Download Theories & Concepts of Entrepreneurship

Theories & Concepts of
Entrepreneurship
Entrepreneurship
ETR3153
By: Wan Nurhamizah Wan Zakaria
Session Objectives
 At the end of the session, students should be able
to:
 Understand the various theories and concepts
of entrepreneurship
 Have a deeper understanding of the discipline
of entrepreneurship
Definition of an Entrepreneur
 “An entrepreneur is a person who
undertakes to do a job”. The term
entrepreneur originated from a French
word “entreprendre” was first coined by
Richard Cantillon (1755).
 In Malaysia, the term “usahawan” is used to
mean entrepreneur.
Definition of Entrepreneurship
• Entrepreneurship involves not only the process that
leads to the setting-up of a business entity but also
the expansion and development of an going
concern.
• The study of entrepreneurship is concerned with
the entrepreneurial behavior, the dynamics of
business set-up and expansion or development of
an entrepreneurial organization.
Development of
Entrepreneurship Theories
 Adam Smith (1776) – An entrepreneur is a person who
acts as agent in transforming demand into supply.
 Jean Baptiste Say (1803) – An entrepreneur is a person
who shifts resources from an area of low productivity to
higher productivity.
 John Stuart Mill (1848) – An entrepreneur is a prime
mover in the private enterprise. The entrepreneur is
the fourth factor of production.
Development of Entrepreneurship
Theories
 Carl Menger (1871) – The entrepreneur acts as an economic
agent who transforms resources into products and services.
These transformation process gives added value to the output.
 Joseph Aloysius Schumpeter (1934) – The entrepreneur is an
innovator. The economy moves through leaps and bounds
because of the innovations. This process is known as “creative
destruction”
 Alfred Marshall (1936) – The process of entrepreneurship
development is evolutionary. The entrepreneur is responsible
for the evolution of sole proprietorships into a public company.
Development of
Entrepreneurship Theories
 Ibnu Khaldun (Abdul Rahman Mohamed Khaldun) – The
entrepreneur is seen as a knowledgeable individual and is
instrumental in the development of a city-state where
enterprises emerge.
 David C. McLelland (1951) – The entrepreneur is a person
with a high need for achievement. This need for
achievement is the foundation of the entrepreneurship
process.
Islamic Entrepreneurship
 Discussion on Islamic entrepreneurship is based
on the following main topics:
 Integration
 Human nature
 Motivation
 Islamic business and entrepreneurs
 Islamic economic system
 Guidelines
 Exemplary conducts
The Concept of Integration
 Islam is a complete way of life. There is no
separation between business and religion.
 Islamic entrepreneurship is part of the way
of life.
 Muslims are encouraged to get involve in
business activities. (9/10 rezeki adalah
dalam perniagaan – Hadis Nabi)
Human Nature
 It is part of human nature to follow the teachings
of their religion.
 In Islam, Muslims are required to fulfil two
important duties, “ibadah” and “khalifah”.
 In Islamic entrepreneurship, Muslims are able to
perform both duties.
 Maximizing profit is not the ultimate aim of
Muslim entrepreneurs.
 “Islamic Man” versus “Economic Man”
Motivation
 Following the sunnah of ambiya and the
companion of Rasulullah saw.
 Islamic entrepreneurship leads to the path of
success both in this world and the hereafter.
 Success in Islam is not measured by the end
result but also the means and ways of
achieving them.
The type of success according to AlQurtubi
 Halal (Rightful means of living)
 Qanaah (Satisfying)
 Taufiq (Guidance)
 Sa’adah (Tranquility/Happy)
 Jannah (Heaven)
The level of success according to AlGhazali
 Depends on the following:
 Level of knowledge
 Level of repentance
 Level of challenges
 Level of obstacles
 Level of motivation
 Level of handicap
 Level of praise and thankfulness
Possession of Wealth
 In Islam, possession of wealth is allowed based on
the following principles:
 Allah s.w.t. is the absolute owner of wealth
 Allah s.w.t. has created wealth in abundance
(melimpah ruah) and sufficient (mencukupi)
for all
 Allah s.w.t. has created wealth for mankind
 Wealth is entrusted to mankind
Entrepreneurship as Ibadah
 Muslim entrepreneurs involvement in business is
to fulfill an obligation known as “fardhu
kifayah”
 Fardhu kifayah~ Unless and until there is an
entrepreneur in a community, the entire community is
deemed to be sinful.
 Muslim entrepreneurs bear the responsibility to
provide goods and services primarily to the
Muslim community and to others
Islamic Entrepreneurship Model
Islam Propagates
(Business Venture)
Allah Prepared
(Facilities)
Islam Provides
(Guidelines & Procedures)
Allah Promised
(Rewards)
Islamic Economic System
 Islamic entrepreneurship is part of the framework
of the Islamic Economic System.
 Islamic economic system involves:
 Islamic banking
 Islamic insurance (takaful)
 Islamic capital markets
 Islamic economic system is based on Islamic
jurisprudence.
Guidelines and Procedures
 Islam has provided an extensive guidelines for
Islamic entrepreneurship activities.
 Among others:
 The principle of buying and selling
 The permissible types of business
 The principle of “zakat” in business
 Business ethics
Entrepreneurial Ethics
 Prevent laziness
 Eradicate fear/shyness
 Search for legitimate ventures
 Avoid unlawful sources of income
 Show gratitude and thankfulness
 Grow and develop wealth
 Diversify business ventures
 Avoid greediness
Entrepreneurial Ethics
 Avoid malicious behavior
 Avoid squandering (elakkan membazir)
 Avoid stinginess (elakkan kedekut)
 Pay zakat and alms (sedekah)
 Be trustworthy
 Pray consistently
 Tawakkal
 Patience
 Qanaah
Exemplary Conducts of Muslim
Entrepreneurs
 Business is secondary to the call of jihad (crusade)
 Never use power or influence for self-interest
 Afraid of accumulated wealth
 Leadership qualities in all aspects
 Practice moderate way of life