Question

Explain in detail the functions of an entrepreneur.

Answer 1

An entrepreneur basically performs three important functions. These functions are:

1. Organising Function
2. Bearing risks and uncertainty
3. Innovative function

• Organising: An entrepreneur aligns the activities in a certain order. That is, he designs the roles and directs the people towards the accomplishment of organizational goals. Also, under this function, human efforts (labor), along with the resources (land and capital), are brought together and coordinated. Besides this, it also includes making payment to the factors of production, supervising the activities of the factors of production, and making decisions about what to produce, how to produce, etc.
• Bearing risks and uncertainty: An entrepreneur performs the function of bearing the risks in the business. Every business is subject to a variety of risks, such as the risk of failure of the business, the risk of loss due to uncertain events, etc. Some of these risks are insurable, while some are non-insurable. The insurable risks include the risk of death, risk of burglary, risk of fire, etc. On the other hand, risks arising out of a change in government policies, changes in the demand for a product, etc., are a part of the non-insurable risks.
• Innovative functions: An entrepreneur, in addition to performing the organizing and risk-bearing functions, also undertakes activities related to innovation. He is an innovator in the sense that he introduces a new combination of the means of production. This combination of the means of production can be done by introducing new products, new techniques, a new market, new sources of raw materials, etc.