Entrepreneurs and Their Communities: Part 3 “What is Entrepreneurship and Why Do People Become Entrepreneurs?”

How would you answer the question “What is entrepreneurship? If you asked a mix of people in your community that question how do you think they would answer? Just for giggles ask several of your aquatints in your circle of friends and business colleagues to see how they define entrepreneurship. Chances are the majority of the answers will include the terms business owner or job creator and perhaps innovator.

A follow-up question is “Why do people become entrepreneurs?” How would you answer that question? How do you think folks in your community might answer that question? Many of the answers to this question will typically include terms like: to work for themselves; to make a living; to be able to stay in the community; because they can’t get a job; to earn more money; or because they have an idea for a new product or service.

Historically entrepreneurship has at least two meanings. Broadly speaking the first meaning is based on the concept of owning and managing a business. The business might employ only the entrepreneur or grow to employ others depending on why the entrepreneur started the business and the business owner’s management skills and drive to develop the business. The second meaning refers to a behavior, the thought that entrepreneurs identify and seize economic opportunity by developing and marketing new products or services. 

Types of Entrepreneurs - Why do people become entrepreneurs?

Entrepreneurs can be grouped in two broad categories: Necessity Entrepreneurs and Opportunity Entrepreneurs. 

Necessity entrepreneurs would normally prefer a career and job working for someone else but for a variety of reasons cannot find a position. According to Don Macke, RUPRI Center for Rural Entrepreneurship, “In rural areas, a close association between a persons’ choice to live in a particular area and the lack of suitable careers/jobs typically results in necessity entrepreneurship.  Also, individuals become necessity entrepreneurs because they do not agree with their current employer or employment, they are tired of commuting long distances for work, or they need a more flexible work environment.  Typical outcomes for necessity entrepreneurs are failure, survival entrepreneur (e.g., getting by, but not doing well), lifestyle entrepreneur e.g., doing well & generally happy), or opportunity entrepreneur.”

Opportunity entrepreneurs are people who like being an entrepreneur and are typically good at entrepreneurship. Generally speaking, opportunity entrepreneurs have more development opportunities and make significantly greater economic impacts than necessity entrepreneurs. Opportunity entrepreneurs create a few dozen to a few hundred jobs.  No comprehensive research is available on the percent of opportunity entrepreneurs in rural areas. However, Don Macke suggests that based on his field experience, 10% to 15% of all business owners in rural areas could be defined as opportunity entrepreneurs. Research indicates that the rates of opportunity entrepreneurship tend to increase in stronger economies where business opportunities are significantly greater.