The entrepreneur may personally bear all or most of the risk of the new enterprise by using only his own resources and thus becoming the sole owner of the business. Frequently, however, the entrepreneur will organize the business in such a way as to share the risks with others, either by borrowing part of the initial financing from banks or from wealthy passive investors or by selling bonds. The entrepreneur may even give up part of the ownership of the enterprise (and thus part of the claims on future profits) to other partners or share-holders willing to buy their way in after the entrepreneur has developed and explained the basic concepts of the new undertaking. However, such risk-sharing arrangements will normally be structured by the entrepreneur in such a way that the entrepreneur retains an ownership interest larger than his original share of the resources put at risk. In other words, there are financial returns to entrepreneurial creativity above and beyond the returns demanded for pure risk-bearing. Entrepreneurship is something above and beyond risk-bearing or even ownership of the enterprise, even though any or all of these functions may happen to be performed by the same person in individual instances.

Because the entrepreneur originated the idea of the business venture and took the lead in mobilizing the human and non-human resources to make it a reality, the entrepreneur often takes on the role of operational management of the new enterprise as well, especially during the lean early years before the basic assumptions of the undertaking have been proved valid in practice. However this need not always be the case, and many highly gifted entrepreneurs in history seem to have been quite remarkably lacking in ordinary managerial ambitions and basic skills. Once the core entrepreneurial function of discerning the new profit opportunity and mobilizing resources to exploit it has been fulfilled, the task of exerting day to day control so that these resources are efficiently employed to meet the owners' planned objectives can well be delegated to professional managers who need not be either entrepreneurs or even share-holders.

Even though entrepreneurs frequently become managers, and even though professionally trained managers sometimes become entrepreneurs, the function of entrepreneurship is as separate and distinct from management as it is from ownership and risk-bearing. It is good to keep this in mind, because the term "entrepreneur" is sometimes applied incorrectly and indiscriminately in ordinary speech to any business owner or high-ranking manager.

[See also: factor of production ]

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