Functions of an Entrepreneur

An entrepreneur frequently has to wear many hats. He has to perceive opportunity, plan, organize resources, and oversee production, marketing, and liaison with officials. Most importantly he has to innovate and bear risk. The main functions of an entrepreneur are as follows:

1. Innovation: Innovation is one of the most important functions of an entrepreneur according to Schumpeter. An entrepreneur uses information, knowledge and intuition to come up with new products, new methods of reducing costs of a product, improvement in design or function of a product, discovering new markets or new ways of organization of industry. Through innovation, an entrepreneur converts a material into a resource or combines existing resources into new and more productive configurations. It is the creativity of an entrepreneur that results in invention [creation of new knowledge] and innovation [application of knowledge to create new products, services or processes.]

Systematic innovation means monitoring the following for innovative opportunity:

i. The unexpected success or failure or any unexpected outside event, (e.g. when the IT bubble burst the ITES sector started growing.)

ii. Innovation based on process need [e.g. plate based cameras, film based cameras, digital cameras]

iii. Changes in industry and market structure [e.g. video cassette VCD, DVD, Blue ray disc]

iv. Demographics changes (e.g. increasing number of working women and nuclear families in most metropolitan cities)

v. New knowledge (e.g. Pentium chip)

2. Risk and uncertainty bearing: According to Hoze list an entrepreneur performs the function of risk and uncertainty bearing. Every decision pertaining to development of new products, adapting new technologies, opening up new markets involves risk. Decision-making in an environment of uncertainty requires anticipation of risk. Profit is said to be the reward for anticipating and taking such risks. However it is pertinent to mention that the entrepreneur is not a gambler, he only takes calculated risks. An entrepreneur develops the art of decision-making under conditions of uncertainty as a matter of survival.

3. Organization building: An entrepreneur has to organize men, material and other resources. He has to perform the functions of planning, co-ordination and control. He has to use his leadership qualities to build a team, generate resources and solve problems. With his organizational skills an entrepreneur builds an enterprise from scratch, nurtures it and makes it grow. His vision sows the seeds for a sound and vibrant organization and synergies are built in the enterprise.

According to Kilby in a developing country even the imitator entrepreneurs are very important and the entrepreneurial role encompasses the following:

i. Perception of market opportunities

ii. Gaining command over scarce resources

iii. Purchasing inputs

iv. Marketing the products

v. Dealing with bureaucrats

vi. Managing human relations within the firm

vii. Managing customer and supplier relations

viii. Managing finance

ix. Managing production

x. Acquiring and overseeing assembly of the factory

xi. Industrial engineering

xii. Upgrading process and product

xiii. Introducing new production techniques and products