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Chapter 1
Small Business: Its meaning
Dr. Gopalakrishna BV
Associate Professor,
AJIM, Mangalore
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Contents
Meaning nature and definition of Entrepreneur
Concepts of Entrepreneur
Evolution of Entrepreneur
Characteristics of Entrepreneur
Types of Entrepreneur Functions of Entrepreneur
Qualities or Traits of Entrepreneur and skills
Role of Entrepreneurs in Economic Development Relationship between entrepreneur and
Intrapreneur, managers and entrepreneurship
Theories of Entrepreneurship
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Entrepreneur is an economic agent play animportant role in economic development of a
country. He possesses required knowledge, ski l ls, initiative,drive and spir i t of innovation and aims to achievegoals.
He is dynamic persons, who brings changes inprocess of production, innovation in business, newideas etc.
The term Entrepreneur is derived from French word
Entreprendre= ahn + tra + pra + nur = whichmeans is a person who organises and manages abusiness undertaking, assuming the risk for the sakeof profit.
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Generally speaking, entrepreneur refers to a
person who establ ishes his own business or
industr ial undertaking with a view to making
profi ts. An entrepreneur is considered to be
an originator of a business venture. He takes
the role of an organiser in the process ofproduction.
In the beginning the term entrepreneur used by
musical or other entertainment. Later in 16thcentury it was used for army leaders
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In 17thcentury Civi l Engineer ing uses this for
construction activities.
Only in 18thcentury the word entrepreneur was
coined by Richard Cantillon (1680-1734) an
Irish Economists entrepreneur refers to
economic activities. An entrepreneur is considered to be an
originator of a business venture. He takes the
role of an organiser in the process ofproduction.
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Definitions
English Dictionary, 1987 An entrepreneur isa person who sets up business deals in order tomake a profits.
J.B Say (1803) An entrepreneur is the
economic agent who unites all means ofproduction.
Richard Cantillon An entrepreneur is theagent who buys factors of production at certainprices with a view to setting its product atuncertain prices. He bearer risk, which is non-insurable.
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Peter F. Drucker Entrepreneur is one whoalways searches for change, responds to it and
exploits it as an opportunities. Innovation is a specific tool of entrepreneurs,
the means by which they exploit change as an
opportunity for different business or service. E.E. Hagen (1958) Defines an entrepreneur is
an economic man who tries to maximise hisprofits by innovations.
Innovations involve problem solving and theentrepreneur gets satisfaction from using hiscapabilities in attacking problems.
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Schumpeter (1952) An entrepreneur in anadvanced economy is an individual who
introduces something new in the economy amethod of production not yet tested by exper iencein the branch of manufacture concerned, aproduct with which consumers are not yetfamil iar, a new source of raw-mater ials or of new
markets and the li fe.
Accordingly to him the functions of anentrepreneurship are I ntroduction of new product
I ntroduction of new methods of production
Development of new markets and finding freshsources of raw-mater ials and
Making changes.
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Thus, an entrepreneur is always action-oriented.
He has the abil i ty to visualise the necessary steps
involved from idea generation to itsactualisation.
He is both a thinker and doer, planner and
worker. He is accepts r isk and manges it.
To summarise, an entrepreneur is the person who
bears r isk, unites var ious factors of production,to explore the perceived opportunities in order to
evoke demand, create wealth and employment.
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Concept of Entrepreneur
As said above definitions on entrepreneur are
broadly classified into three groups
Entrepreneur
Risk Bearer
Organiser
Innovator
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Functions of
Entrepreneur
InnovationRisk-
Bearing
Organization &
Management
New process & production
Creation of new market
New Technology
New sources of raw material
New sources of transport &
communications
Assembling Factors of
Production
Decide project
Raise Finance
Plan Production
Manage Enterprise
Earn Profit
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1. Entrepreneur as risk bearer
Richard Cantillon defined entrepreneur as an
agent who buys factors of production at certainprices in order to combine them into a product
with a view to sell ing i t at uncertain prices in
future.
He pays contractual income rent for land, wagesand salaries to labourers interest to capital.
Hence both of them are risk-bearing agents of
production. P.H. Knight described entrepreneur to be a
specialized group of persons who bear
uncertainty.
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2. Entrepreneur as an organiser
According to J.B. Say an entrepreneur isone who combines the land of one, labour of
another and capital of yet another and thus
produces a product.
By selling the product in the market, he pays
interest on capital, rent on land and wages to
labour and what remains is his profit.
This concept of entrepreneur is associated with
the functions of co-ordination, organisation and
supervision.
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3. Entrepreneur as an innovator
J.A Schumpeter (1934) considered economic
development as a dynamic change brought byentrepreneur by insti tuting new combinations of
factors of production i.e., innovation.
The introduction of a new combination accordingto him 1. I ntroduction of new product in the market
2. Use of new method of production, which is not yet
tested.
3. Opening of new market
4. Discovery of new source of raw-mater ials.
5. Br inging out of new form of organisation.
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Schumpeter also made distinction between
inventor and innovator
An inventor is one who discovers new
methods and new materials. An innovator
utilises inventions and discovers in order to
make new combinations.
Hence, an entrepreneur can be defined as a
person who tries to create something new,
organises production and undertakes risks andhandles economic uncertainty involved in
enterprise.
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Sl No. Name of the successful Entrepreneurs Areas of enterprises
1. Steve Wozniak Apple Computers
2. Bill Gates Microsoft
3. Oprah Winfrey Harpo inc.
4. Michael H & Jay Arrington Harpes Arring to Publishing
and media
5. Steven Spielberg Film Industry
6. Vera Wang Vera Wang Fashions
7. Donald Trump Trump Enterprises
8. Russel Simmons Pat Farm Clothing
9. Gordon Moore Intel Corporation
10. Tyler Perry Tyler Perry Productions
11. Bill Hewlett Hewlett Packard
12. Mark Burnett Television Show Producer
13. Larry Page & Sergey Brin Google
14. Ted Turner Turner Broadcasting
World famous and Successful Entrepreneurs
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Sl
No.
