module 1- foundations of entrepreneurship

8/10/2019 Module 1- Foundations of Entrepreneurship

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EntrepreneurshipMysore University


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Nature of Entrepreneurship

Social & Cultural Factors affecting Entrepreneurship

Institutional support for Promoting Entrepreneurship

Universities, colleges, CSIR Labs

Case Study - Incubation

Module Contents

Module 1 Foundations of Entrepreneurship


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Entrepreneur

A person who perceives a need and bringstogether the manpower, material and capitalrequired to meet that need.

An individual or team that identifies theopportunity, gathers the necessary resources,creates a performing organization and isresponsible for the performance of theorganization

Introduction to Entrepreneurship



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Economics-

One who brings resources, labour, material and other assets in

such a way that the end result generates incremental value Introduces changes, innovations and a new order

Psychology

A person driven by certain forces the need for achievement,need to experiment, accomplish and the need to escape authority

Management

Creates wealth for others, finds a better way to utilize resources,reduce waste and creates jobs

More on Entrepreneur



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Entrepreneurs have certain common characteristics ortraits

Personal resourcefulness

Need for achievement Opportunity seeking

Innovativeness

Risk taking

When these elements converge at high intensities, in nonrestrictive environments, it is likely to give rise to anenterprise

So whats common?



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Entrepreneurship The process of creating value by bringing together a unique package of

resources to exploit an opportunity

The process of creating something new with value by devoting the

necessary time and effort, assuming the accompanying financial,psychic and social risks and uncertainties; and receiving the resultingrewards of monetary and personal satisfaction

Entrepreneurship involves Creation process

Devotion of time and effort by entrepreneurs and team Rewards for the entrepreneur are independence, personal satisfaction,

monetary reward

Assuming risks and uncertainties

Entrepreneurship



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Opportunity based Entrepreneurship

Entrepreneur perceives a business opportunity andexplores it sufficiently well to make it a profitableventure

Necessity based Entrepreneurship Entrepreneur chooses to run an own venture due to

economic compulsions, ancestral compulsions etc

Types of Entrepreneurship



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An Intrapreneur is a person who takes risk and initiative and createssomething new within an existing organizational framework

Driven by the needs of achievement and personal satisfaction, like an entrepreneur

But opt to operate within an organizational structure, on account of loyalty to the

parent organization or any other reason

Advantage of Intrapreneurship

Existing resources People, Technology, Systems, Markets, can be made use of toexplore the new opportunity

Challenges for Intrapreneurship Hierarchy

Rewards may be inadequate

Freedom to innovate also needs Bandwidth for independent decision making,which may be less in existing system


Intrapreneur


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The Entrepreneur is essentially a Visualizer & an

Actualizer. He can Visualize something, and

when he visualizes it he sees exactly how to

make it happen.



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Behavioural Traits of Entrepreneurs

Individual traits affect the behaviour and actions of entrepreneurs, that in turn

affect business outcomes


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Entrepreneurial Decision making can be characterised by the abilityto rapidly act, sense and mobilise, even under uncertain conditions.Some specific mental characteristics : Entrepreneurs perform Effectuation Cognitive Adaptability

Learn from failure

Cognitive Adaptability: Ability to generate multiple decision making frameworks based on

understanding the changes in the environment around them. Are theydynamic, flexible and self regulating?

To find out how cognitive adaptable an individual is, Prof Mike Hayniehas developed a survey by asking questions on the following - Comprehension Tasks Connection Tasks Strategic tasks Reflection tasks


Entrepreneurial Mindset HowEntrepreneurs think


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Refers to the Rules of Thumb that entrepreneurs useto base their decisions.

The unrecognised and unarticulated policies that lie at the

back of their minds and guides their actions


Entrepreneurial Heuristics

Successful Entrprnr Unsuccessful Entprnr

Accept a project if it enjoysteam consensus & is viable

Accept a project will enjoythe support of externalagencies

Minimize borrowed funds Borrow as much funds aspossible

Test the market beforeventuring out

Produce & Sell

Learn the ropes and

familiarize with technology

Manage technology

through paid workers


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Actively search for ideas from a wide range of sources

Choose partners for their ideological congruence &

complementary skills

Minimise initial investments


Examples of common Heuristics(Rules of Thumb)


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Legitimacy of Entrepreneurship or Social Status for Entrepreneurs

Degree of Approval or disapproval in the society for entrepreneurship. Also called Cultural Themesand Sanctions

May require a shift or reorientation of traditional values to support entrepreneurship

Social Mobility

Ease of Geographical movement and social movement for the entrepreneur

How rigid the social hierarchies are. Need for openness in the system Need for flexibility in role relations

