Entrepreneurship acts as a method of management, which, over the course of centuries of evolution, has been established in the economies of developed countries. Today it is considered the most important socio-political institution.
general characteristics
At first, the subjects of this sphere included people who participated in market turnover or those who were gambling and prone to risky actions. Over time, the social function of entrepreneurship has increased. It began to include any activity of citizens that was aimed at generating income and not prohibited by law. The formation of an official institution occurred in the 17th century. Its development was quite complicated. Even today, this process is accompanied by the emergence and resolution of various contradictions. Let us further consider in detail what entrepreneurship is: the essence, functions, types of this activity.
general characteristics
The essence and functions of entrepreneurship distinguish it from other activities. In particular, one of the characteristic features of this institution is the presence of such motivation as the desire to achieve success. This need is focused on solving various problems, materializing many new and often risky ideas. Entrepreneurial motivation differs significantly from the incentive of administrators or ordinary specialists. The latter direct their efforts to accumulating knowledge and professional growth.
For this purpose, the assessment of his qualifications by professionals is of particular importance. The administrator's activities are aimed at career growth. Such subjects are prone to managerial activities. Not every administrator or specialist can become an entrepreneur. This requires special abilities and certain motives. The functions of entrepreneurship in economics include many tasks related to economic life. People engaged in this activity seek to make a profit by satisfying the needs of other citizens. Entrepreneurship is based on skills, the ability to implement ideas, and make predictions. At the same time, the activity is associated with a certain amount of risk. However, those who go for it, having made a correct forecast, as a rule, receive the expected effect.
Hisrich's theory
The owner of a small shop, a large banker, the owner of a controlling stake in securities, a farmer, a dealer, the owner of a company - all these people are united by belonging to one category - entrepreneurs. Today, in world practice, a unified definition of this activity has not been developed. According to Hisrich, an American scientist, entrepreneurship should be considered the process of creating a new object that has its own value. At the same time, the author of the idea himself calls the person who spends all his time and energy on it. It is he who takes on social, psychological, and financial risks, receiving rewards for this in the form of monetary income and satisfaction.
Smith's definition
In the 18th century, the concept of “entrepreneur” was associated with the word “owner”. In particular, Smith adhered to this idea. He spoke of an entrepreneur as an owner who takes a certain economic risk when implementing a commercial idea in order to make a profit. According to Smith, such an individual independently plans, organizes his production, sells the product, and manages income. Later in economic life there was a separation of capital as the function of entrepreneurship and capital as property.
View of modern authors
In the literature, entrepreneurship is viewed as economic organizational creativity, innovation, free expression of initiative, and willingness to take risks to generate income. In domestic publications, this institution is considered as an independent activity of citizens and associations. It is aimed at making a profit and is carried out at the operators’ own risk and under their property liability.
Functions of entrepreneurship according to McConnell and Brew
Entrepreneurship acts as one of the specific forms of the emergence of social relations. It contributes not only to the expansion of material potential, but also creates a favorable soil for the practical implementation of the talents and abilities of each individual, and leads to national unity. This expresses the social function of entrepreneurship. 
Specifics
Entrepreneurship is considered to be the art of doing business. In this regard, like other creative trends, it has a strictly subjective coloring, appearing in real life as a personified phenomenon. The content of the activity acts as a complex of production factors or as the introduction of an innovative element into the manufacturing process and promotion of products. This helps to increase the efficiency of the enterprise and best meets the interests of consumers. Entrepreneurship is primarily a thought process. But due to the fact that each person has his own apparatus and stereotype of thinking, the success of individuals directly when implementing ideas is different. Mental abilities manifest themselves in the form of design, the starting point of any planned activity.
The necessary conditions
Entrepreneurship development is based on a number of principles. These include, in particular, the presence of:
- Ownership rights to production means, manufactured goods and income received from its sale.
- A certain economic environment and socio-political climate that would promote, and not just declare, self-government, the opportunity to invest profits, and freedom of choice. In other words, running a business requires a competitive market economy. Only in such conditions can the functions of small business, which currently have special significance for the development of the economic system of many countries, be fully realized.
- A certain set of rights and freedoms that allows you to choose the appropriate type of activity, source of financing, sales of products, access to resources, formulate a production program and prices, and method of disposing of income.
- Variety of types, categories, forms of ownership (private-corporate, private, collective, state) and methods of their assignment.
