An entrepreneur is one who takes risk to start a business or other venture, or to buy and assume the management of a company. The word “entrepreneur” comes from the French word that meant to undertake or take on some task, knowing the risks and rewards that are possible.
In the dictionary, the base word of entrepreneurship refers to someone who manages and organizes, “usually with considerable initiative and risk.” An entrepreneur may simply be someone who hires labor to do a job, but this is usually applied to a person who hires as a contractor. The inherent risk and reward are still present.
A professor at West Virginia University, Russell S. Sobel, has devoted considerable time to the concept of entrepreneurship. He bases his work on the original meaning of the word “entrepreneur” so that it is clear the individual means to do something in the world of business. Beyond that this person must also be willing to take personal risk, usually financial, to work toward the objective. In this sense, a person working for a guaranteed salary, however independent, is not an entrepreneur.
Others insist that a true entrepreneur adds the element of innovation into the economy, whether it is in the form of a product or invention that is truly new, or just a new way of doing something in a traditional system. This may be the actual basis for entrepreneurship, the trait and behavior that someone displays in pursuing the goal. Sobel includes references to actions of a disruptive nature as indicative of entrepreneurship.
For instance, according to these guidelines, it couldn’t be said that the manager of a large corporation is an entrepreneur because his daily decisions focus on maintaining an existing system. There is little risk in this, according to the strict definition of “entrepreneur.”
What Sobel and other researchers have done that takes the subject beyond the basic idea of a risk-taking individual is to look at what pushes a person to the point of entrepreneurship. What factors in an individual’s life, along with factors in society, make a person want to engage in disruptive behavior?
Hundreds of pages of information show that the last two decades of the 20th century and the first few years of the 21st century have been full of evidence of entrepreneurship. The question is: Why?
In an interesting note, several academics have pointed to such evidence as high tax rates making self-employment likely. The studies indicate that the high tax rates on regular income encourage people to work on their own, starting their own businesses to evade taxes or claim more of their expenses on tax returns.
In this scenario, individuals who may not want to be entrepreneurs take on the risks in hopes of reaping some of the rewards. Yet they may not possess many of the personality traits that most would assign to a risk-taking individual. The studies also show, curiously, that available funding from an outside source does not necessarily lead to more entrepreneurship.
The opposite seems to be true. Funding follows new ideas and creativity. Funding does not create entrepreneurs.