The essential qualities of a successful entrepreneur are innovation, risk taking, decision maker and organisation and management and many which are discussed below.
There has been a great deal of confusion and contradiction in literature on the qualities of an entrepreneur. Classical economics considered entrepreneur as the owner of business enterprise to which he supplied capital. No distinction was made between an entrepreneur and the capitalist. But in modern approach corporate ownership is separated from control. Ownership of business lies with shareholders who bear risk but they do not exercise much control over the business activities. Control lies with a small group of insiders known as board of directors. The board of directors bears a little risk and receives a larger remuneration even when no dividend could be paid to the shareholders due to insufficiency of profits. Thus, the classical theory of the enterprise fails in the modern corporate world.
An entrepreneur should poses qualities like risk taking, innovation, motivation, organization and control, in keeping pace with time and environment. The entrepreneur has to react to new ideas; new demands exploit the opportunities and contribute towards technical progress. Thus, he is a nucleus of high growth of the enterprise.
(1) Innovation : J. Schumpeter has made substantial contribution to the literature of entrepreneurship. He says that an entrepreneur is basically an innovator and he introduces something new in the economy. He sees profitable opportunities and exploits them. According to Schumpeter, the entrepreneur is one who carries out new combinations of means of production. The process of innovation may be in the form of :
(a) Introduction of a new product.
(b) Use of new methods of production.
(c) Opening of a new market.
(d) The conquest of new source of supply of raw material.
(e) A new form of organization.
Schumpeter also entrusts the function of sound management and control for the survival as well growth of the production unit. Further he also distinguishes between an inventor and innovator. An inventor discovers new methods and new materials whereas an innovator utilizes inventions and discoveries in order to make new combinations and thus produces better goods which give him more profits and satisfaction than before.
A distinction has also been made between a manager and an innovator by Schumpeter. A manager performs the function of looking after day to day affairs of his going concern while an innovator changes the factor combinations to enhance productivity and profits. Schumpeter said that the basic function of an entrepreneur was to innovate. He was never a risk-bearer. He said that though the basic function of an entrepreneur is to innovate, this function must always appear mixed up with other kinds of activity. He wrote : "Everyone is an entrepreneur only when he actually carries out new combinations and loses that character as soon as he has built up his business, when he settles down to running it as other people run their business".
Generally speaking the organizational innovativeness is related to the innovativeness, personality, attitude and background characteristics of organizational members. This is more so in case of innovations.
Stephen Loveless and Barry Bozeman offered an explanation that the influence of an innovator on the organization is more than the influence of mere members of the organization,
An entrepreneur who is successfully performing the function of innovation would be more supportive than adopters.
It is not true that inventions can be carried out only by large firms due to their strong financial, technical and managerial base. The world's most useful inventions have been made by the small firms. For example :
Large firms may have strong base but they lack flexibility. They cannot react rapidly to new demands and exploit them but small firms can do this.
(2) Risk-taking : Richard Cantillon states that entrepreneur is an agent who buys means of production at certain prices and sells them at uncertain prices. Thus, Cantillon introduces elements of direction and speculation into the functions of an entrepreneur.
Knight describes him as the bearer of uncertainty. There is difference between risk and uncertainty. A risk situation occurs when the entrepreneur is required to make a choice between two or more alternatives whose potential outcomes are not known and must be subjectively evaluated. As a risk taker, the entrepreneur has to make decisions in conditions of uncertainty, balancing potential success against potential loss. Uncertainty is defined as risk which cannot be calculated. The entrepreneur, according to Knight, is the economic functionary who undertakes such responsibility which, by its very nature, can neither be insured nor salaried.
The entrepreneur performs the function of reducing uncertainty in his plan of investment and expansion of the enterprise.
J.B. Say also stresses risk-taking as the specific function of an entrepreneur.
(3) Decision Maker : Some writers are of the view that the qualities of the entrepreneur is to take decisions regarding the activities of the concern. He is expected to take decisions about the type of business to be done and the way of doing it. Arthur H. Cole describes an entrepreneur as a decision maker and describes the following functions of an entrepreneur.
(a) The determination of objectives of an enterprise and the change of those objectives as conditions required or made advantageous,
(b) The development of an organisation including efficient relations with subordinates and all employees,
(c) Securing adequate financial resources, the relations with existing and - potential investors,
(d) The acquisition of efficient technological equipment and the revision of it as new machinery appears,
(e) The development of a market for the products and the devising of new products to meet or anticipate consumer's demand,
(f) The maintenance of good relations with public authorities and with society at large.
(4) Organisation & Management Marshall : recognized organization and management of the enterprise as the important functions of an entrepreneur.
When the organization grows bigger, the entrepreneur effectively delegates authority and finds responsibility at various levels of management. The network of decision making becomes more complex. The organisational structure may become highly complex with the expansion of business but the central function of an entrepreneur remains the same. It is the entrepreneur who has to perform the function of expansion and contraction of the total business and its branches.
Harbinson does not denote the entrepreneur in Schumpeter's sense but, he says that the entrepreneur harnesses new ideas of different innovations to the best advantage of the organisation. The entrepreneur may or may not try new combinations of resources but he must be a good administrator. He is at the helm of affairs and is the final judge in the conduct of his business.
The function of organisation and management includes :
(a} Planning of an enterprise,
(b) Co-ordination, administration and control,
(c) Routine type of supervision.
The entrepreneur is in essence an institution which comprises of all people required to perform various functions. The task of such people is to innovate, adjust or combine various factors of production, and expand on account of change in demand and market conditions. They must foresee the opportunities and must also be in a position to make opportunities out of a given situation.