Basic functions of entrepreneurship
There are three main categories in total. These include:
- Resource function. Its implementation is carried out through the mobilization of information, material, labor, financial and other means for use in production. A businessman’s focus on dynamic efficiency requires him to constantly search for new resources. Many of them would not be in demand by society if no one mobilized them.
- Organizing function. Mobilized resources benefit the actor only if they are used properly. In this regard, the businessman takes upon himself the organization of production, sales of products, research of market relations, scientific developments, and so on.
- A creative task. The above discussed primarily the economic functions of entrepreneurship. However, as you know, a businessman is aimed at constantly searching for new ideas. He seeks to maximize income or other effect, which he recognizes as the goal of his work. This does not allow him to be content with the existing situation. An entrepreneur is constantly looking for ways to improve his business. The manifestation of creative abilities causes the emergence of many different scientific, technical, organizational and other solutions.
The nature of entrepreneurial potential in the Russian Federation is determined by the transitional state of the domestic economy. One of the key points is the awareness of citizens engaged in this activity of their responsibility in implementing the assigned tasks.
In a developed market economy, entrepreneurship as an integrated set of entrepreneurial organizations (companies, firms), individual entrepreneurs, as well as complex associations of entrepreneurial organizations performs the following functions: general economic, creative search (innovation), resource, social, organizational. Some scientists believe that entrepreneurship also has a political function, which is usually carried out by associations (unions) of entrepreneurs.
- 1) General economic the function of entrepreneurship in a developed market economy is determined by the role played by individual entrepreneurs and business organizations as market subjects. The essence of the general economic function of entrepreneurship is manifested through the expenditure of various resources in the production of goods and services and bringing them to consumers (specific people, households, other entrepreneurs, the state, etc.). Moreover, entrepreneurs act under the influence of the entire system of economic laws (supply and demand, competition, price and cost, etc.), which is the objective basis for the manifestation of the general economic function. In economically developed countries, due to the fulfillment of its general economic function, entrepreneurship is one of the determining conditions for economic growth, increasing GDP and national income, etc.
- 2) Creative, exploratory, innovative function is the second function of entrepreneurship, which is associated not only with the use of new ideas by entrepreneurs, but also with the development of new means and factors to achieve their goals. The creative function of entrepreneurship is closely related to all other functions and is determined by the level of economic freedom of business entities and the conditions for making management decisions.
- 3) Resource function - is one of the most important functions of entrepreneurship. Its essence lies in the fact that, as a rule, entrepreneurship involves highly efficient use of all available resources. This refers to both reproducible and non-reproducible resources, various material and intangible conditions and factors of production. An entrepreneur can achieve success only when he finds the most effective scientific, technical and organizational ideas and innovations in his field of activity, is able to use highly qualified labor and effectively use material resources. Since, in the pursuit of maximum profit, entrepreneurs often take a predatory approach to the consumption of resources, the state becomes important in regulating the resource function of entrepreneurship. The history of the development of entrepreneurship clearly shows that entrepreneurs are very rational about their own or paid resources and completely ruthless about public resources.
- 4) Social function - its essence is manifested in the fact that any capable individual can demonstrate his talents and abilities by creating his own effectively functioning business. This function is most manifested in the processes of formation of a new category of people - enterprising people, gravitating towards independent economic activity, capable of creating and developing their own business, overcoming the resistance of the environment. On the other hand, the number of hired workers also increases, who economically and socially depend on how successful the activities of business organizations are.
- 5) Organizational function - manifests itself in the adoption by entrepreneurs of independent management decisions regarding the organization of their own business, its modernization and diversification, the merger and division of enterprises, participation in large entrepreneurial projects, etc. The organizational function is especially clearly manifested in the development of small and medium-sized businesses, in the development of new business forms (network organizations, Internet organizations, “people’s” enterprises, etc.).
The more efficiently business organizations function, the more significant the flow of their funds into budgets at various levels and into state extra-budgetary social funds. At the same time, the development of entrepreneurship ensures an increase in the number of jobs, a reduction in the unemployment rate, and an increase in the level of social status of employees.
Consequently, the essence of entrepreneurship is most comprehensively manifested in the combination of all its inherent functions, which are objectively characteristic of civilized entrepreneurship, but largely depend on the subjects of entrepreneurial activity themselves, on the system of state support and regulation of entrepreneurship.