Mobility channels Movement of young and educated workforce reduces entrepreneurial behaviour

Marginality

Social marginality has been found to promote entrepreneurship

Individuals/groups in the perimeter of the social system or between two social systems

Religious/ Cultural/ Ethnic/Migrant groups

Reasons Positive attitude towards entrepreneurship & high Degree of group solidarity Cohesion

Security

Entrepreneurship is likely to emerge under medium turbulence or moderate secur

Insecurity does not hinder entrepreneurship, but different kinds of insecurity results in different kind ofentrepreneurship


Socio-Cultural Determinants


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ENTREPRENEURS BACKGROUND & CHARACTERISTICS

Family Environment In most cases, people follow the footstep of father, or close relatives Traditional Entrepreneurial families

Education Education has no correlation with entrepreneurial spirit, if there is, it seems to be inverse.

Entrepreneurs need the Will to Succeed more than any thing else. Indian challenges - Problems of licence, quota, inspector raj, preferrence for a govt job trend slowly changing.

Age Normal to start as early as probably 10 Others after their retirement. Harland David Sanders, better known as Colonel started his famous Kentucky Fried Chicken

business quite late in his varied career.

Commonly, in the age group of 25 35 and women in the age group of 3045 Physical Attributes

Have absolutely no correlation with entrepreneurial spirit.

Marital Status No direct correlation but going by the age group, most entrepreneurs are married.




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Working History Entrepreneurs quite often have some working experience as a salaried employee in the

field of their venture helps to learn a little about business before putting the money in Sindhi community

Family Contacts

Family contacts in business world reduce the risks and help the entrepreneur

Professional Contacts Professional contacts again help. Industry contacts Alumni networks

Personal values Value hardwork, Result oriented, Self driven

Lifestyle Most entrepreneurs are fond of good things in life but are willing to wait till they strike

rich. In the interim they are willing to rough it out.




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McClellands Theory of Need Achievement Personality characteristics indicating high need achievement

Can be developed through intensive training programmes

Withdrawal of Status Respect Proposed by Hagen

Refers to loss of status by a group. Example, Japan

Developed sooner than any non western society. Samuraigroups.

Any of the four behaviours Retreatist, Ritualist, Reformist,Innovator


Psychological Factors


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Phases of Entrepreneurship Process


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Phases of Entrepreneurship Process


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Based on type of Business Trading Entrepreneur

Retailer, Wholesaler or Middlemen

Manufacturing Entrepreneur Agricultural Entrepreneur

Based on Use of Technology Technical Entrepreneur

Non Technical Entrepreneur

Based on Ownership

Private Entrepreneur

State Entrepreneur

Joint Entrepreneur


Types of Entrepreneurs


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Based on the Size of the Enterprise Small Scale Total Investment in P&M < 1Cr

Medium Scale - Total Inv in P&M between 1Cr and 5 Cr

Large Scale - Total Inv in P&M greater than 5 Cr

Based on Classification by Clarence DanhofClassifies based on economic success and enthusiasm

Innovating Entrepreneurs

Imitative Entrepreneurs

Fabian Entrepreneurs Great Caution and Skepticism Drone Entrepreneurs Refusal to adopt opportunities to make

changes in production even at the cost of reduced returns relative toother competitors


Types of Entrepreneurs Contd.


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Other behavioural classifications

Solo Operators

Active Partners

Inventors Challengers

Buyers

Life Timers


Types of Entrepreneurs Contd.


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Case Study Saras Sarasvati


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A Process that starts with a desired outcome andfocuses on the means to generate the outcome.

It finds out the causes or factors responsible for theparticular outcome

Application

Research and Development of new products Medical researches and Studies

Investigation


Causal Process


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A Process that starts with what one has (that is who

they are, what they know and whom they know) andselects among possible outcomes.

Providing a practical means to accomplish something.


Effectuation


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Has 5 Principles under it

The patchwork quilt principleThis is a principle of means-driven (as opposed to goal-driven) action. The emphasis here ison creating something new with existing means than discovering new ways to achievegiven goals.

The affordable loss principle

This principle prescribes committing in advance to what one is willing to loserather than investing in calculations about expected returns to the project.

The bird-in-hand principleThis principle involves negotiating with any and all stakeholders who are willing to make

actual commitments to the project, without worrying about opportunity costs, or carryingout elaborate competitive analyses.Furthermore, who comes on board determines the goals of the enterprise. Not vice versa.


Effectuation


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The lemonade principle

This principle suggests acknowledging andappropriating contingency by leveraging surprisesrather than trying to avoid them, overcome them, or

adapt to them.