Name of the successful
Entrepreneurs Area of enterprises (industry)
1. Tulsi Tanti Suzion Energy Limited
2. Shiv Nadar Hindustan Computers Limited (HCL)
3. Rahul Bajaj Bajaj Group
4. Dr. Pratap Reddy Apollo Hospital Groups
5. Naresh Goyal Jet Airways
6. Narayana Murthy Infosys Technology Limited
7. Anil Dhirubhai Anil Dhirubhai Ambani Groups
8. Azim Premji Wipro Technologies
9. Ekta Kapoor Queen of Indian Television
10. Kiran Mazumdar Shaw Biotechnology Company in India
10 most famous Entrepreneurs from India
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Evolution of Entrepreneur
The term entrepreneur is derived from the French
word Entreprendre which mean to undertakebusiness activities for the sake of profits.
However the current meaning of entrepreneur hasevolved through centuries of various usages of the
same word.
Some stages of the evolution of the conceptentrepreneurare as follows
In the beginning the term entrepreneur used bymusical entertainment.
Middle Age Actor or person-in-charge of largescale production project.
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16th Century people who organised and led militaryexpeditions in France.
17
th
Century Person bearing the risk of either profitor loss in a fixed-price contract with the government.
18th Century An entrepreneur as a person is risk-taking and different from the person who supplies
capital. 19thCentury An entrepreneur is distinct from both a
financier as well as manager. A Finacier receivesinterest for funds supplied while a manager receivessalary for responsibilities discharged.
20thCentury An entrepreneur came to be know as aninnovator and risk-taker during the middle of 20thcentury.
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Characteristics of entrepreneur
An entrepreneur is a highly goal oriented,enthusiastic and energetic individual.
Anybody can become an entrepreneur provided hehas got a certain set of behaviour traits and
mental aptitudes. His success depends more on hard work than goodluck.
He must be a DOER and not a DREAMER.
The success of an entrepreneur depends largely onhis intel l igence, imagination capacity to innovate
and his abil i ty to turn visions into reali ties.
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It is not necessary that he should possess
a professorsintelligence,
a prophetsforeseeing capacity,a salesmanspersuasiveness,
a bankersfinancial talent,
a politicianspower,a filmstarsmagnetic personality.
The only capacity, very essential to become an
entrepreneur is the willingness to work hard.
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1. Action-oriented highly motivated and readyto take risk at all levels to achieve the goal.
2. Should have unwavering determination andcommitment.
3. Creativeness and result oriented,
hardworking4. Accepts responsibilities with enthusiasm
5. Self confident, dedicated and self disciplined
6. Both thinker and doer, planner and worker7. Future vision, intelligent, imaginative and
self directed.
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Characteristics of Entrepreneur
E - Effective communication
N - Negotiating skillsT - Total commitment/tactical/team man
R - Risk-taking ability
E - Emotional Stability/Ethical
P - Problem solvingR - Resultoriented
E - Energetic
N - Net working ability
E - Excellence in Economics
U - Unambiguous
R - Real Innovator
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Entrepreneurship
Decision Making
Risk Taking
InnovationManagement of
the enterprise A
Success
Skillful
Management
Organisation
Accepting Challenges
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1. Vision
An entrepreneur has a dream and visualizes to achievethat dream.
In doing so he visualises marked demand, socio-economic and technical environment.
Without a vision of making a big mark on the mobileindustry Dhirubhai and now Ambani could not have
made what Reliance Communication is today.2. Knowledge
An entrepreneur has sound conceptual knowledge aboutall the technicalities of his business.
Technological, operational, financial or marketdynamics.
For example without sound knowledge of computersNarayanamurty could not have made Infosys what it istoday.
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3. Desire to succeed
An entrepreneur has a strong desire to succeed in life.
Their dreams are not just limited to achieving one singlegoal but they constantly work to achieve higher goals.
For example Mukesh Ambani Retail, Real Estatesand Bio-tech.
4. Independence An entrepreneur needs independence in work and
decision-making.
They dontfollow the rules of thumb but make their own
rules and destiny. Shabeer Bhatia quite his job and start new business
on his own Hotmail, internet Portal andArzoo.Com.
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5. Optimism
Entrepreneurs are highly optimistic about achieving
their vision Narayanamurthy
Infosys forexample.
6. Value Addition
Entrepreneurs do not follow the conventional rules
of thumb.
They have a constant desire to introduce somethingnew to the existing business.
They create, innovate or add value to the existingproducts and services.
Without the value addition of introducing life timefree incoming call Tata Indicom.
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7. Leadership
An entrepreneur exhibits the qualities of leader.
They are good planners, organisers, good
communication skills, empathetic towards their
employees, good decision makers, initiative to
implement plans and result-oriented.8. Hardworkingwork is worship
They put in continuous efforts to achieve success
and know that there is no substitute for hard work. Put in hard work from now to find changes in your
own aspirations, growth and sustainability.
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9. Desire to have control over their own fate
Entrepreneurs do not want to move in herds
l ike sheep but want to pave their own paths.
They do not believe in luck or destiny but
create their own destiny.
Sarath babu of IIM, Ahmadabad.
10. Risk taking ability
Frank-Knight has identified risk-taking abilityas the most integral element in defining
entrepreneurial characteristics.
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Growth of Entrepreneurs
1. Low growth Entrepreneur
2. Medium growth Entrepreneur
3. High growth Entrepreneur
4. Very high Entrepreneur
Types of
Business
1. Business Entrepreneur
2. Trading Entrepreneur
3. Industrial Entrepreneur
4. Corporate Entrepreneur
5. Agricultural Entrepreneur
6. Retail Entrepreneur
7. Service Entrepreneur
Types of Entrepreneurs
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Use of Technology
1. Technical Entrepreneur
2. Non-technical Entrepreneur
3. Professional Entrepreneur4. High-tech Entrepreneur
5. Low-tech Entrepreneur
According to Area1. Urban Entrepreneur
2. Rural Entrepreneur
Gender and Age
1. Men Entrepreneur
2. Women Entrepreneur
3. Young Entrepreneur
4. Old Entrepreneur
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Stage of Development1. First Generation of entrepreneu
2. Classical Entrepreneur
3. Modern Entrepreneur
Scale of Entrepreneur
1. Small Scale Entrepreneur
2. Medium Scale Entrepreneur
3. Large Scale Entrepreneur
Others
1. Innovating Entrepreneurs
2. Adoptive Entrepreneurs
3. Fabien Entrepreneurs4. Drone Entrepreneurs
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Small Scale
Entrepreneur
Large Scale
Entrepreneur
Medium Scale
Entrepreneur
Scale of Production
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1. Innovative Entrepreneur
An innovating entrepreneur is one who
introduces new goods.