The essence of entrepreneurial activity is most fully manifested in the combination of its inherent functions, among which the following can be distinguished:
1. General economic a function implemented in the production of goods (services) and their delivery to a specific consumer. The development of entrepreneurship is one of the determining conditions for economic growth.
2. Innovative function that is of greatest importance for entrepreneurship. This function is associated not only with the use of new ideas in the process of entrepreneurial activity, but also with the development of new means and factors to achieve set goals. This function can be implemented in the following areas:
Manufacturing a new good unknown to consumers or creating a new quality of a particular good;
Introduction of a new production technology, still unknown in this industry;
Development of a new sales market, i.e. a market in which the product was not represented, regardless of whether this market existed before or not;
Obtaining a new source of raw materials or semi-finished products, regardless of whether this source existed before, but was not taken into account or was considered inaccessible, or has yet to be created;
Changing the market situation, in particular, creating your own monopoly position or undermining the monopoly of competitors.
3. Resource a function that involves the efficient use of both renewable and limited resources. This function is contradictory and has a dual character. The essence of the contradiction is that an entrepreneur, as the owner of resources, is interested in their rational use and at the same time can irrationally use public resources (in particular, natural ones), as widely evidenced by both world and social practice.
In this regard, the regulatory role of the state, establishing the forms of responsibility of the entrepreneur for the incorrect implementation of the resource function, becomes important.
4. Organizational a function that manifests itself in the entrepreneur making independent decisions about organizing his own business, in forming an activity strategy, and choosing a management style.
5. Social a function expressed in the opportunity for each capable individual to demonstrate their individual talents and capabilities. This function is manifested in the formation of a new social stratum - enterprising people, gravitating toward independent economic activity, capable of taking risks, overcoming the resistance of the external environment, and achieving their goals.
According to available sociological estimates, pronounced entrepreneurial qualities are inherent in approximately 5% of the population, although in different countries, depending on the characteristics of the national character and established cultural traditions, this indicator may vary.
The social function of entrepreneurship is expressed in reducing unemployment, increasing the number of jobs for hired workers, who, in turn, economically and socially depend on how sustainable and efficient the activities of entrepreneurial firms are.
Types of entrepreneurship
Entrepreneurial activity covers all spheres of the economy, with significant differences in different industries in the form and content of operations and methods of their implementation. business activities are most effectively implemented in such areas as the service sector, intermediary activities, production of consumer goods, and financial transactions.
Taking into account the direction of entrepreneurial activity, the object of investment of capital and specific results, the following types of entrepreneurship are distinguished.
1. Manufacturing Entrepreneurship. The main component of industrial entrepreneurship is the production of products and work that are subject to subsequent sale to consumers. On the basis of the international division of labor, there is an international specialization of production companies to produce goods and export them to other countries. Specialization and growth in production volumes of a certain type of product based on the latest technologies leads to a reduction in costs and an increase in the quality of goods. The specificity of Russia is that it joined this process quite late. The consequence was that the products of domestic entrepreneurs-manufacturers are difficult to compete with foreign analogues due to lower prices for the latter, higher quality, and well-known brands.
Industrial entrepreneurship, which was actively developing in the first years of market reforms in Russia, quickly gave way to commercial entrepreneurship.
2. Commercial entrepreneurship. This type of entrepreneurship is associated with the purchase and sale of goods, with commodity exchange, commodity-money transactions. It includes searching, purchasing goods for subsequent sale, ensuring their safety, conducting an advertising campaign, transporting goods, selling them, selling and after-sales service to the buyer.
According to expert estimates, a commercial transaction is advisable if it provides 20-30% of net profit, which is explained by the high level of risk in such transactions.
Commercial entrepreneurship relies on a specific infrastructure, including shops, markets, exchanges, exhibitions and sales, auctions, trading houses, trading bases, etc.
Commercial entrepreneurship is attractive due to the supposed opportunity lying on the surface to sell a product at a price higher than the one at which it was purchased, and thereby relatively quickly make a significant profit. At the same time, practice shows that realizing this opportunity is often very difficult.
3. Financial and credit entrepreneurship. This is a specialized area of entrepreneurial activity, the characteristic feature of which is that the subject of purchase and sale are securities (stocks, bonds, etc.), currency values and national money. To organize financial and credit entrepreneurship, a specialized system of institutions is formed: commercial banks, financial and credit companies, stock and currency exchanges, etc.
4. Insurance business. It is also a specialized type of business activity. This includes property insurance, personal life and health insurance, risk and liability insurance. In general, insurance entrepreneurship can be characterized as the purchase and sale of insurance services.
