Why of Entrepreneurship

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While not an expert on theory of entrepreneurship , I would like to offer my two cents on why people start new ventures, obviously subjective.

Success of entrepreneurships has a low percentage but everyone is happy when a new venture succeeds. When established ( succeeded for a long time, steady state response), it results in a product (or services) in a location which in turn produces a) New jobs and salaries that produce wellbeing b) Additional wealth which can fuel expansion or a new venture. If an old product already exists, consumers would already exist. Some entreprise would probably diminish or die for new entrant to come in. We could call such ventures as Evolutionary Enterprises. Bring ing solutions from far will be examples of such ventures; improved products a company may bring out to replace their existing products would also fit in this category.

For a product that did not exist, a new consumer set has to be created and time period involved to build this up is an additional burden. Some new jobs are created. Locality is not a necessity. Rather than many new jobs, a reputation may be built to catalyse additional activity. These could be called Revolutionary Enterprises. Clearly, an entrepreneur's motive in this case is more altruistic, longer term in nature and the risks are higher. Rewards especially in terms of reputation are higher. A typical enterprise would rest between these two extremes. Silicon valley produces 5 people revolutions, Europeans produce 200 people improved communication systems.

Consumers in either case benefit, and appreciate the enterprise in the form of revenue to fund both growth (a) and new enterprise (b). Both enterprises are necessary to increase the wellbeing of everyone in the location or a larger entity. Consumers are always critics of products, tougher than any employee's supervisor.

Using unusual nomenclature, a venture needs fixed assets/expenses unrelated to number of workers and per worker amounts. Existence of large fixed assets injects a sense of an economic size, whereas if these were small compared to say monthly revenue per employee, an enterprise can exist at different sizes. For example, if the cost of minimum optical fibre connection for an expected size of (about 200 employees) corresponds to two months of revenue of the employee, then any number in the range 50-200 is OK. However, if it is 50 months worth of investment for 200 employees, 200 is better optimized compared to 50. This number is small in the knowledge industry. Both fixed expenses are lower and per employee revenues are higher.

While steady states are easier to understand, transients are more difficult. The rate of growth of entrepreneurship is dependent on wealth generated per employee. Dealing with transient state, requires right proportions at the right time. Besides wealth, another key ingredient is prime movership. She has to solve the transient solution aiming at the right steady state size without requring huge instantaneous injection of capital. Keeping an eye for the net amounts spent is also critical. Let us draw a list of what we think should be the characteristics of such a person.

1) She is a necessary cog in increasing wellbeing of the community, assuming evolutionary entrepreneurism.
2) Good at imagining a sustainable steady state and the path between present and steady state with possible amount of wealth at her disposal. Looks like a great planner.
3) For successfully executing the plan, the community rewards her with wealth and fame.
4) Through transition, she will probably require to live with less, bringing in "delayed gratification", which I believe is a necessary quality.
5) If she fails, not all is lost, next time she has a better chance of succeeding than a novice.

Sorry, if I have not kept clear delineation between capitalism and communism. We wanted to discuss entrepreneurship.

Typical reasons such as not wanting a boss, making a lot of money and fame also do not take centre stage in these arguments.

I hope the conclusions are justified by the arguments presented. Typical of second type of entrepreneurship, there are not many references to earlier work.