Entrepreneur As A Factor of Production

INTRODUCTION

An entrepreneur can be defined as the factor of production that co-ordinates and organizes other factors of production (Land, Labour and Capital) in order to produce goods and services. The entrepreneur bears the risks and takes his capital in setting up the business with the aim of obtaining maximum profit.

In summary, the entrepreneur is the person who co-ordinates, controls and organizes the process of production in order to make maximum output at minimum cost thereby making profits. He is the Managing Director (M.D) or the Chief Executive Officer (CEO) in an executive office. The reward for this factor called entrepreneur is what we refer to as profit.

Characteristics of features of entrepreneur

1. Risk bearing: He risks his capital in the course of investment and whatever comes out of it, whether good or bad, he has to take.
2. Organization: He is the one who organizes productive resources for the production of goods and services.
3. Decision making: He is the one who takes decisions in the course of production, which can lead to enhanced or improved results.
4. Control of Other Factors: He has the absolute control over other factors of production e.g. their combinations in order to get maximum production at minimum cost.

Importance of Entrepreneur As A Factor of Production

1. Decision making: The entrepreneur takes decisions during the process of production. He may take decision on what to produce, quantity to produce, what to supply and at what price to sell. Good decisions taken will bring out positive results.
2. Provision of capital: The entrepreneur is responsible for the provision of capital for the business. The availability of enough capital will determine the level of success of the business. His capital may include physical cash, buildings, motor vehicles, plants and machinery.
3. Risk bearing: He is the one who bears the risks associated with the business. Lots of risks are involved in all business set up e.g. stealing, bad weather and fire. When his goods are in high demand, he makes profit but when the reverse is the case, he suffers losses.
4. Efficient management: The entrepreneur also ensures efficient management of the business by combining the other factors of production in order to maximize production as well as profits.
5. Effective organization: The entrepreneur also ensures an effective organization in the business. He ensures that he has trained, experienced and qualified personnel and assigns duties to them to ensure effective operations in the business.

REVISION QUESTIONS

1. What do you understand about the term 'entrepreneur'?
2. Explain five characteristics of entrepreneur.
3. Explain five importance of entrepreneur.

You can also read the following related topics:
1.Labor as a factor of production
2.Capital as a factor of production
3.Land as a factor of production
4.Limitations to the scale of production