Inaugurates new method of production.
Discovers new market and re-organizes of the
enterprise. Peter F. Drucker - an innovating entrepreneur
is one who always searches for change,
responds to it, and exploits it as anopportunity.
He creates new values or increases the value ofwhat already exists.
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Joseph Schumpeter, only the innovating
persons are designated as entrepreneur.
The ordinary producers repeat the sameproduction for years where as innovatorsproduce new goods in new ways and enter intonew strategies.
1. I ntroduction of new product in the market
2. Use of new method of production, which is not
yet tested.
3. Opening of new market4. Discovery of new source of raw-mater ials.
5. Br inging out of new form of organisation.
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2. Adoptive or imitative Entrepreneur
Imitative entrepreneur is one who is ready to adopt thesuccessful innovations already inaugurated by innovating
entrepreneurs. In other words, an imitative entrepreneur does not
innovate anything by himself, but he only imitatestechniques and technologies innovated by others.
He follows the innovators after carefully observing howthe later fare and to what extent their innovation hascaught the imagination of the society.
Such types of entrepreneurs are particularly suitable forthe under-developed regions.
For example the Cochin Shipyard has been constructedby using the innovative technology provided byM itsubishi Heavy Industr ies L td by Japan.
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3. Fabian Entrepreneur
These are traditionally bounded entrepreneur
who always be cautious and they neither
introduce new changes nor adopt new
methods innovated by the most enterprising
entrepreneurs. They are lazy, follow old customs, traditional
sentiments etc.
Hence, they are total ly uninterested in takingr isk and imitatingsuccessful entrepreneurs.
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4. Drone Entrepreneurs
Drone entrepreneur is one who blindly fol lows
the traditional methods of production even
when it causes lots to him.
He is not prepared to introduce any change
under any circumstances in the method of
production he has already introduced.
He continue to carry out his business in the
traditional way even when he suffers losses
Coir Industry in Kerala is dominated by drone
entrepreneurs
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Types of Business
1. Industrial Entrepreneur
Industrial entrepreneur is an entrepreneur who is into
manufacturing of a product. He identifies the needs and wants of customers and
accordingly manufactures products to satisfy theseneeds and wants.
It would include all the entrepreneurs essentially intomanufacturing.
2. Trade Entrepreneurs
Trading entrepreneur is one who undertakes tradingactivities (buying and selling of goods and services) andis not concerned with manufacturing of products.
He identifies potential markets, stimulates demandsand generates interest among buyers to purchase aproduct.
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3. Agricultural Entrepreneurs
Agricultural entrepreneurs are those entrepreneurs
who undertake business related to agriculturalactivities.
Like farm equipments, fertilizers and other inputs ofagriculture.
They provide supportive products that can increase the
agricultural production through biotechnologies,mechanization and improvement in agricultural yield.
4. Service Entrepreneurs
Such entrepreneurs engage in service activities like
repair, consultancy, beauty parlor etc whereentrepreneurs provide service to people.
5. Corporate entrepreneurs
Corporate entrepreneurs undertake their businessactivities under legally registered company or trust.
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Stages of Development
First Generation Entrepreneur
A First Generation Entrepreneur is one who starts an
industrial unit by means of an innovative skill. He is essentially an innovator combining different
technologies to produce a marketable product or service.
Classical Entrepreneur
A Classical Entrepreneur a stereo-type entrepreneur isone whose aim is to maximize the economic returns at alevel consistent with the survival of the firm, with orwithout element of growth.
Modern Entrepreneur
Modern Entrepreneur is one who undertakes business tosatisfy the contemporary demands of the market.
They undertake those venture which suit the currentsocio-cultural trends.
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Use of Technology
Technical Entrepreneur - is essentially comparedto a master craftsman who develops and
improved quality of goods because of histechnological expertise. In this type concentration ismore on production than on marketing.
Non-technical Entrepreneurs are those who are
not concerned with the technical aspects of theproduct, but concerned only with marketing anddistr ibution for promoting their business.
High-tech Entrepreneurs who concerned with
updated technicalaspects of their product.Professional Entrepreneurs is a person who isinterested in establishing a unit, but does not haveinterest in managing it , once it is established.
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Rural Entrepreneurs
Entrepreneursselecting rural based industrial opportunity ineither khadi or village industries sector or in farm
entrepreneurship are regarded as rural entrepreneurs. According to khadi and village industry commission (KVIC)
Village or rural industry means any industry located in ruralarea, population of which do not exceed 10,000 whichproduces any goods and services in which fixed investment
of an artisan or a worker does not exceed Rs. 1,000.Women Entrepreneurs
According to GOI an entrepreneurs is defined as anenterprise owned and controlled by 16 women and havingminimum financial interests of 51% of the capital and giving
at least 51% of the employment generated in the enterprise towomen.
Women entrepreneurs play an important role in economyespecially in rural areas.
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Function of Entrepreneurs
Classical Approach - considered entrepreneur as
the owner and provider of capital. Modern Approach separates co-operate
ownership and control.
An entrepreneur has to carryout a combination of
function like innovation, risk-taking, decision-making organising and controlling etc.
In tune with the demands of dynamic business
environment and changing times - LPG An entrepreneur has to perform a number of
functions right from the generation of idea up tothe establishment of an enterprise.
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1. Primary function
Planning, organisation, decision-making,
management, innovation, risk-bearing2. Other function
Diversification of production, expansion of the
enterprise, maintaining cordial employer and
employee relations, talking labour problems, co-ordination with outside agencies.
3. Functions important for developing countries
Management of scarce resources, dealing withpublic, engineering, new product development,
parallel opportunities, marketing, management,
customer relation.
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Planning
Organisation
Decision-makingManagement
Innovation
Risk-bearing
Uncertainty-bearing
Primary Function Other Functions Functions importantfor developing
countries
Function of Entrepreneur
Diversification of
Production
Expansion of theEnterprise
Employer and Employee
Takling Labour Problem
Coordination with outside agencies
Management of scarce
Resources
Dealing with public
New Product
Development
Parallel Opportunities
MarketingManagement
Customer relations
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1. Planning planning is a first step of
entrepreneur. He prepares his plan of proposed
project or business in a very systematic way.Planning involves
Study of various ideas Scanning and
selection of the best idea Selection of
location of plant Deciding the type of
business organisation Preparation of
Budget Studying the govt rules and
regulations study Selection of work forceStudy selection of market strategies.
