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PERSPECTIVES TOWARDS THE DEFINITION OF ENTREPRENEURSHIP Various scholars (Schumpeter,1934; Knight, 1971; Kirzner, 1973) have over decades

CHAPTER 3: SOCIAL NETWORKS AND ENTREPRENEURSHIP

3.2 CONCEPTUALISING ENTREPRENEURSHIP

3.2.2 PERSPECTIVES TOWARDS THE DEFINITION OF ENTREPRENEURSHIP Various scholars (Schumpeter,1934; Knight, 1971; Kirzner, 1973) have over decades

2. The entrepreneurial assessment approach: This view focuses on the individual entrepreneurial development and his responsibility and accountability for conceptualizing and implementing a new venture. New businesses are created, developed and managed for growth and profitability through the entrepreneurial process (Timmons & Spinelli, 2007:51; Nieman &

Nieuwenhuizen, 2010:9; Venter et al., 2012:5). ECFs in South Africa can only fully emerge and expand if they invest in the development and growth of their businesses by investing in innovative activities.

3. The multidimensional approach: This view looks at interactions between the entrepreneur, the business and the environment and includes the extensive array of financial and non-financial resources that are necessary on an ongoing basis. This approach resonates with the central thesis of the current study. The study contends that when ECFs invest financially, by innovating and relying on other non-financial resources, such as social networks, which are value free, they will enjoy a better firm performance than their rivals.

Although there is no consensus on the definition of entrepreneur or its derivative, entrepreneurship, definitions of Joseph Schumpeter, Israel Kirzner and Frank Knight have become perhaps the most well-known to many scholars in recent decades. The next section reviews some of the most well-known perspectives on the definitions of entrepreneurship.

3.2.2 PERSPECTIVES TOWARDS THE DEFINITION OF ENTREPRENEURSHIP

3.2.2.1 Schumpeterian view of entrepreneurship

An early definition of entrepreneurship posited by Schumpeter (1934:9) defines entrepreneurship as an endeavour that is centrally characterized by innovation.

Schumpeter defines an entrepreneur as a person who can convert a new idea or invention into a successful innovation in the economy. As an innovator and industrial leader, an entrepreneur implements change within markets, identifies market opportunities (where others see chaos) and uses innovative approaches to exploit such opportunities (Antonites & van Vuuren, 2005:257; Timmons & Spinelli, 2007:79).

Schumpeter, like Kirzner (1973), does not see the entrepreneur as bearing a risk but rather engaging in a capitalist’s role of generating a profit.

Schumpeter’s conception of entrepreneurship, unlike Kirzner’s, disrupts the market equilibrium and is usually associated with firms and leadership. Schumpeter’s definition suggests that ECFs should not only be contend with the status quo but should be innovative in their markets in order to enjoy a competitive advantage over their rivals.

3.2.2.2 Knight’s view on entrepreneurship

Knight (1971:11) suggests that an entrepreneur assumes the uncertainty and risk associated with unique situations, and therefore must be able to make good decisions about these uncertainties in the economy. According to Knight’s definition, the function of an entrepreneur includes leadership in innovation, adaptation to change, and risk bearing in connection with unique situations (Iversen, Jørgensen, & Malchow-Moeller, 2008:25).

Knight (1971) links entrepreneurship to businesses, and in his conception, like Schumpeter’s, entrepreneurship can lead to economic development. But Knight does not emphasize the contribution of entrepreneurship to economic development, a contribution widely appreciated by scholars (Gumede, 2004; Mutezo, 2005; Rogerson,

2008; Fatoki, 2011; Apulu, 2012), and only emphasizes good economic decision- making as an important role of entrepreneurs.

3.2.2.3 Kirzner’s view on entrepreneurship

According to Kirzner (1973:8), the entrepreneur can earn profit by buying at low prices and selling at high prices (in another place or time); thus, his concept is regarded as an arbitrage theory of entrepreneurship. For him, the essence of entrepreneurship is the ability to identify and exploit profit opportunities, without being deterred by the possibility of failure. Kirzner argues that capitalists bear risks of failure, however, the entrepreneur does not need to possess any capital.

In the context of emerging construction firms (ECFs), Kirzner’s definition places owner/

managers of ECFs as middlemen who only add up a mark-up to an original price and ultimately charge a customer a higher price. Knight’s definition in ECFs’ context suggests that management decision making, to collaborate and innovate or not for the purpose of this study, is more key than just being entrepreneurial. Table 3.1 below gives an indication of some of the common definitions of entrepreneurship extant literature offers.

Table 3-1: Some common definitions of entrepreneurship

Definition Author(s) Interpretation

Entrepreneurship is a process that results in innovations which cause changes in the economic system, thereby creating and enhancing value for both owners and society.

Timmons and Spinelli (2007:

79)

This definition takes a similar view to that of Schumpeter in that ECFs are to challenge the economic equilibrium by innovating and enjoying a better firm performance.

Entrepreneurship is a process through which production factors of natural resources, human resources and capital are combined so as to manufacture a good or offer a service in order to make a profit.

Strydom

(2008:7) This definition takes a view that in order for a business to be successful an entrepreneur must take an innovative stance of combining the four factors of production to create value.

Entrepreneurship is characterized as a way of thinking and reasoning and seizing opportunity by entrepreneurs to create goods and services for customers with the intention of making profit while bearing the inherent risk

Nieman and Nieuwenhuizen (2010:9)

The implication of this definition to ECFs is that of continuous assessment of ECFs’ market environments in order to identify opportunities.

Entrepreneurship is a process or an action-oriented management style which takes innovation and change as the focus of thinking and behaviour.

van Aardt et al.

(2011:6) This definition takes a similar view to that of Knight’s definition in that ECFs managerial decision to collaborate and innovate becomes vital.

Entrepreneurship is a tendency of profit- seeking individuals to harmonize personal characteristics with the opportunities and challenges of the environment; to acquire and control inputs and to find innovative ways of transforming inputs into goods and services that fulfil the needs of the society.

Dzansi and Hoeyi

(2014:18)

In ECFs’ context this implies that ECFs must find innovative means of providing their customers with goods and services whilst also enjoying profits.

From the definitions in Table 3.1 above, it is clear that an individual’s propensity to innovate remains the cornerstone of every entrepreneurial adventure. For the purpose of this study, entrepreneurship is defined as an entrepreneur’s deliberate process of creating an innovative economic organisation/network of organisations for the purpose of making profit under conditions of risk and uncertainty and remaining competitively better than others. The lack of common definitions of entrepreneurship in literature seems not to be the only concern but the interchangeable use of the term with the concept of small businesses is another major concern despite small businesses being the product of entrepreneurship (Nieman &

Nieuwenhuizen, 2010:9; Venter et al., 2012:21). The next section will first distinguish

between the two constructs and thereafter discuss what constitutes a small business, its classification, its challenges and its contribution to the economy.