5. Intermediary business. Acts as an integral part of production, commercial, financial and credit entrepreneurship. The intermediary does not directly produce products, does not trade goods, currency, securities, does not provide money on credit, but facilitates the implementation of these operations and the conclusion of relevant transactions, accelerates and facilitates the processes of not only the purchase and sale, but also the circulation of goods, services, and funds. generally.
6. Advisory Entrepreneurship. The essence of this type of business is to provide independent advice and assistance on management issues, including identifying and assessing problems, recommending appropriate actions and helping to implement them.
In developed economies, investing in intellectual capital in the form of consulting services is considered to be no less effective than investing in new equipment or advanced technology.
Consulting services can be provided in the form of oral one-time advice. However, most often they are provided in the form of projects and include the following main stages:
Identifying the problem (diagnosis);
Development of solutions, projects;
Implementation of decisions, projects.
There are three types of consulting: expert, process and educational. At expert In consulting, the consultant independently carries out diagnostics, develops solutions and recommendations for their implementation. At process In consulting, specialists together with the client analyze problems and develop proposals for solving them. At educational In consulting, the main task of specialists is to enhance the client’s activities in developing solutions to existing problems. For this purpose, lectures, seminars are held, and teaching aids are developed. This provides the necessary theoretical and practical information. In practice, as a rule, a combination of all three counseling methods is used.
In Russia, the market for consulting services has recently undergone significant development. Consulting on marketing activities is developing at the fastest pace. In terms of the share of consulting services in the gross national product, Russia is in second place in the world after Great Britain.
7. Of particular note venture entrepreneurship– development and implementation of the results of research and development work into practice. In countries with developed economies, the venture business infrastructure includes innovative banks, specialized insurance companies, support funds and other organizations that support high-risk entrepreneurial transactions. Regardless of the type of business activity, it will be successful if the entrepreneur is able to timely and correctly assess market opportunities in terms of the goals and resources of his company, and produce only the goods and services necessary for market participants at lower costs and of the required quality. This can only be achieved by organizing effective marketing activities within the company.
A citizen is an independent activity carried out at one’s own peril and risk, the purpose of which is the systematic receipt of profit through the sale of works, goods, services, and the use of property. At the same time, a citizen carrying out such activities must be registered in the manner prescribed by law.
Currently in Russia there is a special list of types of economic activities (OKVED). Thus, everything that an entrepreneur conducts can be carried out within the framework of some type of economic activity.
One very important point is that entrepreneurial activity can only be carried out if state registration is successfully completed, which will result in the receipt of a registration certificate. Only such a certificate gives permission to conduct business activities on the territory of the Russian Federation and abroad.
You should also pay attention to the fact that many types of business activities require mandatory certification or licensing.
Another significant point is that entrepreneurial activity can only be carried out by those who have independently received registration and have the appropriate certificate, as well as by a legal entity, the participant of which may be a citizen (individual). All decisions made about how activities are conducted, how profits are spent, how clients are attracted and business processes are built are made directly by the community itself or by all members of the community. It is this circle of people who bears full responsibility for the decisions made.
When making decisions in the process of implementing entrepreneurial activity, the owner does not always have the opportunity to see the whole picture and does not attach importance to certain influencing factors. In this regard, decisions appear that can cause certain damage to activities, the so-called risks in business activities. Among the risks, there are external ones, which are associated with the external economic environment, market processes and government decisions, and internal ones, arising from the actions of the individual entrepreneur himself, the quality of business processes, the work of personnel and much more.
In a market economy, entrepreneurial activity will perform a number of functions: resource, general economic, innovative, social and organizational.
Functions of entrepreneurship.
The general economic function is determined by the conduct of entrepreneurial activity itself, aimed at the production of goods and services, which is the basis for the manifestation of this function.
The resource function is realized through the effective use of both renewable and An entrepreneur can achieve high results if he can effectively combine the use of “capital”, “land”, “labor” and “entrepreneurial talent”.
The innovation function means the ability of entrepreneurs to use not only new ideas in the process of their activities, but also to develop new means of achieving their goals.
The social function arises from the ability of each citizen to run his own business. It manifests itself in the formation of people capable of conducting independent economic activity, capable of overcoming the resistance of external factors and achieving effective results.
The organizational function is carried out through the owners making independent decisions on organizing their own business, forming management, changing the company’s behavior strategy and creating economic structures.
