FUNCTION OF AN ENTREPRENEUR

Functions of an entrepreneur:

In general, an entrepreneur performs the following functions

(i) Initiating business enterprise and resource co-ordination: An entrepreneur senses business opportunities, conceives project ideas, decides on scale of operation, products and processes and builds up, owns and manages his own enterprise. The first and the foremost function of an entrepreneur is to initiate a business enterprise. An entrepreneur perceives opportunity, organizes resources needed for exploiting that opportunity and exploits it. He undertakes the dynamic process of obtaining diuerent factors of production such as land, labour and capital, bringing about co-ordination among them and using these economic resources to secure higher productivity and greater yield. An entrepreneur hires the services of various other factors of production and pays them fixed contractual rewards: labour is hired at predetermined rate of wages, land or factory building at a fixed rent for its use and capital at a fixed rate of interest. The surplus, if any, after paying for all factors of production hired by him, accrues to the entrepreneur as his reward for his euorts and risk-taking. Thus, the reward for an entrepreneur, that is a profit, is not certain or fixed. He may earn profits, or incur losses. Other factors get the payments agreed upon, irrespective of whether the entrepreneur makes profits or losses. 

(ii) Risk  bearing or uncertainty bearing: The ultimate responsibility for the success and survival of business lies with the entrepreneur. What is planned and anticipated by the entrepreneur may not come true and the actual course of events may diuer from what was anticipated and planned. The economy is dynamic and changes occur every day. The demand for a commodity, the cost structure, fashions and tastes of the people and government’s policy regarding taxation, credit, interest rate etc. may change. All these changes bring about changes in the cost and/or demand conditions of a business firm. It may happen that as a result of certain broad changes which were not anticipated by the entrepreneur, the firm has to incur losses. Thus, the entrepreneur has to bear these financial risks. Apart from financial risks, the entrepreneur also faces technological risks which arise due to the inventions and improvement in techniques of production, making the existing techniques and machines obsolete. The entrepreneur has to assess and bear the risks. However, Frank Knight is of the opinion that profit is the reward for bearing uncertainties. An entrepreneur need not bear the foreseeable risks such as of fire, theft, burglary etc. as these can be insured against. Uncertainties are diuerent from risks in the sense that these cannot be insured against and therefore, the entrepreneur has to bear them. For example genuine business uncertainties such as change in tastes, emergence of competition etc. cannot be foreseen or insured against. Thus, an entrepreneur earns profits because he bears uncertainty in a dynamic economy where changes occur every day. While nearly all functions of an entrepreneur can be delegated or entrusted with paid managers, risk bearing cannot be delegated to anyone. Therefore, risk bearing is the most important function of an entrepreneur

(iii) Innovations: According to Schumpeter, the true function of an entrepreneur is to introduce innovations. Innovation refers to commercial application of a new idea or invention to better fulfilment of business requirements. Innovations, in a very broad sense, include the introduction of new or improved products, devices and production processes, utilisation of new or improved source of raw-materials, adoption of new or improved technology, novel business models, extending sales to unexplored markets etc. According to Schumpeter, the task of the entrepreneur is to continuously introduce new innovations. These innovations may bring in greater eflciency and competitiveness in business and bring in profits to the innovator. A successful innovation will be imitated by others in due course of time. Therefore, an innovation may yield profits for the entrepreneur for a short time but when it is widely adopted by others, the profits tend to disappear. The entrepreneurs promote economic growth of the country by introducing new innovations from time to time and contributing to technological progress. But innovations involve risks and only a few individuals in the society are capable of introducing new innovations. The greater the innovating ability, the greater the supply of entrepreneurs in the economy, and greater will be the rate of technological progress.

Goods and Service Tax Book (Updated upto 20th January 2018)

GST Student friendly Book most relevant/Useful for CA Intermediate/IPCC, CS executive , CWA Intermediate and CA final. 

Also useful for B.Com / M.Com / MBA/ BBA/UPSC/ SSC and Various Govt Exams.!! 

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Author Name- CA Harshita Raichandani and CA Dhananjay Ojha

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GST (Goods and Services Tax) Book -A student friendly Book. - Bharat Gurukul

GST Student friendly Book most relevant/Useful for CA Intermediate/IPCC, CS executive , CWA