering the family‘s pottery business as the income was negligible. Later, he 
became a supervisor at a roof-tile manufacturing company and eventually, in 1989, 
returned to his passion for pottery by producing tavdi or tawa (frying pan) from 
clay. 
Although his father-in-law desired him to continue working at the roof-tile 
company, Prajapati‘s wife encouraged him to experiment with the family business all over again. 
It was this abiding interest in innovation that led him to develop the Mitticool water filter, way back 
in 1997. 
A lot of rigorous experimentation went into his work on the Mitticool refrigerator, which he launched 
in 2002. 
 
2 
Besides a tank for cooling and storing 10 litres of water, the earthenware refrigerator has two 
compartments for storing 5 kg of vegetables, fruits and other food. 
It takes about seven days to make one Mitticool fridge. The special terracotta clay used is baked at 
1,200 degree Celsius to harden it. Like any clay pot used to cool water, the fridge too works by keeping 
the inside temperature 10 degrees lower than the outside. 
The natural cooling process keeps vegetables and fruits fresh for up to five days, and milk products for 
up to three days. 
Measuring 27 inches high and 15 inches wide, the fridge costs between Rs.3,000 to Rs.3,500. As it 
works without electricity, it is especially useful in villages that experience frequent power cuts. 
 
Entrepreneurship 
Entrepreneurship is a ship on a voyage that has on board, innovative and creative men and 
women, who like to do all those constructive things which nobody could lay his/her hands on 
before. They make a fortune out of ideas. Success never goes to their heads and each set back 
makes them bold enough to carve their future, aiming for excellence. Entrepreneurship is the 
freedom to do what one likes to do, with all its attendant profits and risks. Entrepreneurship is 
defined by results and not by attributes. It is a passion and all about commercial risks. A true 
entrepreneur uses not only his/her senses one to five, but six, seven, eight and nine. Six to nine 
do not really exist, but he/she develops them through his/her exposure, experience, failures 
and following the concept of listening to understanding.  
Are these people Entrepreneurs? 
Vegetable vendor, Newspaper distributor, Laundry service. 
To a large extent they are also risk takers. They may not be innovative, but they take risks up to their own 
potential and level. 
Entrepreneurship has evolved through the centuries and it has been viewed differently 
according to conditions prevailing in the world economy. The new-age business ventures are 
more idea–centric and not just product-based. The key to success in business is not just 
inheritance; it is creation of more wealth and the constant innovation, from the prevailing to the 
next best practices. Accordingly, a wide range of small and mid-sized businesses have emerged 
and gained popularity with the affluent middle class, determined to spend more, as well as 
derive value out of every rupee spent.  
Earlier, any business venture was product based – manufacturing of cars, production of dress material, 
watches etc. If we analyse carefully we find that there are many entrepreneurs found in these ventures, 
and there was a monopoly in certain areas. But as the economy grew, and companies started competing 
with one and another globally, we see a lot of idea-centric and need-based companies mushrooming all 
over the country. For instance, Mumbai‘s Dabbahwalaah, crèches, ready to eat food, instant noodles etc. 
 
3 
The Concept of Entrepreneurship 
Entrepreneur   Entrepreneurship   Enterprise 
 
         
  Person     Process or action    Outcome 
  (Subject)    (Verb)    (Object) 
Concept of Entrepreneur 
An entrepreneur is a person responsible for setting up a business or an enterprise. He has the 
initiative, skill for innovation and who looks for high achievements. He is a catalytic agent of 
change and works for the good of people. He puts up new green field projects that create 
wealth, opens up many employment opportunities and leads to growth of other sectors. 
ENTREPRENEUR is a person who: 
 Develops and owns his own enterprise. 
 Is a moderate risk taker and works under uncertainty for achieving the goal. 
 Is innovative. 
 Is a persuader of deviant pursuits. 
 Reflects a strong urge to be independent. 
 Persistently tries to do something better. 
 Is dissatisfied with routine activities. 
 Is prepared to withstand the hard life. 
 Is determined, but patient. 
 Exhibits a sense of leadership. 
 Exhibits a sense of competitiveness. 
 Takes personal responsibility. 
 Is oriented towards the future. 
 Tends to persist in the face of adversity 
An entrepreneur is a person who starts an enterprise and converts a situation into opportunity. 
He/she searches for change and responds to it. A number of definitions have been given of an 
entrepreneur. The economists view him/her as the fourth factor of production, along with land 
labour and capital. 
Sociologists feel that certain communities and cultures promote entrepreneurship; for example, 
in India, we say that particular communities are very enterprising. Still others feel that 
entrepreneurs are innovators who come up with new ideas for products, markets or techniques. 
Page 4


