Entrepreneurship in Business: Concept, Theories, Types of Enterprises, and Importance

This article discusses the concept and theories of entrepreneurship, different types of enterprises, and the importance of entrepreneurship to individuals, organizations, and the economy. It covers the characteristics of entrepreneurship, theories such as innovation theory, economic theory, sociological theory, discover theory, and creation theory, and types of enterprises such as sole proprietorship, partnership, limited liability company, and non-profit organizations. It also highlights the importance of entrepreneurship in improving productivity, creating job opportunities, and contributing to economic growth.

Entrepreneurship in
Business

Table of Contents
Introduction.................................................................................................................................................3
Main Body...................................................................................................................................................3
Concept and theories of entrepreneurship....................................................................................................3
Different types of enterprise....................................................................................................................6
Identify importance of entrepreneurship to individual, organizations and economy................................8
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11

Introduction
Entrepreneurship is an activity setting a new business entity. It is related to bear the risk
and start a new business based on an innovative and creative idea. Main aim of entrepreneurship
is to earn potential profit and offer unique as well as different products to the customers. In this,
a new entity is started with an aim to earn significant amount of profit margin. Entrepreneurship
is undertaken by an entrepreneur. Here, entrepreneur is a person who has the capabilities and
potential to bear the risk of starting a new venture. Entrepreneur has the ideas and potential to
convert the idea into reality. It is identified that entrepreneurs not only generate opportunities for
self but also play a crucial role in economic development. They create employment opportunities
for ample of people and contribute in enlargement of economy and the whole nation (Ribes-
Giner and et. al., 2018). Main aim of the present study is to understand the dynamics of
entrepreneurship. It is based on such entrepreneurs who start a new venture and gained
tremendous success in short period of time. The study will cover concept and theories of
entrepreneurship along with different types of enterprises with suitable examples. In addition,
importance of the respective activity for individuals, organization and economy has also been
included in the following report.
Main Body
Concept and theories of entrepreneurship
Concept of entrepreneurship
Entrepreneurship is a dynamic process that is related of creating wealth. Here, the wealth
is created by a person who takes risk to start a new business venture. In this, entrepreneur offers
a product or service based on unique features and attributes. These attributes are added in the
product by entrepreneurs with the use of their skills & capabilities. It is recognized that
entrepreneurs act as an agent of the business and come up with innovative, creative and unique
ideas which further help the business to grow (Randerson and e. al., 2021). For instance, there
are several successful entrepreneurs who not only working for profit but also significantly
contributes towards economic development. Larry Ellison is the founder of Oracle. He is a

software engineer who has the clear vision from the initial days to start something of his own.
Further, Ellison was able to establish such a large empire with constant dedication and passion.
Characteristics of entrepreneurship
 Entrepreneurship is a dynamic and risky process. However, the business is started with
an aim to earn profit but there is no surety regarding profit.
 It involves decision making wherein entrepreneur is required to take suitable decisions
for the success and growth of new business venture.
 Entrepreneurship is complete process. It starts with innovative idea which continue
establishment, developing and running the venture. It is not a particular incident rather
based on constant efforts and hard work (Ferreira and et. al., 2017).
 It is a philosophy that is related to the way one think, acts. Therefore, entrepreneurship
can exist in any situation. It can be present in government, private, education and even in
the field of science and technology.
Theories of Entrepreneurship:
Innovation theory: This theory of entrepreneurship was developed by Schumpeter. As
per this, entrepreneurship is about innovation wherein entrepreneur introduces unique and
different combinations. It is assumed that entrepreneur is a innovator who identifies creative
ways for the betterment the entire economy (Hasan and et. al., 2017).
Advantages:
 This theory facilitates innovation and creativity at market place. It helps in development
of unique and different products. Here, it helps in upliftment of society by offering
different products or services.
Limitations:
 In this, entrepreneurs who operate traditional business are not taken into consideration.
Innovation theory also ignores risk taking aspect of entrepreneurship.
Economic Theory: This theory was introduced by Mark Casson in one of his books. As per
this, demand of entrepreneurs increases with changing needs. However, the supply is limited.