The pilot-in-the-plane principle

This principle urges relying on and working with humanagency as the prime driver of opportunity rather than

limiting entrepreneurial efforts to exploiting exogenousfactors such as technological trajectories and socio-economic trends.



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Causal Effectuation

Begin with the effect or result Work with the inputs or

determinants.Working out various ways to reachthe result

Works out various combinations ofresults

Use Predictive strategies Use logic of action. Non predictive

Decision based Design based

Based on the premise:To the extent we can predict thefuture, we can control it

Effectual logic is based on thepremise:To the extent we can control thefuture, we do not need to predict it.


Differences

Both have an inverse relationship


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Institutional Support to

Entrepreneurs



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Finance Life Blood of Business

Minimum Level of prior Infrastructure

Need for Development funds on soft and liberalconditions

Perks for developing industries in Backward Areas

Compensate for deficiencies in Transport and

Communication


Need for Institutional Support

There are always plenty of resources for those who create practical plans forusing it - N Hill


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Central Level Institutions SSI Board NSIC SIDO KVIC (Khadi and Village Industries Commission) NPC

IIE State Level Institutions

DICs (District Industries centres) SISIs (Small Industries Service Institutes) SFC

Other Agencies NABARD HUDCO NGOs Industry Associations EPC SIDBI


Institutions Profiled


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NSIC, an ISO 9000 certified company, founded in 1955

Promoting the growth of SSI

Functions

Provide machinery on hire purchase scheme to SSIs

Provide equipment leasing facility

Help in exporting the products

Participate in bulk purchase program

Distribute raw materials through raw material adopts

Impart training in industrial trades

Set up industrial estates


National Small Industries Corporation(NSIC)


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Marketing Support Consortia and Tender marketing

Helps in procurement by forming consortia of units producingsame products

Single Point Registration under Government PurchaseProgramme Issue tenders free of cost

Exemption from payment of earnest money

Advance intimation of tenders issued by DGS&D

Issue competency certificate for high value orders above thespecified limit

Exhibitions and Technology Fairs

Buyer Seller Meets


Area Specific Support of NSIC


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Credit Support Equipment Financing

Tie-ups with commercial banks

Financing for procurement of Raw Materials (Short Term) Financing of Marketing Activities

Performance and Credit Rating Scheme for Small Industries

Technology Support Setting up of Science Technology Parks/ Business

Incubators


Area Specific Support of NSIC


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Constituted in 1954

Lead Institution to coordinate inter institutionallinkages

Apex Advisory body to render advice to thegovernment on all issues on SSI sect

Broad areas :-

Policies and Programmes

Devpt of industries in specific regions like North East Credit facilities, taxation, modernisation

Industrial sickness


Small Scale Industries Board


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SME (Small and Medium sector) Fastest growingsectors across the world

Need for SME Devpt Agency to focus on this coresector

In India, Office of Devpt Commissioner (small scaleindustries) also called SIDO is the Nodal Devpt Agencyfor small industries

Functions under Ministry of SSI


Small Industries Devpt Organization(SIDO)


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DC SSI heads SIDO, which has the following Institutionsunder it


Institutional Network

DC SSI

SISI(30)

Br. SISI(28)

FTS(4)

RTC (4)

HTI (2) TR/TDI(10)


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Small Industries Service Institutes (SISIs) operationalthroughout the country. Main Functions

Interface between central and state govts

Technical Support and Consultancy Services

EDPs

Promotional Programmes

Regional Testing Centers 4 RTCs in the four metros. Theysupport 8 field Testing Stations

Hand Tool Institutes Equipped with Electronic, HEA, ComputerLabs

Tool Rooms and Tool Design Institutes (TR/TDI)

Product-cum-Process Devpt Centers


Inst Network contd..


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Entrepreneurship Devpt and Management Training

Extension and Training Services

Skill Development

Entrepreneurship Development Institutes (EDI) Grantof upto 5 million per EDI

Preparation of Project Profiles

Plant Modernisation Studies

Prototype Development and Training Centre


Services Provided by SIDO


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Credit Linked Capital Subsidy Scheme for TechnologyUpgradation @ 12% upto 4.8 lacs for individual SSIs

Credit Guarantee Scheme Collateral free loans upto25 lakhs

ISO 9001/ISO14001 Certification Reimursement Scheme

Full subsidy on space rent and shipment of exhibits forSSI units

Integrated Infrastructure Development (IID): Assitanceto state govt or industry assocs

One time grant for procurement of hardware

M d l F d i f E hi

SIDO Schemes

module 1- foundations of entrepreneurship

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