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2.Organisation An entrepreneur coordinates andsupervises the various tasks of organising for
optimal utilisation of resources.3.Decision-making He has to take effectivedecisions with regard to business objectives of the
enterprises. Arrangement of resources men,
material, machines, money, technology etc.4.Management managing of the day-to-dayproblems.
5.Innovationhe should be innovative in launchingof new product, new technology, new market etc.
6.Risk-taking he should undertake responsibilityof risk due to unforeseen situations.
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Importantfunctions of an Entrepreneur are
1. Idea generation
2. Determination of business objectives
3. Raising of funds
4. Procurement of machines and materials5. Market research
6. Determining form of enterprise
7. Recruitment of manpower8. Implementation of the project.
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1. Idea generation
The first and the most important function of an
entrepreneur is idea generation.
Idea generation implies product selection and
project identification.
Idea generation is possible through vision,
insight, keen observation, education,
experience and exposure.
This needs scanning of business environment
and market survey.
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2. Determination of business objectives
Entrepreneur has to state and lay down the businessobjectives.
Objectives should be spelt out in clear term. Theentrepreneur must be clear about the nature and type of
business.
Whether manufacturing concern or service oriented unitor a trading business.
3. Determining form of enterprise
Entrepreneur has to determine form of enterprise
depending upon the nature of the product, volume ofinvestment etc.
The form of ownership are sole proprietorship,partnership, joint stock company, co-operative society etc.
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4. Rising of funds
All the activities of the business depend upon the
finance and hence fund rising is an importantfunction of an entrepreneur.
An entrepreneur can raise the fund from internal
source as well as external source. He should beaware of different sources of funds.
He should also have complete knowledge of govt
sponsored schemes PMRY, SASY, REAP etc.
He can get govt assistance in the form of seed,
capital, fixed and working capital for his business.
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5. Market research
Market research is the systematic collection of
data regarding the product which the entrepreneurwants to manufacture.
Entrepreneur has to undertake market researchpersistently to know the details of the intending
product i.e. The demand for the product
Size of the market/customers
The supply of the product Competition
The price of the product etc.
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6. Procurement of machines and materials
Another important function of an entrepreneur
is to procure raw-materials and machines. Entrepreneur has to identify cheap and regular
sources of raw-materials which will help him to
reduce the cost of production and facecompetition boldly.
While procuring machineries he should specifythe technical details and the capacity.
He should consider the warranty, after salesservice facilities etc before procuringmachineries.
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7. Recruitment of manpower
To carry out this function an entrepreneur hasto perform the following activities
Estimating man power requirement for short
term and long term.
Laying down the selection procedure.
Designing scheme of compensation
Laying down the service rules Designing mechanism for training and
development.
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8. Implementation of the project
Entrepreneur has to develop schedule and action
plan for the implementation of the project The project must be implemented in a time bound
manner.
All the activities from the conception stage to thecommissioning stage are to be accomplished byhim in accordance with the implementationschedule to avoid cost and time overrun.
He has to organise various resources and co-ordinate various activities.
This implementation of the project is an importantfunction of the entrepreneur.
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Qualities of Successful Entrepreneurs
There are different belief on what makes
successful entrepreneurs.
The study conducted by Entrepreneurship
Development Institute of India (EDI) has
identified the following entrepreneurialcompetencies -
H igh achievement and success, Risk-taking,
Opportunity explorer, Planner, Stress taker,Facing uncertainties, Independent, Flexible,
Self conf idence, Motivation
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James J. Berne has stressed the following qualities ofgood entrepreneur
1. He is an enterpr ising individual energetic,hardworking, resourceful, aware of new
opportunities and able to adjust himself to changing
world.
2. He is interested in a advancing technologically and
improving the quali ty of his product or services.
3. He is interested in expanding the scale of operation.
4. He can adopt himself to changing world.
5. He is a f irm believer in planning and systematicwork.
6. He works for the society at large and for the good of
his fellow-being.
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Success and
Achievement
Motivation
Risk-bearingOpportunity &
explorer
Planner
Stress takerSelf-confident
Flexible Independent Facing
Uncertainties
Qualities ofEntrepreneurs
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3. Opportunity explorer
He always identifies opportunities and explores
them. New product, new technology, new market,
discovering new sources of raw-materials and new
means of transportation and communication.4. Planner
He is a good planner and doer. He plans and
follows the plans sincerely to achieve the goals.
planning is a first step of entrepreneur. He prepares
his plan of proposed project or business in a very
systematic way
5 St t k
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5. Stress taker
He should accept and bear any amount of
stresses that may evolve in the business. Fully commits himself to the project and rests
only when achieved longer hours works.
What ever problem arises he can take itpositive ways.
6. Facing uncertainty
They should face the uncertainties andunexpected outcomes and accept them sudden price increases, policy can be change,business recession etc.
7 I d d t
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7. Independent
He is an independent person and likes to be his
own master - He is a job given and not jobseeker.
An entrepreneur needs independence in workand decision-making.
The entrepreneurs dislike controls fromoutsiders government, politicians etc.
8. Flexible
He is an open minded person, flexible to adoptto demanding situational changes economicpolicy and budget policy etc.
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9. Self-confidence
He directs his abilities towards the accomplishment
of goals. What ever steps taken by him, he feel confident
about his ability.
10. Motivation
A Successful entrepreneur should be a goodadministrator.
He should know the art of getting things done by
other people without hurting their feelings or self-respect.
He initiates and influences people, motivates thepeople to accomplish the goals.
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Entrepreneurial Skills
Entrepreneurs do not shoot in dark room, they
are not gamblers, yes they do take risks but onlycalculated risk.
Some experts think of entrepreneurs are willing to
take risks that other people are not.
Types of risks
1. Career Risk
2. Financial Risk
3. Psychological risk4. Business Management risk
5. Technological risk
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1. Career riskown risk
He has risked his means to earn a living for
himself and his family. He takes a career risk either by not opting to take
up a job or by leaving a job.
In doing so, on one hand his livelihood is at riskand on the other hand, his professional reputationis at risk.
The career risks are
1. To work for someone else2. To be a self-employed professional
3. To be an entrepreneur
2 Fi i l Ri k
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2. Financial Risk
Any business venture needs finances for creation,
functioning and growth. And since there is an element of uncertainty
involved in the success of business, the financewhich he has arranged from his savings and
borrowings is at stake.3. Psychological Risk
Business involves a ser ies of uncertainty due to consumer demands, competi tors strategies, new
innovations and substi tute products, government
polices, changing economic conditions and
demographic trends etc.
