Nature and Importance of Entrepreneurship PDF

NATURE AND IMPORTANCE OF ENTREPRENEURSHIP LI. INTRODUCTION Business and manufacturing have evolved over the centuries. Historically, the head of the state, a king, used to fund and initiate new ventures, mostly for manufacture of war equ...

NATURE AND IMPORTANCE OF ENTREPRENEURSHIP LI. INTRODUCTION Business and manufacturing have evolved over the centuries. Historically, the head of the state, a king, used to fund and initiate new ventures, mostly for manufacture of war equipment or new monuments or forts for the king. These projects included considerable planning, follow ups and regular reviews. The new ideas, manufacturing processes, building new forts or temples have come out of such pioneers or entrepreneurs. Being an entrepreneur and creatinga new line of business or a project takes courage. leadership, time and efforts. The chances of success are few and the process is full of problems and uncertainties. Having entered once, it is not easy to retrace. The bsiness in the initial stages has both financial and emotional risks. When the new venture comes out successful the entrepreneur gets immense satisfaction from having dared the challenging task. Since dawn of civilisation, at periodic intervals appeared leaders who dreamt new ideas and shaped better future for the mankind. These thinkers. visionaries, scientists and builders were ahead of their times and benefited all mankind. Change is the law of nature. The manufactured products, the technologies, the requirements keep changing. The change brings in new entrepreneurs from time to time. The concept of an entrepreneur varies from country to country. Who is an entrepreneur ? and what is entrepreneurship ? are questions frequenty asked show keen interest of management thinkers and public o1. this important issue. I.2. NATURE OF ENTREPRENEURSHIP The onset of industrialisation in 17h century brought the importance of entrepreneurs as a separate factor and a contributor for the production. The industrial revolution also gave a special status to the entrepreneur. He was also recognised as the key element in generating investment opportunities for new industries. An entrepreneur undertakes many types of decisions and jobs for achieving his goals. The theory of entrepreneurship has evolved around the entrepreneur for about two and half centuries. The business has on date undergone a change with many problems and thus poses challenges for achieving the success of the business enterprise. Broadly the main characteristics of today's business are:  4 Entrepreneurship Rapid changes Finance & scarce resource Large sIze An Enterprise R&D and Technology All Stakeholders CHARACTERISTICS OF ToDAY FiG. I.I.: BusINESS communication: Modern technology such as informatio 1. Information technology and decades. Faster modes ofcommunication since last three technology has entered every walk ofhuman life have revolutionise electronic media namely e-mail, networking and state of art web technologies through different levels of management. The scene with the fast and upto date information the industrial implementation. processes also have gone considerable changes in decision making and management networking within the With the above 1.T. and communication revolution, the 2. Rapid changes: availability industry has increased many fold. The exchange of information and industry and outside the ever before in the history. resources is bringing changes in the industry faster than of computerised 3. Large size: There is considerable increase in automation and introduction of The demand for the goods and the geographical reach is production and process controls in industries. as services. The size gets advantage of economies of scale in bringing large size industries well India is also joining the race of large companies and thus few have got listed manufacturing marketing. world. already in the Fortune 500 companies of the is technology. The companies of 4. R&D and technology: The cutting edge in today's market amounts on research and development activities to bring in better processes today are spending large at competitive cost. The companies are also for manufacture of the goods, faster and quality products are bringing new products, new opportunities registering patents for the innovations. The R&D efforts in the market. 