Definition (quick answer)

Entrepreneurship is the process by which individuals or groups pursue a commercial opportunity by bringing something new—or meaningfully improved—to market, most often through forming a start-up company designed to grow. It is a dynamic process that operates under uncertainty and risk and plays a central role in innovation, economic growth, and long-term productivity.

Entrepreneurship and the American tradition

“The fundamental impulse that keeps the capital engine in motion comes from the new consumers’ goods, the new methods of production and transportation, the new markets … [The process] incessantly revolutionizes from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact of capitalism.”

— Joseph Schumpeter

Entrepreneurship is deeply embedded in the American identity. The American experiment itself can be understood as an entrepreneurial undertaking—rooted in a frontier spirit of freedom, adventure, and self-reliance, alongside a commitment to democratic values of fairness and cooperation. Entrepreneurs, past and present, occupy a prominent place in American culture, and the idea of striking out on one’s own is woven into the nation’s social fabric.

Indeed, entrepreneurship seems to be everywhere, but what is it exactly?

Why entrepreneurship is hard to define

Despite its central role in the economy, entrepreneurship remains an elusive concept. Although interest in entrepreneurship is widespread and its importance broadly recognized, there is no single, universally accepted definition.

The word entrepreneur comes from the French entreprendre (to undertake), leaving wide latitude for interpretation and application.

This ambiguity is reflected in modern conceptions of entrepreneurship. Some define it statically, as small business owners or the self-employed, while others narrow it to firms that employ people. Others still follow the “Schumpeterian” dynamic view, or the creation of something new or improved to seize on a commercial opportunity—especially those innovations of product or process that are substanially different, and the growth-oriented businesses that are organized around them.

Entrepreneurship as a multidisciplinary phenomenon

The study of entrepreneurship spans a wide range of domains, including economics (incentives, markets), management (opportunity, process), sociology (influence, norms), psychology (motivation, biases), anthropology (history, culture), geography (co-location, regionalism), and law (contracts, firm structure).

This span of disciplines reveals that the study of entrepreneurship covers both processes and states of being, firms and individuals, internal organization and external environment, market motivations and extra-rational behavior, and temporal or lifecycle dimensions. In other words, entrepreneurship is a complex phenomenon.

A working definition of entrepreneurship

Our preferred definition of entrepreneurship and related concepts encompass these elements in both scope and domain:

Entrepreneurship

Entrepreneurship is the process by which individuals or a group of individuals (entrepreneurs) exploit a commercial opportunity, either by bringing a new product or process to the market, or by substantially improving an existing good, service, or method of production. This process is generally organized through a new organization (a start-up company), but may also occur in an established small business that undergoes a significant change in product or strategy (see below on growth).

Entrepreneur

An entrepreneur is a person who organizes the means of production to engage in entrepreneurship, often under considerable uncertainty and financial risk. Entrepreneurs may partner with other entrepreneurs to jointly found companies (co-founders), or with an existing organization (e.g., corporate or university spin-outs).

Start-up company

A start-up company is a business organization that is formed by an entrepreneur or a group of entrepreneurs, which is used to coordinate the process of entrepreneurship under a common ownership structure.

Growth as the defining feature

A defining characteristic of start-ups is growth—either as a stated business objective or as the result of its success. Fundamentally, what differentiates entrepreneurial ventures from small businesses, and entrepreneurs from small business owners, is a desire or ability to grow—for entrepreneurs, growth is the primary objective, not to be one’s own boss or other non-pecuniary factors.

The temporary nature of start-ups

A second basic feature of start ups is that they are temporary—the stage of “starting up” is one of potentially many in a company’s lifecycle (e.g., sustained existence, an acquisition or public offering, decline, or closure), and thus must end. The study and policy priorities of entrepreneurship, entrepreneurs, and start-ups, then, are concerned with the process of establishing and developing growth-oriented companies in their early, formative years.

In summary

In sum, entrepreneurship is the process of starting and developing a company, with the aim of delivering something new or improved to the market, or by organizing the means of production in a superior way. This process is principally organized through the formation of a start-up company, is managed by entrepreneurs, often under considerable personal and financial risk, and is temporary in duration, as a phase in a business’s lifecycle.

A key distinction between start-ups and other small or young businesses is an aspiration (realized or not) to substantially grow. As companies mature out of the start-up phase, they evolve into sustainable businesses, are acquired or sold to public investors, or decay and may eventually shut down, as new companies start-up and take their place.

Common questions

Is entrepreneurship the same as self-employment?

Not necessarily. Some conceptions treat entrepreneurship statically as self-employment or small business ownership, while the dynamic view emphasizes bringing something new or substantially improved to market—often through growth-oriented ventures.

Does entrepreneurship only happen in new companies?

Entrepreneurship is generally organized through a new organization (a start-up company), but it may also occur in an established small business that undergoes a significant change in product or strategy.

Why is “growth” treated as a defining feature?

In this framework, what differentiates entrepreneurial ventures from small businesses is a desire or ability to grow. For entrepreneurs, growth is the primary objective rather than non-pecuniary motivations such as simply being one’s own boss.

What does “creative destruction” mean?

Creative destruction describes how new products, processes, and markets continuously reshape the economy by replacing older approaches—an ongoing process that “incessantly” creates the new while destroying the old.

Further reading