French term (taken over into English) for "enterpriser" or "one who undertakes." An entrepreneur is a person who detects a previously untapped opportunity to make substantial profits (either by lowering the costs of producing existing good/services or by creating brand new ways for people to satisfy their wants through new products) -- and then takes the initiative in bringing together the necessary factors of production to exploit this opportunity, typically by organizing a new business firm (or perhaps a new subdivision of an existing firm) for the purpose. The new opportunity which the entrepreneur has detected may involve the introduction of a new good or service only recently invented or improved. It might involve introducing some existing good or service into a new market area where it is presently unavailable or deepening the original market by finding and publicizing new ways for new groups of customers to use it. It might involve recognizing the potential of some new production technology for dramatically lowering the costs of production of an existing good or service, making it possible to garner huge sales increases at the expense of much higher cost substitutes that are thereby rendered obsolete and no longer competitive. Entrepreneurs thus serve an important role in enabling the economy to adapt to changing conditions and new possibilities for material improvements by creating new production organizations, and even whole new industries. Because of its essential role in initiating the process of production, entrepreneurship is identified by some economists as a "fourth factor of production ," alongside land , labor and capital .

In its essence, entrepreneurship involves looking ahead to foresee future conditions of supply and/or demand that will be quite substantially different from present conditions. Having arrived at a vision of the future based on observation of previously unnoticed trends, tentative theories, recent discoveries and inventions, and a large dose of creative imagination, the entrepreneur differentiates himself from the prophet, the social scientist and the idle dreamer by taking practical action to reallocate costly resources in the present so as to prepare for meeting an expected future demand. However, if the entrepreneur's vision of the future proves to be incorrect, all or part of the resources mobilized to prepare for that future may prove to have been wasted, so there are risks of large losses. The prospect of far above average profitability is normally necessary to attract the necessary resources into an undertaking with such a high possibility of loss. Being the first in the field with an exceptionally good idea may well yield far above average profits because of the possibilities for explosive sales growth and because of especially favorable pricing conditions enjoyed due to the temporary monopoly the firm enjoys until imitators can gear up to enter the marketplace. More...

English glossary of political economy terms.      Английский глоссарий политико-экономических терминов.