 
1 
UNIT 1 
Entrepreneurship: Concept and Functions 
Learning Objectives: 
After studying this lesson the students should be able to: 
 Understand  the concept of Entrepreneurship 
 Explain the functions of Entrepreneurship 
 Appreciate the need for Entrepreneurship in our economy 
 State the myths, advantages and disadvantages of Entrepreneurship  
 Describe the process of Entrepreneurship 
Case Study 
The Earth at this Innovator’s Feet 
Mansukhbhai Prajapati remoulded his family‘s struggling pottery 
business to produce the Mitticool range of ingenious earthenware, 
including a fridge that works without electricity. 
Reporting on the devastation and thousands of lives lost during the 2001 
earthquake in Gujarat, local newspapers had this intriguing headline 
describing the havoc wreaked at a potters‘ colony: =Garibonna fridge no 
bhookon‘ (pieces of the poor people?s fridge). Among the debris were 
the shards of hundreds of broken clay pitchers. 
That headline proved to be a game-changer for Wakaner- based potter, Mansukhbhai Prajapati, who 
literally picked up the pieces to begin afresh on a remarkably innovative idea — the Mitticool 
refrigerator, which is made of mud/clay and works without electricity. 
Originally from Morbi village in Rajkot, South Gujarat, Prajapati, a tenth-
standard dropout, began working at a tea-stall after his father discouraged him 
from entering the family‘s pottery business as the income was negligible. Later, he 
became a supervisor at a roof-tile manufacturing company and eventually, in 1989, 
returned to his passion for pottery by producing tavdi or tawa (frying pan) from 
clay. 
Although his father-in-law desired him to continue working at the roof-tile 
company, Prajapati‘s wife encouraged him to experiment with the family business all over again. 
It was this abiding interest in innovation that led him to develop the Mitticool water filter, way back 
in 1997. 
A lot of rigorous experimentation went into his work on the Mitticool refrigerator, which he launched 
in 2002. 
 
2 
Besides a tank for cooling and storing 10 litres of water, the earthenware refrigerator has two 
compartments for storing 5 kg of vegetables, fruits and other food. 
It takes about seven days to make one Mitticool fridge. The special terracotta clay used is baked at 
1,200 degree Celsius to harden it. Like any clay pot used to cool water, the fridge too works by keeping 
the inside temperature 10 degrees lower than the outside. 
The natural cooling process keeps vegetables and fruits fresh for up to five days, and milk products for 
up to three days. 
Measuring 27 inches high and 15 inches wide, the fridge costs between Rs.3,000 to Rs.3,500. As it 
works without electricity, it is especially useful in villages that experience frequent power cuts. 
 
Entrepreneurship 
Entrepreneurship is a ship on a voyage that has on board, innovative and creative men and 
women, who like to do all those constructive things which nobody could lay his/her hands on 
before. They make a fortune out of ideas. Success never goes to their heads and each set back 
makes them bold enough to carve their future, aiming for excellence. Entrepreneurship is the 
freedom to do what one likes to do, with all its attendant profits and risks. Entrepreneurship is 
defined by results and not by attributes. It is a passion and all about commercial risks. A true 
entrepreneur uses not only his/her senses one to five, but six, seven, eight and nine. Six to nine 
do not really exist, but he/she develops them through his/her exposure, experience, failures 
and following the concept of listening to understanding.  
Are these people Entrepreneurs? 
Vegetable vendor, Newspaper distributor, Laundry service. 
To a large extent they are also risk takers. They may not be innovative, but they take risks up to their own 
potential and level. 
Entrepreneurship has evolved through the centuries and it has been viewed differently 
according to conditions prevailing in the world economy. The new-age business ventures are 
more idea–centric and not just product-based. The key to success in business is not just 
inheritance; it is creation of more wealth and the constant innovation, from the prevailing to the 
next best practices. Accordingly, a wide range of small and mid-sized businesses have emerged 
and gained popularity with the affluent middle class, determined to spend more, as well as 
derive value out of every rupee spent.  
Earlier, any business venture was product based – manufacturing of cars, production of dress material, 
watches etc. If we analyse carefully we find that there are many entrepreneurs found in these ventures, 
and there was a monopoly in certain areas. But as the economy grew, and companies started competing 
with one and another globally, we see a lot of idea-centric and need-based companies mushrooming all 
over the country. For instance, Mumbai‘s Dabbahwalaah, crèches, ready to eat food, instant noodles etc. 
 
