The connection between entrepreneurship and small business.

Topics: Small business, Business, Entrepreneurship Pages: 7 (2011 words) Published: August 27, 2003
This essay discusses the concepts of small business and entrepreneurship and relationship between them. We will try to define and explain the terms ?owner-manager? and entrepreneur, in other words who operate a small business enterprises. We also will examine the similarities and differences of these terms.

From the outset it needs to be emphasized that while we will talk about the small business and entrepreneurship, these terms need to be defined. For small business there is still no single definition which satisfies all purposes. There are several other definitions based on both quantitative, such as number of employees, invested capital and total value of sales, and qualitative characteristics, which was covered in Report of the Committee of Inquiry on Small Firms, 1971. According to that, ?a small firm is one that has a relatively small share of its market. Secondly, ?it is managed by its owners or part-owners in a personalized way, and not through the medium of a formalized management structure. Thirdly, it is also independent in the sense that is does not form part of a large enterprise and that the owner-manager should be free from outside control in making their principal decisions.?(Cameron & Massey, 1999, p.5).

These criteria certainly may be applied to an entrepreneurship as well. Most people equate entrepreneurship with either new or small businesses. However, entrepreneurship can be more correctly viewed as a behaviour characteristic. ? An entrepreneur is someone who recognizes an opportunity, raises the money and other resources needed to exploit that opportunity, and takes or all of the risk associated with the executing the ensuing plan?{Barrow, 1993, p.14).

Further, Barrow indicates that the term of ?entrepreneur? was introduced into economics by Cantillon (1755) and raised to prominence by the French economist J.B.Say around 1800. He used it to describe someone who ?shifts economic resources out of an area of lower and into an area of higher productivity and greater yield?. Classical and some modern economists do not recognized entrepreneurship adequately. J.Schumpeter was the first one who returns to Say?s ideas. In the ?Theory of Economic Dynamics? (1911) he postulated that dynamic instability induced by the innovating entrepreneur, rather than optimization and the balancing of needs and resources, is the norm in a healthy economy.

As we seen above all these terms have many common features. The terms ?small business owner? and ?entrepreneur? are sometimes used interchangeably. However, it is important to note the differences in the titles. As we stated above, small businesses are businesses that are independently owned and operated, are not dominant in their field, and usually do not engage in a new or innovative practices. Hodgetts & Kupatko (1998, p.7) examine differences between these terms. They state that small businesses ?may never grow large, and the owners may prefer a more stable and less aggressive approach to running the business.? In other words, they prefer stable sales, profits and growth, and may purchase as ongoing businesses as well as franchises.

On the other hands, entrepreneur?s primary objectives are profitability and growth. Thus, the business is characterized by innovative strategic practices and continued growth. Entrepreneurs are usually seeking rapid growth and immediate profit. Thus, entrepreneurs may be view as having a different perspective from small business owners in the actual development of their firm.

To illustrate the concept of connection between small business and entrepreneurship we chose the article called ?Defining our entrepreneurs? by J. Kirkwood & K.Brown in NZBusiness (November, 2001). In this article the authors try to paint a picture of New Zealand?s entrepreneurs on the base of survey that has been held in the University of Otago. There were 308 business founders from throughout New Zealand in this survey. The results show that around...
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