Nowadays, entrepreneurship is a word that gets thrown around a lot. Often it is done so seemingly without the total command of the meaning of the word. According to the Global Entrepreneurship Monitor (GEM), however, there are 582 million entrepreneurs in the world. Let’s put this staggering number into perspective. If the world’s population is at 7.8 billion, this would mean that one in 13 people is an entrepreneur. But, what exactly does this word mean? What types of entrepreneurship are there? How important is entrepreneurship for the global economy? We will try to answer all of these questions and more.
What is entrepreneurship?
Entrepreneurship is the process of coming up with an idea for a business venture, developing it, and finally, launching and running that same business venture.
The person undertaking entrepreneurship is then called an entrepreneur.
According to the US Bureau of Labor Statistics (BLS), around 20 per cent of small businesses fail within their first two years.
Even worse, according to some sources, up to 90 per cent of startups fail within the first 5 years.
Taking this into account, it is clear that all types of entrepreneurship involve taking financial risks as well.
Even so, 2 out of 3 people worldwide consider entrepreneurship to be a good career choice.
However, even with this explanation, entrepreneurship still remains quite a vague term.
These are its most basic characteristics, but there is much more to it, especially when it comes to different types of entrepreneurship. Let’s take a look.
The 4 types of entrepreneurship
There are four basic types of entrepreneurship.
Small business entrepreneurship
A great majority of businesses in the world today are actually a result of small business entrepreneurship.
The percentages may differ slightly from country to country, but the bottom line is the same.
In the US, for example, 99.7 per cent of all companies are small businesses.
They also employ 50 per cent of all workers, not counting those that work in government institutions.
In essence, these small businesses are started by people who run them and work in them, usually employing family members or local people.
They fund their small business through family savings, small bank loans, or loans from friends and family.
Their main aim is to earn a living to support their families. Small businesses rarely have the scale to attract venture capital and grown into something else.
On the other hand, it is possible to expand small businesses beyond their initial capacities.
Think businesses like hairdressers, grocery stores, travel agents, consultants, etc.
Most of these businesses are service businesses and they involve the least risk out of all of the types of entrepreneurship.
If you are looking to start a low-risk business, perhaps this is the type you should look into.
While there is a competition between small businesses aiming at the same market niche, overall there is a feeling of community between small business owners and a desire to support one another.
So bear that in mind when running your business.
For example, if you want to relocate your business with adequate help, try to hire a family-run moving company if you can, etc.
Your support will surely pay off.
Scalable startup entrepreneurship
This is one of the types of entrepreneurship for which the original idea and vision are of utmost importance.
Ideas that have the potential to change the world are what starts these businesses.
Startups require funding from venture capitalists and hire the best possible people they can find for the job.
The plan is always to find a scalable and repeatable business model in order to grow their business.
Once they have found it, they require further funding so they could expand.
Examples of this type of entrepreneurship are all around us in the form of highly successful ventures like Facebook, Instagram, women-only co-working space the Wing, etc.
Even though we have all heard of some examples of these types of businesses, they still aren’t numerous.
The reasons for this are the high risk and outsize profit that characterize them.
Large company entrepreneurship
Large companies are types of entrepreneurship driven by developing sustainable innovation.
They have cornered a part of the market with some of their core products, but are always developing new products that are variations on those basics.
These new products are necessary to keep the customers – their needs are changing and technology is always advancing.
Very often, large companies partner with smaller innovative companies in order to stay ahead of the curve.
Some examples that you have probably thought of already are Apple, Microsoft, Samsung, etc.
As stated above, each of the types of entrepreneurship hangs on the entrepreneurs’ ability to come up with something innovative and original.
Social entrepreneurship does the same, with a heavy slant towards what is perceived as social needs and problems.
Making the world a better place, however, cliché that sounds is higher on the list of priorities of social entrepreneurs than making a profit.
For this reason, these ventures can be non-profit, hybrid, and profit.
One famous example is Muhammad Yunus who won the Nobel Prize for founding Grameen Bank.
He based his bank on microcredit and microfinance principles which help people get out of poverty.
The importance of different types of entrepreneurship
Now that you are familiar with the actual meaning of entrepreneurship and its different types, you probably have some idea of why it is important for both national economies and the global market.
- Creation of jobs. Starting a business venture opens up space for job opportunities of different levels. In many cases, they are particularly hailed for creating entry-level jobs that allow people to gain the skills and experience they’ll need in the future.
- As is evident from the text, innovation is the driving force behind entrepreneurship. Without it, there would be no entrepreneurs and, consequently, fewer, if any, improvements made in the world.
- Social development. The social benefits of social entrepreneurship are clear. However, the ways communities benefit from other types of entrepreneurship as well shouldn’t be overlooked. The more jobs there are, the more money there is to spend on making our communities better through investing in education, social safety nets, etc.