5. All stakeholders: The stakeholders of today are more knowledgeable and get upto date as the progress of particular industries where information about the industry developments as well involvement than interested. Thus there is an awareness by the stakeholder which gives him closer ever before. The stakeholders also react the way an enterprise functions by his investments, purchasing products, selling inputs and the like to the enterprise. (a) Government: The attitudes of government world over have changed from a regulatory function to a facilitator function. The government is no more interfering in industries but are contributing in its own way for developments of business in various sectors of economy. Government of India has assumed the role of an agent partners of economic development since 1991. It is also seen that the government intervene in the industrial activities and playing its active role in development. (b) Market competition: India has come out of sheltered, inward looking markets. The competition in the market place hence, is increasing and business men are forced to be competitive self reliant and increase efficiencies. Competition is making the industrial organisations leaner, cost competitive, more productive and fit for survival. In the bargain the weaker organisations are improving or getting eliminated. (c) Variety: The industrialists are looking for new avenues of growth. The R&D activities in the industrial organisations and customer preferences for new product is bringing variety of new goods and diversification of the industry. The large business houses in India have variety of businesses under  Nature and Importance of Entrepreneurhip 5 them. The industry does not depend on growth of one sector for achieving the over all corporate objective of over all profits. (d) Globalisation: Globalisation is an international phenomena which is sweeping across all continents and every sector of business. The political barriers to business are being eliminated. The alectronic media and communication have reduced the distances putting the customer at the center of business. (e) Finance and scarce resources: The optimal use of the resources is becoming important in achieving competitive edge in any business. The important resource is finance and as such the financial analysis of any enterprise or any decision is made in clear details to arrive at quality decisions. The timely deployment and use of the resources is critical for the success of an enterprise. In a dynamic industrial scenario the entrepreneurship concept assumes multidimension and nature of entrepreneurship are: 1. Function of achievement. 2. Innovation changes initiated by entrepreneurship. 3. Group leadership and managerial skills. 4. Organisation skills. 5. A function of economical, social and political structure. 6. A function of religious beliefs. 1. Function of achievement: Broadly two characteristics of entrepreneurship are identified one doing things new and better ways and second decision making under uncertainty. This aspect was propounded by well known author McClelland. The achievement orientation of entrepreneur is a direct relevant factor in explaining the behaviour of the entrepreneur. The primary motive is to achieve success and consistently performing in relation to his own set standard of excellence. A motivation is required to struggle and achieve, for which, the entrepreneur sets himself higher standards. Thus entrepreneur takes a calculated risk. 2. Innovation changes initiated by entrepreneurship: An entrepreneur brings in innovation in the industry by bringing new processes, new equipment, new items and doing things differently in to the economy. That means an entrepreneur has an eye for potential profitable opportunity and plans was written by well known ahead to exploit the opportunity. The concept of creativity and innovation author in the field of entrepreneurial development Schumpeter. Various innovative changes initited by entrepreneurs are given in Table 1.1: TABLE I.I Innovation of Changes Initiated by Entrepreneurs 1. - Initial project New Green Field project and production of goods. 2. Expansion of the project - subsequent changes and expansions in the amount of goods produced. - 3. Factors innovation increase in supply or productivity of factors. (i) Financial - procurement of capital from new source or in new form. (ii) Labour- procurement of labour from new source or new type; upgrading of existing labour. (iii) Material - procuremnent of old material from new source or use of new material.  6 Entrepreneurship Production innovations - changes in the production process. 4. () Technological- introducing of new production techniques. Value addition to a.t. product. - change of form or structure or relationships among pennla (ii) Organisational innovations changes in the size or composition of the market. 