Entrepreneur is the Essential Factor of Production, Critically examine this statement and also explain the role of the Entrepreneur.
In earlier
times, wants were few. Each man did his own efforts and produced things he was in
need of. He had his own land, his own labour and capital and thus produced the
essential things. But nowadays production is highly organized and complex.
The invention of machines has revolutionised the system of production. The
modern process of production is very long. It is carried on with the help of
hired labourers. The work for producing even an insignificant thing is now
divided into a number of operations. This results in the division of labour. Each
man or each group of men is engaged in performing only one particular
operation. This complexity of modern production has brought the question of
organization or entrepreneurship into prominence.
The organizer or
entrepreneur may not be a risk-taker. He is the captain of the industry. The armies
of the industry can no more be raised, equipped, held together, moved and engaged
without their commanders or entrepreneurs. He has to select a suitable site
for his factory. He has to secure machinery and tools required for
production. He has to purchase his raw materials from and sell the finished
products at the best market. In short an entrepreneur is a person who has to
collect, adjust and Marshall
He starts the
work, organizes and supervises it. He undertakes to remunerate all the factors
of production, to pay rent to the landlord, interest on the borrowed capital
and wages to labour and pay them in advance of the sale of goods. The residue
if any is his. Nothing may be left after he has made the necessary payments. In
that case, his venture will have been miscarried. But it is also possible that
he may be lucky to make a handsome profit. Whatever may be the outcome, he must
be prepared to accept it. He thus takes the final responsibility for the
business. If he has anticipated the consumer’s wishes origin and interpreted
them correctly, he is amply rewarded. Organizing or risk-taking or uncertainty
bearing as it is sometimes called are the two chief functions of the modern
entrepreneurs.
The entrepreneur is the inventor. Innovation by the entrepreneur
implies a variety of things. It may mean the introduction of a new method of
production or an improvement in the old methods. It may consist of the
introduction of a new commodity like the transistor radio sets or a new make of
old product e.g. yet another brand of toothpaste. Innovation may refer to the
discovery of new materials, fresh sources of old materials, or new uses for
materials or final goods. It also includes the opening of new markets.
Innovation may also take the form of new techniques in the way of
administration, finance, marketing or human relations inside the business and
public relations outside i.e. with suppliers of materials and consumers of
products. It is involved finally, when new forms of business organizations are
instituted, such as chain stores, the merger of several establishments or a
monopolistic combination among producers.
It will be
easily understood that uncertainty is inherent in the making of the decisions
like those enumerated above and also in any innovations that may be adopted.
The all-embracing function that the entrepreneur performs is therefore that of
uncertainty bearing.
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