1. Theories & Concepts of Entrepreneurship
ETR3153
By: Wan Nurhamizah Wan Zakaria

2. Session Objectives
At the end of the session, students should be able to:
Understand the various theories and concepts of entrepreneurship
Have a deeper understanding of the discipline of entrepreneurship

3. Definition of an Entrepreneur
“An entrepreneur is a person who undertakes to do a job”. The term entrepreneur originated from a French word “entreprendre” was first coined by Richard Cantillon (1755).
In Malaysia, the term “usahawan” is used to mean entrepreneur.

4. Definition of Entrepreneurship
Entrepreneurship involves not only the process that leads to the setting-up of a business entity but also the expansion and development of an going concern.
The study of entrepreneurship is concerned with the entrepreneurial behavior, the dynamics of business set-up and expansion or development of an entrepreneurial organization.

5. Development of Entrepreneurship Theories
Adam Smith (1776) – An entrepreneur is a person who acts as agent in transforming demand into supply.
Jean Baptiste Say (1803) – An entrepreneur is a person who shifts resources from an area of low productivity to higher productivity.
John Stuart Mill (1848) – An entrepreneur is a prime mover in the private enterprise. The entrepreneur is the fourth factor of production.

6. Development of Entrepreneurship Theories
Carl Menger (1871) – The entrepreneur acts as an economic agent who transforms resources into products and services. These transformation process gives added value to the output.
Joseph Aloysius Schumpeter (1934) – The entrepreneur is an innovator. The economy moves through leaps and bounds because of the innovations. This process is known as “creative destruction”
Alfred Marshall (1936) – The process of entrepreneurship development is evolutionary. The entrepreneur is responsible for the evolution of sole proprietorships into a public company.

7. Development of Entrepreneurship Theories
Ibnu Khaldun (Abdul Rahman Mohamed Khaldun) – The entrepreneur is seen as a knowledgeable individual and is instrumental in the development of a city-state where enterprises emerge.
David C. McLelland (1951) – The entrepreneur is a person with a high need for achievement. This need for achievement is the foundation of the entrepreneurship process.

8. Islamic Entrepreneurship
Discussion on Islamic entrepreneurship is based on the following main topics:
Integration
Human nature
Motivation
Islamic business and entrepreneurs
Islamic economic system
Guidelines
Exemplary conducts

9. The Concept of Integration
Islam is a complete way of life. There is no separation between business and religion.
Islamic entrepreneurship is part of the way of life.
Muslims are encouraged to get involve in business activities. (9/10 rezeki adalah dalam perniagaan – Hadis Nabi)

10. Human Nature
It is part of human nature to follow the teachings of their religion.
In Islam, Muslims are required to fulfil two important duties, “ibadah” and “khalifah”.
In Islamic entrepreneurship, Muslims are able to perform both duties.
Maximizing profit is not the ultimate aim of Muslim entrepreneurs.
“Islamic Man” versus “Economic Man”

11. Motivation
Following the sunnah of ambiya and the companion of Rasulullah saw.
Islamic entrepreneurship leads to the path of success both in this world and the hereafter.
Success in Islam is not measured by the end result but also the means and ways of achieving them.

12. The type of success according to Al-Qurtubi
Halal (Rightful means of living)
Qanaah (Satisfying)
Taufiq (Guidance)
Sa’adah (Tranquility/Happy)
Jannah (Heaven)

13. The level of success according to Al-Ghazali
Depends on the following:
Level of knowledge
Level of repentance
Level of challenges
Level of obstacles
Level of motivation
Level of handicap
Level of praise and thankfulness

14. Possession of Wealth
In Islam, possession of wealth is allowed based on the following principles:
Allah s.w.t. is the absolute owner of wealth
Allah s.w.t. has created wealth in abundance (melimpah ruah) and sufficient (mencukupi) for all
Allah s.w.t. has created wealth for mankind
Wealth is entrusted to mankind

15. Entrepreneurship as Ibadah
Muslim entrepreneurs involvement in business is to fulfill an obligation known as “fardhu kifayah”
Fardhu kifayah~ Unless and until there is an entrepreneur in a community, the entire community is deemed to be sinful.
Muslim entrepreneurs bear the responsibility to provide goods and services primarily to the Muslim community and to others

16. Islamic Entrepreneurship Model
Islam Propagates
(Business Venture)
Allah Prepared
(Facilities)
EXAMPLE
EXAMPLE
Islam Provides
(Guidelines & Procedures)
Allah Promised
(Rewards)

17. Islamic Economic System
Islamic entrepreneurship is part of the framework of the Islamic Economic System.
Islamic economic system involves:
Islamic banking
Islamic insurance (takaful)
Islamic capital markets
Islamic economic system is based on Islamic jurisprudence.

18. Guidelines and Procedures
Islam has provided an extensive guidelines for Islamic entrepreneurship activities.
Among others:
The principle of buying and selling
The permissible types of business
The principle of “zakat” in business
Business ethics

19. Entrepreneurial Ethics
Prevent laziness
Eradicate fear/shyness
Search for legitimate ventures
Avoid unlawful sources of income
Show gratitude and thankfulness
Grow and develop wealth
Diversify business ventures
Avoid greediness

20. Entrepreneurial Ethics
Avoid malicious behavior
Avoid squandering (elakkan membazir)
Avoid stinginess (elakkan kedekut)
Pay zakat and alms (sedekah)
Be trustworthy
Pray consistently
Tawakkal
Patience
Qanaah

21. Exemplary Conducts of Muslim Entrepreneurs
Business is secondary to the call of jihad (crusade)
Never use power or influence for self-interest
Afraid of accumulated wealth
Leadership qualities in all aspects
Practice moderate way of life