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Technical Skills
Writing, Oral Communication, Monitoring
environment, Technical Business Management,
Technology, Interpersonal, Listening, Ability to
organise, Network building, Management style,
Coaching and Being a team player
Business management Skills
Planning and goal setting, Decision making,
Human relations, Marketing, Finance, Accounting,Management, Control, Negotiation skill, Venture
launch, Managing growth
Intrapreneur
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Intrapreneur
The term Intrapreneuremerged in during the seventies.
Several senior executives of big corporations left theirjobs to start their own small business.
Because the top bosses in these corporation were notreceptive to innovative ideas.
This kinds of Brain Drain phenomena is not limited toUS but also spread all over the world.
Every organisation faces the problem of suddenresignation of their top executive.
A few of these executives tend to become entrepreneursand start their own ventures.
Some of these business ventures may becomecompetitors to the organisation.
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I ntrapreneur is the person who focuses on
innovation and creativi ty and who transforms
a dream or idea into a profi table venture, byoperating within the organization.
Therefore, companies should provide such
entrepreneurial talents with adequate financialsupport and freed to develop their business
idea.
Those who do a good job for the company areto be rewarded with promotion and bonus.
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Gif ford Pinchot I I I an American Management
Guru suggested in 1985 that large corporations
should create smaller streams within theorganisation and allow certain executive to
operate like entrepreneurs.
He also suggested that these ambitious executivesshould be provided with adequate financial
resources and the autonomy necessary for the
development and application of their ideas.
Such a system would provide selected executives a
status similar to that of an entrepreneur in the
society intrapreneurs.
These intrapreneurs would introduce new
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These intrapreneurs would introduce newproducts, services and processes which enable thecompany to grow and succeed in a changing
environment. Infact, many American Corporations such as IBM,
GM DUPONT, AT and T, Texas Instruments etchave started encouraging intrapreneurs and have
had considerable success. For example Steve Wozniak small computer
Hewlett Packard, he left the popular company
Steve Jobs Apple Computers.
Thus, an Intrapreneur is an individual, whoperforms all the duties of an entrepreneur, butwithin an established organisation.
Role of Entrepreneurs in Economic Development
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Role of Entrepreneurs in Economic Development
Entrepreneurs play an important role in theeconomic development of a region.
Economic development implies development ofagr icul ture, industry and service sectors resultingin an increase in the per capita income of thecountry.
The economic development largely depends onhuman resources. Again human resources alonecannot produce economic development.
It requires an agent who is nothing but a dynamic
entrepreneur. The entrepreneur really acts as a captain of a ship
of economic development
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1. Coordinating role
The essential function of an entrepreneur is to
coordinate the var ious factors of production. Coordination involves selection of the r ight typeof factors, employment of each factor in the r ight
quanti ty, use of the best technology, division of
labour etc.
Schumpeter feels that economic development wi l l
be a reali ty if new combinations of factors of
production are undertaken.
In the absence of this coordinating role, thefactors of production will remain idle in the
country.
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2. Capital formation
Entrepreneurs promote capital formation by
mobil ising the idle savings of the public. Again, the profits they earn lead to savings of
wealth which ultimately goes to capital
formation. Entrepreneurs have been referred to as the
human agents needed to mobilse capital to
exploit natural resources, to create markets
and to carry on trade.
Without capital formation, economicdevelopment would remain static.
3 Generation of Employment
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3. Generation of Employment
By creating a new venture, entrepreneurs generateemployment opportunities for others.
Unemployment is a major issue, especially in the contextof developing economies like India.
Educated youth often are unable to get a suitable
employment for themselves.
Thus, entrepreneurs do the service by not onlyemploying themselves into entrepreneurial ventures, butalso by employing others.
From the last 20 years, Fortune 500 companies andlarge corporations have endured major retrenchmentand eliminated millions of jobs, whereas discoveries inthe entrepreneurial sector have yielded an average of600,000 new incorporations per year.
4 Improvement in Per capita income
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4. Improvement in Per capita income
Entrepreneurs locate and exploit opportunities.They convert the latent and idle resources likeland, labour and capital into national income andwealth in the form of goods and services.
They help to increase Net National Product and
Per Capita Income in the country, which areimportant yardsticks for measuring economicdevelopment.
5. Reduces Concentration of Wealth
Entrepreneurs help in reduction of concentration ofwealth and economic power in the hands of fewpeople.
6. Balanced Regional Development
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6. Balanced Regional Development
Entrepreneurs help in remove regional disparities ineconomic development.
Entrepreneurs play a dominant role to achieve balancedregional development by starting small-scale industries.
Small scale industries provide immediate large scaleemployment, ensure a more equitable distribution of
national income and thus facilitate balance regionaldevelopment.
I n addition, var ious concessions and subsidies, they set-
up industries in backward areas, facilitating the
development of that area ensur ing balanced regionaldevelopment.
They help in equitable distribution of resources, wealth,income and political power in the entrust of the country.
7 Resource Mobilisation
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7. Resource Mobilisation
Entrepreneurs encourage effective resource
mobilization of funds and skill which mayotherwise remain unutilized or underutilized.
8. Improvement in Standard of Living
Entrepreneurs help in removing scarcity ofessential commodities and introduce new
products which help to improve the standard of
living of a common man. Besides this employment generation also helps
in improving the living standards.
9 Role of Innovation
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9. Role of Innovation
Innovation is a key to entrepreneurship.Innovation implies the commercial application ofan invention.
As an innovator, the entrepreneur assumes the roleof a pioneer and an industrial leader.
Entrepreneurs have contributed many innovationsin developing new products and the existingproducts and services.
All these have resulted in economic developmentby providing more employment and more income
etc. Infact, the innovational activity raises the
productive efficiency of the economy resulting ingreater output and income.
10. Export Promotion role
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10. Export Promotion role
Entrepreneurs also promote a countrys export tradewhich is an important ingredient to economic
development.11. Harnessing Natural Resources
Entrepreneurs help in harnessing vast natural resourcesof the country for its economic growth.
12. National Self-reliance
Entrepreneurs help in manufacturing import substitutesthereby reducing dependence on foreign countries.