5. Market () Product - production of new product or change in quality or reducing cost of a. product. (ii) Market - entering a new market. aspects of Erones managerial skills: In his book "Sociological 3. Group leadership and managerial skills are critical inputs in noted that leadership and Growth' author Hoselitz has is no leader no new enterprise. The author fu are secondary. That entrepreneurship. Other aspects a) money lenders (b) managers and (c) entreprenee identifies business leadership in three categories two to f second an authority oriented and third group adds the first First group is market oriented the should not only start a new organisation hu new venture and is production orientated. An entrepreneur encoure manager to nurture it. The society and the conditions prevailing should also function as a good persons for developing them as entrepreneurs. the enterprise orientated the details of the processes involved and entrepreneur should know 4. Organisation Skills: The is essential in pushina the purpose and the clear cut time frame the sequences thereon. The clarity of function and organise the resources for the to take charge of this new enterprise. The entrepreneur has process of and missed opportunities during the success of the new enterprise. There will be problems course action to make up the deficiency and corrective of organisation. The entrepreneur has to plan on its track. keep the enterprise Author John H. Kunkel in his book of economical, social and political structure: 5. A function entrepreneurs Behavioural Perspective ofSocial Change, writes that the Society and Economic Growth-A in the population. The minorities have provided more entrepreneurs are few and not equally distributed in the society depends on : The development of the entrepreneurial talent in open discussions The openness in the society and the limits society offers to its members exchange of views and learning. as the captal that are made available to the members of the society such The opportunities the skills, the training and a demanding market. as rewards for entrepreneurship and policies tor heipug The Government policies such economic growth. a large impact in bul 6. A function of religious beliefs: Max Weber considers religion has entrepreneurship culture. The spirit of capitalism is an attitude towards acquisition of money A background. As activities thereon. The attitude towards spirit of capitalism comes from the religious such : an attitude per Weber the Protestants have the mental attitude for capitalism while Hinduism lacks insight The Weber's theory was found invalid in subsequent research work. Rather Weber has little'generatio the Hindu value system. The overall and rapid growth of various types offenterprises and new entrepreneurs in India since Independence prove spirit. The entrepreneurial that Hinduism generates entrepreneurship in India was probably blocked by colonial rule till 1947.  IO Entrepreneurship up in prod.. indemands of the market. Indian industries were catching the period to meet the change western world. methods with the counterparts in the technologies and managemnent Era which etos. The second phase is Information Technology Second Phase Growth: field who worked towards conversion of mech one pioneers in the 1970's. IBM were the of was also responsible for development of the punch card system one. IBM were further develone typewriter to electrical computers. The typewriters a new era of computing and thus starting size of the equipment in stages. The age of macro reducing the electrical to electronic model and and Data General Corporation and helped to ime Corporation electronics was introduced by Intel development work in use of the electronic work stations f Soft-ware created the computing capabilities. improving the capabilities. The developments and manufacturing induet pushed the competing industries growing faster than the industries started new top rated entrepreneurhi opportunities and the service also had hign risks. The new industries merchandising, cosme 1980's. The high growth of entertainment, as communication, food services, a vilaos opportunities arose such communication reducing the distances to global the electronic global standards apparel, parcel services, with entrepreneur has to bench mark himself with and the developed i The market size is growing 40 years of Independence 1947 to 80's, India, during cars, scooter India's Growth: In modern fertilizers, rail, wagon building, locomotives, steel, were conceived and develope! capabilities in basic industries like, so on. All these industries metals and Oberoi cement, chemicals, non- ferrous Tata, GD. Birla, Dhirubhi H. Ambani, entrepreneurs. Names like, J.N. Tata, JRD by host of service O.P. Munjal are famous. Information Technology (1T) and IT enabled Modern period saw rapid growth of abroad hae bunch entrepreneurs in India and Indians India. New of industry in last one decade in Entrepreneurs like N.R. Narayan Murthy, Azim H. Premji in this industry. entrepreneus made a name for themselves are well known names. India is proud to have Deshpande Sam Pitroda, Khosla, Gururaj in Biotechnology areas in recent years. I.8. DEFINITIONS recognised of entrepreneurial role has been revolutions the importance Since the days of industrial and activities of an entrepreneut. many considering different facets The entrepreneur word is used by to been evolved since two centuries. According and the theories have The concept of entrepreneurship assumes risk and management of business." The one who the Webster dictionary "entrepreneur is 16h Century is detailed below: evolution of the term development since TABLE 1.2 The Term Entrepreneur and Development its origin in the French verb "entreprendre." It means to undertake The word "entrepreneur" has French attributed entrepreneur to the people who organised and / or leu In the early 16h century, the were responsible to find new land were also military expeditions. Subsequently, all those people who called "entrepreneur". Period and Personality Their Opinion on Entrepreneur Person bearing risks of profits (loss) in a fixed price contract wi 17th century-Gen. Concept  Nature and Importance of Entrepreneurship government. 