Here, entrepreneurship is highly affected by the economic conditions. Presence of favorable
conditions in the economy is important for growth of entrepreneurship. In this context, major
motivators are the incentives like taxation policy, source of finance, raw material etc (McElwee
and Atherton, 2021). According to this theory, entrepreneur needs to have qualities such as good
decision making, self motivation and more.
 Advantages: This theory helps in facilitating economic activities that further contributes
towards development of economy efficiently.
 Limitations: It only focuses on the economical aspects of entrepreneurial activities.
However, it has also influence on social and environmental, technological conditions of
the country (Raff and Scranton, 2017).
Sociological Theory: Here, entrepreneurship depends on social elements. The activities of
entrepreneurship are studied from social value and hierarchy. In this theory, it is assumed that
behavior of an entrepreneur within the society is affected by social attitudes, values and beliefs
of society, social and political environmental factors etc (Ratten, 2018). Additionally, the theory
states that an entrepreneur needs to work efficiently in order to meet with the expectation level of
society.
 Advantages: The theory creates a profound balance between social needs and
entrepreneurship. It further facilitates the growth and development of the society at large.
 Limitation: For an entrepreneur, it is not easy to gain acceptance in the society. In
addition, addressing the changing needs and requirements of society is also a challenging
task for entrepreneur (Ratten, 2017).
Discover theory: In this, an entrepreneur identifies the opportunities. It is assumed that
individuals and opportunities affect each-other. For instance, opportunities comes in existence
while discover by the individuals (Bates, Bradford and Seamans, 2018). On other side, an
individual can undertake entrepreneurial activities due to the presence of opportunities.
 Advantages: It helps in identifying new opportunities that will contribute in success
and growth of business.
 Limitations: It is quiet challenging to identify new opportunities to start, develop as
well as run a successful business venture.

Creation theory: This theory focuses on creation of unique business ventures. As per this
theory, opportunities are identified by the individuals and then they further create unique
products or service by realizing those opportunities significantly (Xabibullayevich, Nabijanovich
and Ibragimovna, 2020).
 Advantages: It helps in creating a new, unique and different business venture by using
the available opportunities in market.
 Limitations: This theory has certain limitations such as procuring the resources,
arranging funds for operating the business.
Different types of enterprise
Enterprises are the commercial business entities that work in order to earn higher amount
of sales and profit margin. Main aim of enterprises is to produce products or services so that they
can fulfill requirements of customers and society. Enterprises play a crucial role in development
and growth of the economy. There are several types of enterprise are operated in the business
environment which differ from each-other in terms of size, scope, ownership and more. Different
types of enterprises are briefly explained below:
Sole Proprietor: Sole traders are the crucial part of the economy. They start as well as
run business on their own. Here, decision making power lies in the hand of owner. In sole
proprietorship, all the activities are performed by business owner. Here, owner is entitled to take
all organizational decisions. In addition, profit of the business only belongs to the owner.
Additionally, there is no intervention of any external party. It is a simple business structure
which is often used in small businesses (Bedi and Yadav, 2019). When an entrepreneur starts the
venture, initially, they work solely in business. In UK, plumbers, carpenters, café, bakery is some
of the well-known examples of sole trade business. In addition, Sole traders are in retailing and
local services within the country.
Partnership: It is a type of business wherein two or more people work together to
achieve a common goal. Here, each and every partner has some specialized capabilities and
skills. Decisions are jointly taken by the partners. In addition, all the partners divide the profit
and loss as per the pre-define profit sharing ratio. In partnership, risk & rewards are divided
among the partners. In certain partnership, liabilities of some partners are limited and they are

not required to bear the risk of debt. For starting a partnership business, it is important to have
minimum two people who come together to attain common goal of earning profit. For instance,
Partnership is generally used in business related to the professional and financial services. In UK,
there are several partnership firm are working such as Pret A manager, Social Chain, Marketing
runners and more.
Limited Liability company: Limited liability is a hybrid business structure where the
owned are known as the members. Here, the members can be individual person, partners and
other businesses. These are the incorporated entities and have their own separate legal identity.
In addition these companies are owned by the shareholders who have limited liability towards
the debt of firm (Landström and Harirchi, 2018). Main aim of such entities is to take advantage
of the principle of limited liability. In current time, limited liabilities companies are growing due
to the favorable market conditions. Limited liability stimulates individuals to invest their savings
for growth of small business entities. In this, directors are appointed by the shareholders who
further take suitable business decisions. Here, decisions are collectively taken by the directors. In
UK, most of the new registered businesses are the limited liability. Here, the liability of
shareholders is limited to the value of share they own in business. If LLC expose any financial
issue in future, members are nit responsible to pay the liability from their personal assets. In UK,
nearly 4 million companies are LLC and over 500,000 companies registered each year as LLC
(Companies house, 2021).
Non-profit organizations: It is a crucial type of enterprise which are started with an aim
to serve the society. These entities are known as the voluntary organizations. Main aim of such
enterprises is to ensure the well-being and upliftment of society. These entities are operated for
social benefits rather earning profit. Additionally, a non-profit organization is not drive by profit
objective but it works on dedication in order to address a specific issues in the society. Here,
Non-profit organizations are used for cooperatives, trusts, charity, advocacy and religious groups
(Sun and Zhang, 2019). Numerous people work with the Npo as volunteers in order to contribute
in social development. For instance, Oxfam is non-profit organization which works to remove
the poverty and inequality from the society.