They contribute substantially in the countrys exporttrade and help to earn scares and vital foreign exchangefor the country.
This leads to economic independence of the country.
Stages in Entrepreneurial process
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Stages in Entrepreneurial process
Entrepreneur can increase their chances of success
if they understand, follow and implement thebasic six stage entrepreneurial process.
These six stages form the backbone of the
entrepreneurial process. Each of the stages includes a main focus activity,
tactics to complete the task, the estimated time
requi red for completing that stage, cost that may
be l ikely incur red for each activi ty which can be
used for preparing budgets.
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The six stages are as follows
Stage 1 Identify an opportunity
Stage 2 Establish a vision
Stage 3 Persuade Others
Stage 4
Gather ResourcesStage 5 Create New Venture
Stage 6 Change/Adapt with time
Stages in Entrepreneurial Process
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Stage 1 Identify an Opportunity
Stage 2 Establish Vision
Stage 3 Persuade Others
Stage 4 Gather Resource
Stage 5 Create New Venture
Stage 6 Change/Adapt with time
Stage I
Identification of New
Opportunities
Searching of New OpportunitiesR & D
Acquiring New Markets
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Stage I Opportunities Acquiring New Markets
Better Profits and faster economies of scale
Stage II Establishment of a
Vision and Mission
State of Vision
Clear Vision
Re-adjustment of Vision
Dream comes reality
Stage III Persuade Others
Multiple skills required
Team Works
Preparation of Business Plan
Stage IV Gather ResourcesFinancial ResourcesOperating Resources
Human Resources
Information Resources (MIS)
Stage V Create New Venture
Establishment of New Venture
EnthusiasmPersuasion
Passion
Self-believes and courage
Stage VI Change or Adapt
with Time
Adaptabilitychanging world
Global Business Environment
1. Identify an opportunity
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1. Identify an opportunity
Identification of an opportunity is the first step
towards building and running successful businessenterprise.
Entrepreneurs identi fy opportunity where other
see obstacles and impossibi l i ty R and D
Identification of opportunity at right time is of
utmost importance.
New opportunity catch-up market better
profi ts and faster economies of scale
Entrepreneur sense opportunities, they are creative
and are open to the new idea.
2. Establish a Vision
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Merely seeking opportunity is not enough, anentrepreneur further moves to establish a vision.
A dream for future which can be achieved only ifopportunities are tapped at r ight time.
He has complete faith in his vision and it is quiteclear to him.
Even if some market forces change he would re-adjust his vision to keep his dream viable andfruitful.
Every successful entrepreneurs have big visions
For example Dhirubai Ambani Reliance,Narayana murthy I nfosys technology, AzimPremji Wipro
3.Persuade othersTeam work
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An entrepreneur does not work alone, heunderstands that multiple skills are required to
make business successful team work. Entrepreneur forms a group of individuals who
would work together to realise his dreams.
An entrepreneur prepares a business plan to make
the vision and means of achieving the vision withothers team efforts.
Skilled workers, unskilled workers, financiers,family members, relatives etc.
For example Narayana mur thy of I nfosys wassupported by his wife for financial andpsychological backing and couple of fr iends.
4. Gather Resources
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4. Gather Resources
Identifying an opportunity establishing a visionpersuading others to join is not enough.
A business enterprise needs resources to be comesuccessful.
This is the phase, which can convert anentrepreneursdream into reality.
Resources can be considered under fourcategories
1. Financial resources
2. Operating resources3. Human Resource Management
4. Information Resources
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A. Financial resources
Finance is the life blood of any organisation. Finance is required to start, run and expand the
business.
Personal savings, family and friends, retainedcapital, commercial partnerships, banks,
venture capital, Government Institutions,
NGOs, floating public issues.
O ti R
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Tangible1. Machineries
2. Raw-materials
3. Land and buildings
4. Office equipment etc
Intangible1. Company image
2. Operating
procedures
3. Transportation
4. Management
Operating Resources
C. Human Resource Management
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g
Human resources are the only living and vibrant part ofthe organisation.
They are the most important resource of theorganisation.
This is due to rising competition, privatisation andglobalisation.
HR can provide them a cutting edge over others.Whether employees are permanent or
temporary/casual employees.
Amount and type of manpower in the organisation
Procedure for recruitment and selection.Training the employees
Compensation systems
Performance appraisals.
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5. Create new venture
In the fifth stage of entrepreneurial process isthe creation or establishment of the new
venture and running the business venture
successfully.
It requires lot of enthusiasm, persuasion
together optimum resources.
The running the business venture requires lot
of perseverance and passion to believe in self.
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6. Change or adapt with time
As change has become the rate of the game intodays business environment the
entrepreneur needs to continuously keep the
organisation upgraded and changing time.
It is not only involves availabi l i ty of fundsbut
also the adaptability of human resources
towards the changed environment.
Distinction between an Entrepreneur and a
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Distinction between an Entrepreneur and aManager
Sometimes, the two terms, namely, an entrepreneurand a manager are considered as synonym i.e.,meaning the same.
At times, an entrepreneur can be a manager, but a
manager cannot be an entrepreneur. Infact, the two terms are two economic concepts
meaning two different meanings.
The major points of distinction between the twoare
Motives, status, Risk-bearing, Rewards,
I nnovation and Qualif ications.
Factors Entrepreneur Manager
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Motive
An Entrepreneur starts a
venture by setting up a
new enterprise for his
personal gratification
But the main aim of a
manager is to render his
services in an enterprise
already set up by
someone else.
Statusentrepreneur is the ownerof enterprise
A manager is the servantin the enterprise
Riskbearing
An entrepreneur being the
owner of the enterpriseassumes all risks and
uncertainty involved in
running the enterprise
A manager as a servant
does not bear any riskinvolved in the enterprise.
Factors Entrepreneur Manager
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p g
Qualification An entrepreneur needs to
possess qualities and
qualifications like highachievement motive, originality
in thinking, foresight, risk-
bearing ability and so on.
On the contrary, a manager
needs to possess distinct
qualifications in terms of soundknowledge in management
theory and practice.
InnovationAs an innovator he is called aschange agent who introduces
goods and services to meet
changing needs of the
customer
A manager executes the plans ofthe entrepreneur. Thus a
manager translates the ideas
into practice.
Rewards Entrepreneur for his riskbearing role he receives profit.