Thus, its essence objectively appears in the combination of all the named functions.
Entrepreneurship represents free economic management in various fields of activity (except for those prohibited by law), carried out by subjects of market relations in order to meet the needs of specific consumers and society for goods (works, services) and generate profit (income) necessary for the self-development of their own business (enterprise) and ensuring financial obligations to budgets and other economic entities.
Entrepreneurship is a fundamentally new type of business, based on the innovative behavior of the owners of the enterprise, on the ability to find and use ideas, and translate them into specific entrepreneurial projects. This is usually a risky business, but those who do not take risks cannot succeed in the end. However, risk is different. An entrepreneur, before deciding to create his own business (this will be discussed separately), must make calculations, study the intended market and competitors, without neglecting his own intuition.
Entrepreneurship is a way of managing that, as a result of centuries of evolution, has become established in the economies of developed countries. Initially, entrepreneurs were called enterprising people operating in the market, or simply energetic, gambling people, prone to risky transactions. Subsequently, entrepreneurship began to include any activity aimed at increasing profits and not prohibited by law. Entrepreneurship has developed in a complex manner, and has been and is being accompanied by an endless process of the emergence and resolution of numerous contradictions. Its first shoots began to emerge along with the emergence of market relations. However, the emergence of entrepreneurship as an established sustainable phenomenon dates back to the 17th century.
Functions of entrepreneurship
In a market economy, entrepreneurship performs general economic, resource, creative and search (innovation), social, and organizational functions.
The determining factor in a developed market economy is general economic function, which is objectively determined by the role of business organizations and individual entrepreneurs as market subjects. Entrepreneurial activity is aimed at producing goods (performing work, providing services) and bringing them to specific consumers: households, other entrepreneurs, the state, which primarily predetermines the general economic function.
The most important function of entrepreneurship is resource. The development of entrepreneurship involves the effective use of both reproducible and limited resources, and resources should be understood as all material and intangible conditions and factors of production. First of all, these are labor resources (in the broad sense of the word), land and natural resources, all means of production and scientific achievements, as well as entrepreneurial talent. An entrepreneur can achieve the highest success if he is able to generate scientific and technical ideas, innovations in the field of activity in which he creates his own business, and combine all this with the use of qualified labor and the efficient consumption of all types of resources. However, the pursuit of maximum income (profit) often leads to predatory use of resources. Such entrepreneurs harm the environment and the population through their activities. In this regard, the regulatory role of the state, establishing the forms of responsibility of entrepreneurs for the improper use of the resource function, becomes important. This function of entrepreneurship is contradictory. On the one hand, an entrepreneur is interested in the rational use of resources, but on the other hand, he can be ruthless with them.
Innovative feature- facilitating the process of producing new ideas (technical, organizational, managerial, etc.), carrying out research and development, creating new products and providing new services, etc.
Creative search, an innovative function associated not only with the use of new ideas in the process of entrepreneurial activity, but also with the development of new means and factors to achieve set goals. The creative function of entrepreneurship is closely related to all other functions and is determined by the level of economic freedom of business entities and the conditions for making management decisions.
Social function- production of goods and services necessary for society, in accordance with the main goal and the requirements of the basic economic law.
Social function manifests itself in the ability of each capable person to be the owner of a business, to better demonstrate their individual talents and capabilities. This function of entrepreneurship is more manifested in the formation of enterprising people, prone to independent economic activity, capable of creating their own business, overcoming environmental resistance and achieving their goals. However, at the same time, the layer of hired workers is growing, who, in turn, are economically and socially dependent on the sustainable activities of entrepreneurial enterprises.
The more efficiently business enterprises operate, the greater will be the amount of their funds flowing into budgets at various levels and into state extra-budgetary social funds. The development of entrepreneurship ensures an increase in the number of jobs, a reduction in the unemployment rate, and an increase in the standard of living and social status of employees.
Organizational the function of entrepreneurship is manifested in entrepreneurs making independent decisions about organizing their own business, its diversification, in the introduction of intra-company entrepreneurship, in the formation of entrepreneurial management, in the creation of complex entrepreneurial structures, in changing the strategy of the entrepreneurial company, etc. The organizational function is especially clearly expressed in the rapid development of small and medium-sized businesses.
The organizational function appears especially clearly in the rapid development of small and medium-sized businesses, as well as in “collective” (network) entrepreneurship.