Identify importance of entrepreneurship to individual, organizations and economy
Entrepreneurship is the activity of establishing, developing as well as running a new
business venture. Main aim of this is to start a new business based on unique and creative
thoughts. It profoundly contributes in success of individuals, organizations as well as the whole
economy. Entrepreneurship creates job opportunities for individuals, generate source of income
which further enhance their living standard. In addition, it contributes in success of organizations
by developing unique and creative ideas. In addition, entrepreneurial activities contribute in GDP
of the economy in significant manner.
Importance to individuals: Entrepreneurship is the activity which allows a person to
create something unique for society. It provides an opportunity to use the capabilities and skills
in order to develop bring something better in market. Being an entrepreneur a person not only
creates opportunities for self but also contributes towards societal development. In addition, they
also crate employment opportunities for the individuals in society. A person can serve the society
effectively by carrying out the entrepreneurship activities. It provides a feeling of self-fulfillment
and accomplishment to individual when they do something for the society. In addition,
entrepreneurship also helps an individual to utilize their skills such as communication,
leadership, time management, problem solving and more in an efficient manner (Honig, 2020).
Additionally, it enhances the confidence level of a person and makes them enable to face the
future uncertainties in an efficient manner. Individuals can use the passion, enthusiasm while
they work as an entrepreneur. For instance, Larry Ellison is the Co-founder of Oracle, he is a
software engineer who founds a venture which is known for the excellence in the field of
technology in current time. He got the opportunity of use his software knowledge while
performing the entrepreneurial activities. Therefore, entrepreneurship contributes in enrichment
and career growth of individuals profoundly.
Importance to organizations: In current time, there is extensive competition present in
market. In this situation, it is imperative for a company to differentiate their product or services
from the competitors. One of the best ways to maintain difference is to use innovative and
creative approaches. In entrepreneurship, innovation and creativity are two most important
factors. If a company fosters entrepreneurial practices, it further helps in development of unique
products. In addition to this, it also encourages the employees to go extra miles for the

betterment of the business. They come up with unique solutions that will help the organization to
secure a distinct position in competitive market place. In addition, entrepreneurship is also
helpful in development of some crucial business skills like communication, problem solving,
critical thinking, decision making, team work and so on (Kamaruddin. and et. al., 2017). These
skills improve the capabilities of employees and make them enable to perform in a productive
way. Therefore, entrepreneurship is really important from the prospective of organization growth
and development.
Importance to economy: Entrepreneurship plays a vital role in economic development.
It creates job opportunities, accelerates economic growth, creates a balance between demand and
supply etc. The significance of entrepreneurship in the economy can be understood through
below mentioned points:
 Entrepreneurship improves productivity: In entrepreneurship a business entity is set-
up in order to meet with requirements of buyers. It enhances the production activity
within the economy in an efficient manner. In addition, entrepreneurship improves the
productivity of firms, increases competition which further increase overall productivity in
an efficient manner (Boudreaux, 2020).
 Accelerate economic growth: Entrepreneurship contributes towards economic growth
by fostering innovation and creativity. In UK, small business units contributed 51% in all
turnover generated by the private sector of the country in 2018.
 Creates job in the economy: New business creates job opportunities which further
contribute in development of whole nation. Small business units provides ample of job
opportunities to individuals.

Conclusion
It is concluded out of above-stated information that entrepreneurship is an activity of
starting, developing as well as running a new business venture. It is analyzed that entrepreneur is
a person who develop an innovative ideas for a new business. Further, there is discussion
regarding theories of entrepreneurship. It is summarized that there are numerous types of
business enterprises such as partnership, sole trader, non-profit organizations and more. It is
found that entrepreneurship contributes towards development of individual, organization and the
economy.

References
Books and journals
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