It is not only uncertain and
irregular but can at times be
negative
A manager receives salary asreward for service rendered
which is fixed and regular can
never be negative
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Sl No. Entrepreneur Entrepreneurship
1. Person Function or process
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2. Organiser Organisation
3. Innovator Innovation
4. Motivator Motivation
5. Leader Leadership
6. Creator Creation
7. Risk-bearer Risk-bearing
8. Initiator Initiative
9. Visualiser Vision
10. Technician Technology
11. Imitator Imitation
12. Administrator Administration
13. Communicator Communication
14. Planner Planning
15. Manager Management
16. Decision maker Decision-making
Definitions
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Entrepreneurship is an elusive concept. Hence, it isdefined differently by different authors at different
periods. A.H. Cole Entrepreneurship is the purposeful
activity of an individual or a group of associatedindividuals, undertake to initiate, maintain or
organise, a profit oriented business unit for theproduction or distribution of economic goods andservices.
Schumpeter entrepreneurship is based onpurposeful and systematic innovation.
Mc Clelland entrepreneurship involves doingthings in a new and better way. It calls for decision-making under uncertainty.
All the above definitions clearly point out the
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All the above definitions clearly point out the
various functions performed by an
entrepreneur.
Thus, entrepreneurship is a process involving
various function to be undertaken to establish
an enterprise.
Entrepreneur Entrepreneurship
PersonProcess of
ActionObject
Entrepreneur
Barriers of Entrepreneurship
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Barriers of Entrepreneurship
The slow pace of growth of entrepreneurship can
be attributed mainly to the present of barriersprohibiting the entry into entrepreneurship.
Continuing as an entrepreneur and existing from abusiness venture.
The various barriers to entrepreneurship can beclassified as under
1. Environmental Barriers
2. Financial Barriers3. Personal Barriers
4. Societal Barriers
Environmental Financial
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Barriers of
Entrepreneurship
Environmental
Barriers
Societal
Barriers
Personal
Barriers
Financial
Barriers
1. Environmental Barriers
il bili f
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1. Raw-materials non availability of rawmaterials for production, especially during peak
season, is a very big barriers.2. Labour human resources is the most important
resource in any organization.
Lack of availability, both quality and quantity, can
affect entrepreneurs.3. Machinery machinery becoming obsolete, and
the need for their maintenance and upgrading is abig difficulty for small business organizations.
4. Land, building and infrastructure these go along way in deciding the fortunes of the companyand the lack of good facilities act as majorbarriers.
2. Financial Barriers
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Finance is the life-blood of any organisation. If thereis no proper flow of finances both in company andin the country, there are bound to be problems.
There are plenty of successful small businesses inIndia. But the entrepreneurs lack the will and the
strength to scale-up their operations.3. Societal Barriers
Religious and conservative attitudes of the societycan inhibit entrepreneurs.
Added to this the communistic feelings in certainstates in India definitely kills the entrepreneurialspirit in many Indians.
4. Personal Barriers
Lack of self confidence this is a very big emotional
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Lack of self-confidence this is a very big emotionalbarrier to an individual. It caused by peer pressure and lackof experience.
Lack of Motivation in the beginning all entrepreneurs areenthusiastic about their projects.
But they may lose interest especially in the face ofchallenges and competition.
Lack of patience this barrier is more dominant amongyouth entrepreneurs.
When things do not go as expected they may lose interestbecause of lack of perseverance.
Inability to invest in R and D and Innovate
This is one of the greatest barriers of Indian entrepreneurs. Since India does not invest in R & D heavily, they have not
caused any technological breakthroughs nor contributedinnovative products to the world.
Theories of Entrepreneur
It is universal fact that entrepreneur is an
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It is universal fact that entrepreneur is animportant factor in economic development
employment and GDP. En entrepreneur is the r isk bearer and works underuncertainty.
But no attempts were made by economists for
formulating systematic theory of entrepreneur. The Traditional notion an entrepreneur is that hebrings together the factor inputs and organisesproductive activity managerial function.
Modern Growth Theory entrepreneur is aresidual factor technological changes in theproduction process which includes technology,education, institutional organisation etc.
Theorists Categorization
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Psychological
Theory
Sociological
Theory
Economic
Theory
Schumpeter Max Weber Papanek
Mc Clelland Cochran Harris
Hagen Hoselitz Kizner
Kunkel Stocker
Young
Sl Various
Views by Various Theorists
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Sl
No Theories
Various
Theorists Theories
1. Psychological
Theory
Schumpeter
Mc Clelland
Hagen
John Kunkel
Innovation Theory
Need for Achievement Theory
Status of Withdrawal Theory
Behavioural Model
2. Sociological
Theory
Max Weber
Kunkel
Bert F. Hoselitz
Theory of Social Change
Theory of Social Behaviour
Theory of Leadership
Theory of Model Personality
3. Economic
Theories
J.R. Harris
G.F. Papanek
Kirzner
Economic Incentives
Inner drivers, Economic Gains
Exploits when market is out of
equilibrium
1. Economic theories
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Entrepreneur and Economic development are
interdependent. Economic development takes place countrysreal national income increases and
employment opportunities
Economic incentives include taxation policy,industr ial policy, sources of finance and raw-
materials, infrastructure availability,
investment and marketing opportunities,access to information about market
conditions, technologyetc.
2. Sociological Theory
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g y
Entrepreneurship is likely to get a boost in a
particular social culture. Social Theory includes societys values,
rel igious beliefs, customs, labours inf luence
the behavior of individuals in a society. The entrepreneur is a role performing
according to the role expectations by the
society. Max Weber, Cochran, Hoseli tz, Stokes and
Young
3. Psychological Theory
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Entrepreneurship gets a boost when society has
sufficient supply of individuals with necessarypsychological characteristics.
The psychological characteristics include needfor high achievement, a vision or foresight,
ability to face opposition. These characteristics are formed during the
individuals upbringing which stress on
standards of excellence, self reliance and self-sufficiency. Etc.
Schumpeter, Mc Clelland, Hagen, Kunkel etc.
Different theories of entrepreneurship
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1. Innovation Theory Joseph Schumpeter
2. Need for Achievement Theory
David McClelland
3. Status of Withdrawal Theory Prof Hagen
4. Theory of Social Change
Max Weber
5. Theory of Leadership - Hoselitze
6. Theory of Model Personality - Cochran
7. Theory of Systematic Innovation Peter
Drucker
1. Innovation Theory
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y
This theory was propounded by J.A.