3 
The Concept of Entrepreneurship 
Entrepreneur   Entrepreneurship   Enterprise 
 
         
  Person     Process or action    Outcome 
  (Subject)    (Verb)    (Object) 
Concept of Entrepreneur 
An entrepreneur is a person responsible for setting up a business or an enterprise. He has the 
initiative, skill for innovation and who looks for high achievements. He is a catalytic agent of 
change and works for the good of people. He puts up new green field projects that create 
wealth, opens up many employment opportunities and leads to growth of other sectors. 
ENTREPRENEUR is a person who: 
 Develops and owns his own enterprise. 
 Is a moderate risk taker and works under uncertainty for achieving the goal. 
 Is innovative. 
 Is a persuader of deviant pursuits. 
 Reflects a strong urge to be independent. 
 Persistently tries to do something better. 
 Is dissatisfied with routine activities. 
 Is prepared to withstand the hard life. 
 Is determined, but patient. 
 Exhibits a sense of leadership. 
 Exhibits a sense of competitiveness. 
 Takes personal responsibility. 
 Is oriented towards the future. 
 Tends to persist in the face of adversity 
An entrepreneur is a person who starts an enterprise and converts a situation into opportunity. 
He/she searches for change and responds to it. A number of definitions have been given of an 
entrepreneur. The economists view him/her as the fourth factor of production, along with land 
labour and capital. 
Sociologists feel that certain communities and cultures promote entrepreneurship; for example, 
in India, we say that particular communities are very enterprising. Still others feel that 
entrepreneurs are innovators who come up with new ideas for products, markets or techniques. 
 
4 
To put it very simply, an entrepreneur is someone who perceives opportunity, organizes 
resources needed for exploiting that opportunity and exploits it. Computers, mobile phones, 
washing machines, ATMs, credit cards, courier services, and ready-to-eat foods, are all 
examples of entrepreneurial ideas that got converted into products or services. 
The word „entrepreneur? is derived from the French word „entreprendre? which means „to 
undertake? i.e. individuals who undertake the risk of a new enterprise. The word 
„entrepreneur?, therefore, first appeared in the French language in the beginning of the sixteenth 
century. The word was coined by Richard Cantillon, an Irishman, living in France.  
Definitions of an entrepreneur 
Richard Cantillon: As a person, who pays a certain price to a product to resell it at an uncertain price, 
thereby making decisions about obtaining and using the resources while consequently admitting the risk 
of enterprise. 
Adam Smith: An individual, who undertakes the formation of an organization for commercial purposes 
by recognizing the potential demand for goods and services, and there by acts as an economic agent and 
transforms demand into supply. 
Joseph Schumpter: Entrepreneurs are innovators, who use the process of entrepreneurship to shatter the 
status quo of the existing products and services, to set new products, new services. He describes 
entrepreneurs as innovators. 
Peter F. Drucker: An entrepreneur is one who always searches for changes, responds to it and exploits it 
as an opportunity. He believes in increasing the value and consumer satisfaction. Thus, a professional 
manager who mobilises resources and allocates them to make a commercial gain from an opportunity, is 
also called an entrepreneur. 
To sum up, entrepreneurship may be defined as a systematic innovation which consists of the 
purposeful and organised search for changes, and a systematic analysis of the opportunities that 
such change might offer for economic and social transformation. 
Enterprise 
An entrepreneur is a person who starts an enterprise. The process of creation is called 
entrepreneurship. The entrepreneur is the actor and entrepreneurship is the act. The outcome of 
the actor and the act, is called the enterprise. An enterprise is the business organization that is 
formed and which provides goods and services, creates jobs, contributes to national income, 
exports and contributes to the overall economic development.  
Entrepreneur versus entrepreneurship 
The term „entrepreneur? is often used interchangeably with „entrepreneurship?? but, 
conceptually, they are different, yet they are just like the two sides of a coin. Both the terms are 
co-related. 
An entrepreneur is a person who bears the risks, unites various factors of production and 
carries out creative innovations. He/she is an individual or one of a group of individuals who 
Page 5


