Entrepreneurship and Innovation Management 214 Complete Numbered 1.

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. lOMoAR cPSD| 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 o 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 It always has to do with bringing about a different use of national resources in that they are withdrawn from their traditional employ and subjected to new combinations.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 o 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. Period Explanation of Period Perspective Authors and Researchers What entrepreneurs do Economic Perspective Cantillon, Say, Schumpeter Who entrepreneurs are Behaviourist Perspective Weber, McClelland, Rotter, De Vries 1980-Present What entrepreneurs do Management Science Perspective Drucker, Mintzberg 1985-Present Supports needed by entrepreneurs Social Science Perspective Gartner, Welsh, Bygrave, Reynold 1990-Present Entrepreneurial activities and competencies Entrepreneurship Perspective Timmons, Vesper, Brockhaus Entrepreneur o 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 o Entrepreneurship is the emergence and growth of new businesses. o 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 o 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. o The Small Business Amendment Act 26 of 2003 offers an official definition of small business in South Africa, including qualitative and quantitative criteria. o Qualitative criteria that relate to the ownership structure of the business must: ƒ Be a separate and distinct business entity ƒ Not be part of a group of companies ƒ Include any subsidiaries and branches when measuring the size ƒ Be managed by its owners ƒ Be a natural person, sole proprietorship, partnership or a legal person, such as a close corporation or company o Quantitative criteria classify small businesses into micro, small and medium in respect of different sectors of the economy, by the following guidelines: ƒ Total full-time paid employees ƒ Total annual turnover ƒ Total gross asset value (excluding fixed property) o 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 o Entrepreneurial ventures are businesses in which the