Schumpeter.
Development implies that carrying out of new
combination of entrepreneur is basically a
creative activity. According to Schumpeter, entrepreneur is one
who perceives the opportunities to innovate
i.e., to carry out new combinations orenterprise. introduces new combinations.
New combination theory covers five cases
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1. The introduction of a new good which
consumers are not yet familiar or a newquality of good
2. The introduction of new method of
production
3. The opening of a new market
4. The conquest of new source of supply of raw
material
5. The carrying out of the new organisation ofany industry like the creation of a monopoly
position.
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2. Need for Achievement Theory
This theory was developed by David C. Mc Clelland
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This theory was developed by David C. Mc Clellandconcerned himself with economic growth and thefactors that influence it high achievementorientation
Mc Clel land emphasis on two factors internal andexternal factors.
Internal factors - human values and motives that lead
man to exploit opportunities. External factors favourable opportunities for trade
and unusual natural resources.
The entrepreneur is concerned with need for
achievement (n-achievement). The n-achievement is called as a desire to do well , notso much for the sake of social recogni tion or prestige.
3. Status Withdrawal Theory
d f l h f i l
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E. Hagen attempted to formulate a theory of socialchange or status of withdrawal theory.
According to Hagen, entrepreneurship is a function ofstatus withdrawal.
His creative personality is an individual characterized bya high need for achievement.
H is view of economic development does not lay any
emphasis on the speed of market, capital accumulation,
the percentage of profitable opportunities and
wil l ingness to save.
Economic development is seen almost exclusively as a
process of technological change in the society.
Most of entrepreneurs in I ndia as a creative problem or
solving problems.
Hagen postulates four types of events whichcan prod ce stat s ithdra al
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can produce status withdrawal
1. Displacement of a traditional elite groupfrom its previous status by another
traditional group by physical force.
2. Denigration of values, symbols through some
change in the attitude of super ior group.3. Inconsistency of static symbol with a
changing distribution of economic power
and4. Non-acceptance of expected status on
migration to a new society.
Hagen further opined that creative innovation or
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change is the basic feature of economic growth.
He describes an entrepreneur as a creativeproblem shooter interested in things in thepractical and technological realm.
Such type of individual feels a sense of increased
pleasure when facing a problem and toleratesdisorder without discomfort.
In traditional societies, positions of authority aregranted on the basis of status, rather than
individual ability..
That is why, Hagen visualized an innovativepersonality.
4. Theory of Social Change
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Max Weber who first of all took the stand thatentrepreneur ial growth was depend upon ethicalvalue system of the society.
Webers theory of social change consists -treatment of the protestant ethic and the spir i t of
capitalism. Moreover, this theory provides an analysis of
religion and its impact on entrepreneurial culture.
Max Weber opined, the spir i t of rapid industr ial
growth depends upon a rationalized technology,
acquisition of money and its rational use for
productivity and multiplication of money.
These elements of industrial growth depend upon aifi l i t ti f i di id l
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specific value orientation of individuals.
Weber analysed his theoretical formulation by therelationship between protestant ethic and the spiritof capitalism.
Protestant are progressed fast in bringing capitalism
because their ethical value system provided themwith rational economic attitude, while the jews,jains, Hindu and juda failed to develop industrialcapitalism because of their value of pariha.
According to this theory, driving entrepreneurialenergies are generated by the adoption ofexogenously supplied religious beliefs.
The important elements of Webers theory are
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1. Spirit of Capitalism
The capitalism is an economic system in whicheconomic freedom and private enterprise areglorified.
2. Adventurous Sprit
He also made distinction between spirit ofcapitalism and adventurous spirit.
According to him, the former is influenced by the
strict discipline. Whereas the latter if affected by free force of
impulse.
3. Protestant Ethic
di b h i i f i li
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According to Max Weber the spirit of capitalismcan be grown only when the mental attitude in thesociety is favourable to capitalism.
4. Inducement of profit
Weber introduced the new business man into the
picture of tranquil routine. The spirit of capitalism intertwined with the motive
of profit resulted in creation of greater no ofbusiness enterprise.
I nfact, this theory suited the British rules, who
desired to encourage European entrepreneurship
in I ndia.
5. Theory of Leadership
di li hi i
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According to Hoselitz, entrepreneurship is a
function of managerial skills and leadership. Business also requires finance but that is of
secondary important.
He further explains that a person who is to become
an industrial entrepreneur must have more than the
drive to earn profits and amass wealth.
In this process, he has to show his ability to lead
and manage.
There are three types of leadership Merchant
money lenders, managers and entrepreneurs.
1. Money lenders are market oriented which deals ingoods and services
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goods and services.
2. Managers - are authority oriented.
3. Entrepreneurs production oriented, they creates hisown commodity and its acceptability is uncertain.
Therefore, the entrepreneur assumes more risk ascompared to a trader or a money lender.
Therefore, GOI and State Governments are trying toencourage first generation entrepreneurs by offeringthem various types of incentives and subsidies.
Potential entrepreneurs are also opting for enterprise
development without cring for social or culturalrestrictions.
7. Theory of Model Personality
The theory of Cocharn is a sociological theory of
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The theory of Cocharn is a sociological theory ofentrepreneurial supply.
Cocharn emphasizes cultural values, role expectationsand social sanctions as the key elements that determinethe supply of entrepreneurs.
According to him, an entrepreneur is neither a super
normal individual nor a deviant person but represents asocietysmodel personality.
His performance is influenced by three factors
1. His own atti tudes towards his occupation
2. The role expectations held by sanctioning groups
3. The operational requirements of the job.
8.Theory of Systematic Innovation
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Prof Drucker has developed the theory ofsystematic innovation.
Systematic innovation consists in thepurposeful and organised search for changesand in the systematic analysis of the
opportunities economic and socialinnovation.
Systematic innovation consists of seven
sources for innovative opportunity within theenterprise (4) and outside the enterprise ofindustry (3)
Internal sources - within the enterprise, whetherbusiness or public service institution or within an
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pindustry or service sector
1. The unexpected the unexpected success, theunexpected failure.
2. The incongruity between reali ty as it actual ly is andreali ty as it is assumed.
3. I nnovation based on process need4. Changes in industry structure or market structure
that catch every one unawares.
External sources - outside the enterprise of industry
5. Demographics (population changes)
6. Changes in perception, mood and meaning