 
1 
UNIT 1 
Entrepreneurship: Concept and Functions 
Learning Objectives: 
After studying this lesson the students should be able to: 
 Understand  the concept of Entrepreneurship 
 Explain the functions of Entrepreneurship 
 Appreciate the need for Entrepreneurship in our economy 
 State the myths, advantages and disadvantages of Entrepreneurship  
 Describe the process of Entrepreneurship 
Case Study 
The Earth at this Innovator’s Feet 
Mansukhbhai Prajapati remoulded his family‘s struggling pottery 
business to produce the Mitticool range of ingenious earthenware, 
including a fridge that works without electricity. 
Reporting on the devastation and thousands of lives lost during the 2001 
earthquake in Gujarat, local newspapers had this intriguing headline 
describing the havoc wreaked at a potters‘ colony: =Garibonna fridge no 
bhookon‘ (pieces of the poor people?s fridge). Among the debris were 
the shards of hundreds of broken clay pitchers. 
That headline proved to be a game-changer for Wakaner- based potter, Mansukhbhai Prajapati, who 
literally picked up the pieces to begin afresh on a remarkably innovative idea — the Mitticool 
refrigerator, which is made of mud/clay and works without electricity. 
Originally from Morbi village in Rajkot, South Gujarat, Prajapati, a tenth-
standard dropout, began working at a tea-stall after his father discouraged him 
from entering the family‘s pottery business as the income was negligible. Later, he 
became a supervisor at a roof-tile manufacturing company and eventually, in 1989, 
returned to his passion for pottery by producing tavdi or tawa (frying pan) from 
clay. 
Although his father-in-law desired him to continue working at the roof-tile 
company, Prajapati‘s wife encouraged him to experiment with the family business all over again. 
It was this abiding interest in innovation that led him to develop the Mitticool water filter, way back 
in 1997. 
A lot of rigorous experimentation went into his work on the Mitticool refrigerator, which he launched 
in 2002. 
 
2 
Besides a tank for cooling and storing 10 litres of water, the earthenware refrigerator has two 
compartments for storing 5 kg of vegetables, fruits and other food. 
It takes about seven days to make one Mitticool fridge. The special terracotta clay used is baked at 
1,200 degree Celsius to harden it. Like any clay pot used to cool water, the fridge too works by keeping 
the inside temperature 10 degrees lower than the outside. 
The natural cooling process keeps vegetables and fruits fresh for up to five days, and milk products for 
up to three days. 
Measuring 27 inches high and 15 inches wide, the fridge costs between Rs.3,000 to Rs.3,500. As it 
works without electricity, it is especially useful in villages that experience frequent power cuts. 
 
Entrepreneurship 
Entrepreneurship is a ship on a voyage that has on board, innovative and creative men and 
women, who like to do all those constructive things which nobody could lay his/her hands on 
before. They make a fortune out of ideas. Success never goes to their heads and each set back 
makes them bold enough to carve their future, aiming for excellence. Entrepreneurship is the 
freedom to do what one likes to do, with all its attendant profits and risks. Entrepreneurship is 
defined by results and not by attributes. It is a passion and all about commercial risks. A true 
entrepreneur uses not only his/her senses one to five, but six, seven, eight and nine. Six to nine 
do not really exist, but he/she develops them through his/her exposure, experience, failures 
and following the concept of listening to understanding.  
Are these people Entrepreneurs? 
Vegetable vendor, Newspaper distributor, Laundry service. 
To a large extent they are also risk takers. They may not be innovative, but they take risks up to their own 
potential and level. 
Entrepreneurship has evolved through the centuries and it has been viewed differently 
according to conditions prevailing in the world economy. The new-age business ventures are 
more idea–centric and not just product-based. The key to success in business is not just 
inheritance; it is creation of more wealth and the constant innovation, from the prevailing to the 
next best practices. Accordingly, a wide range of small and mid-sized businesses have emerged 
and gained popularity with the affluent middle class, determined to spend more, as well as 
derive value out of every rupee spent.  
Earlier, any business venture was product based – manufacturing of cars, production of dress material, 
watches etc. If we analyse carefully we find that there are many entrepreneurs found in these ventures, 
and there was a monopoly in certain areas. But as the economy grew, and companies started competing 
with one and another globally, we see a lot of idea-centric and need-based companies mushrooming all 
over the country. For instance, Mumbai‘s Dabbahwalaah, crèches, ready to eat food, instant noodles etc. 
 
3 
The Concept of Entrepreneurship 
Entrepreneur   Entrepreneurship   Enterprise 
 
         
  Person     Process or action    Outcome 
  (Subject)    (Verb)    (Object) 
Concept of Entrepreneur 
An entrepreneur is a person responsible for setting up a business or an enterprise. He has the 
initiative, skill for innovation and who looks for high achievements. He is a catalytic agent of 
change and works for the good of people. He puts up new green field projects that create 
wealth, opens up many employment opportunities and leads to growth of other sectors. 
ENTREPRENEUR is a person who: 
 Develops and owns his own enterprise. 
 Is a moderate risk taker and works under uncertainty for achieving the goal. 
 Is innovative. 
 Is a persuader of deviant pursuits. 
 Reflects a strong urge to be independent. 
 Persistently tries to do something better. 
 Is dissatisfied with routine activities. 
 Is prepared to withstand the hard life. 
 Is determined, but patient. 
 Exhibits a sense of leadership. 
 Exhibits a sense of competitiveness. 
 Takes personal responsibility. 
 Is oriented towards the future. 
 Tends to persist in the face of adversity 
An entrepreneur is a person who starts an enterprise and converts a situation into opportunity. 
He/she searches for change and responds to it. A number of definitions have been given of an 
entrepreneur. The economists view him/her as the fourth factor of production, along with land 
labour and capital. 
Sociologists feel that certain communities and cultures promote entrepreneurship; for example, 
in India, we say that particular communities are very enterprising. Still others feel that 
entrepreneurs are innovators who come up with new ideas for products, markets or techniques. 
 
4 
To put it very simply, an entrepreneur is someone who perceives opportunity, organizes 
resources needed for exploiting that opportunity and exploits it. Computers, mobile phones, 
washing machines, ATMs, credit cards, courier services, and ready-to-eat foods, are all 
examples of entrepreneurial ideas that got converted into products or services. 
The word „entrepreneur? is derived from the French word „entreprendre? which means „to 
undertake? i.e. individuals who undertake the risk of a new enterprise. The word 
„entrepreneur?, therefore, first appeared in the French language in the beginning of the sixteenth 
century. The word was coined by Richard Cantillon, an Irishman, living in France.  
Definitions of an entrepreneur 
Richard Cantillon: As a person, who pays a certain price to a product to resell it at an uncertain price, 
thereby making decisions about obtaining and using the resources while consequently admitting the risk 
of enterprise. 
Adam Smith: An individual, who undertakes the formation of an organization for commercial purposes 
by recognizing the potential demand for goods and services, and there by acts as an economic agent and 
transforms demand into supply. 
Joseph Schumpter: Entrepreneurs are innovators, who use the process of entrepreneurship to shatter the 
status quo of the existing products and services, to set new products, new services. He describes 
entrepreneurs as innovators. 
Peter F. Drucker: An entrepreneur is one who always searches for changes, responds to it and exploits it 
as an opportunity. He believes in increasing the value and consumer satisfaction. Thus, a professional 
manager who mobilises resources and allocates them to make a commercial gain from an opportunity, is 
also called an entrepreneur. 
To sum up, entrepreneurship may be defined as a systematic innovation which consists of the 
purposeful and organised search for changes, and a systematic analysis of the opportunities that 
such change might offer for economic and social transformation. 
Enterprise 
An entrepreneur is a person who starts an enterprise. The process of creation is called 
entrepreneurship. The entrepreneur is the actor and entrepreneurship is the act. The outcome of 
the actor and the act, is called the enterprise. An enterprise is the business organization that is 
formed and which provides goods and services, creates jobs, contributes to national income, 
exports and contributes to the overall economic development.  
Entrepreneur versus entrepreneurship 
The term „entrepreneur? is often used interchangeably with „entrepreneurship?? but, 
conceptually, they are different, yet they are just like the two sides of a coin. Both the terms are 
co-related. 
An entrepreneur is a person who bears the risks, unites various factors of production and 
carries out creative innovations. He/she is an individual or one of a group of individuals who 
 
5 
try to create something new. He/she always attempting to bring about change in terms of factor 
proportions, which is known as innovation. 
On the contrary, entrepreneurship is the set of activities performed by an entrepreneur. It is 
process of identifying opportunities in the market place and marshalling the resources required 
to pursue these opportunities for long term gains. It is the attempt to create value.   
Functions of an Entrepreneur 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rajesh Marwaha and J. S. Mehandipur in their book “Entrepreneurship and Small Business?, 
have given a comprehensive classification of the functions of entrepreneurs. 
A.  Entrepreneurial functions 
 Innovation: 
 It is the basic function of an entrepreneur. As an innovator, the entrepreneur has to 
introduce new combinations of the means of production, new product, new market for a 
product and new sources of raw material. They introduce something new in any branch of 
economic activity. He/she foresees a potentially profitable opportunity and tries to exploit it. 
 Example: I-Pod, Smart phones, Induction cook top etc.  
Functions of an entrepreneur 
Entrepreneurial 
Functions 
 
Promotional 
Functions 
 
Managerial 
Functions 
Commercial 
Functions 
Innovation 
Risk-taking 
Organisation 
building 
Investigation of 
an Idea 
 
Planning 
Detailed 
investigation 
Assembling the 
requirements 
Production 
Leadership, Communication, 
Motivation, 
Directing 
Staffing 
Organising 
Financing the proposition 
Personnel 
Marketing 
Accounting 
Finance 
Co-ordination 
Controlling 
Motivation