1725: Richard Cantillon Person bearing risks is different from one supplying capital. 1797: Beaudeau Person bearing risks, planning, supervising, organising and owning. 1803: Jean Baptiste Say : Separated profits of entrepreneur from profits of capital. : 1876 : Francis Walker Distinguished between those who supplied funds and received ínterest and those who received profit from managerial capabilities. Joseph Schumpeter An entrepreneur is an innovator and develops untried technology. : : 1934 1958: Haggen : An entrepreneur is an economic man who tries to maximise his profits by innovations. 1961: David McClelland : Entrepreneur is an energetic moderate risk taker. innovations. 1964 Peter Drucker : : Entrepreneur maximises opportunities through systematic 1975:Albert Shapero : Entrepreneur takes initiative, organises some socio-economic mechanisms, and accepts risk of failure. business 1980: Karl Vesper :Entrepreneur seen differently by economists, psychologists, persons, and politicians. an already established 1983 : Gifford Pinchot :Intrapreneur is an entrepreneur within organisation. value 1985: Robert Hisrich Entrepreneur is the process of creating something different with by devoting the necessary time and effort, assuming the accompanying financial, psychological, and social risks and receiving the results rewards of monetary and personal satisfaction. a person with vision, original idea, decision making and An entrepreneur can be defined decides how business has to be done, daring to try: one who acts as leader and boSs of the show, who one who has expertise in the field, who who coordinates and arranges all the factors of production, anticipates the market trends and demand patterns and prices. The entrepreneur also is an inventor who brings in new ideas, new commodities, new processes and encourages his team in new activities. The entrepreneur is also an organiser and good businessman. Definition functions that are not rewarded immediately An entrepreneurship encompasses all the productive funds by regular wages, interest and rent and non routine human labour. It is also not investing capital investment, production opportunity alone. Higgins defines entrepreneurship as function of seeking process, raising capital, hiring labour, arranging organising an enterprise to undertake new production resources and introducing new organisation. I.9. IMPORTANCE OF ENTREPRENEURSHIP any economic development of a country is entrepreneurship. One of the important inputs in any development. Entrepreneurship is the life blood of More the entrepreneurship activity better the are: economy and it applies more to a developing economy like India. The areas of development by creation of value. i)) Taking to higher rate of economic growth use of the factors of production. (ii) Speed up the process of industrial  12 Entrepreneurship (ii) Creation of employment opportunities. new axe (iv) Dispersal of economic activities to different sectors of economy and identifving of growth. (v) Development of backward and tribal areas. (vi) Better social changes. (vi) Improvement of the standard of living of different weaker sections in the society. (vii) Bring socio political change in the society. (ix) Develop technological know-how. (X) Improve culture of business and expand commercial activities. (xi) Entrepreneurship act as a change agent to meet the requirements of the changing market and customer preferences. (xii) Develop a culture of achievement orientation.. I.IO. SUMMARY Man is interested in industry since time immemorial. The industry has evolved continuously Man's First item of production started from arrows for hunting. Since then we have sophisticated machines and equipment to produce large variety of goods and services. Scientific and technological inventions have enhanced pace of entrepreneurship activities. One industry development has given rise to other industries, and thus, giving a multiplier effect to growth and spread of variety of industries. The development in the areas of industrialisation has been continuously affecting the lives of people in their social customs, consumption patterns, traditions, beliefs and an industrial culture is emerging. An entrepreneur is helping industrial growth in turn helping national income. Growth of industry is stimulating demand. Industrialisation has given economic progress by stimulating growth in sectors like agriculture, coal, steel, power and exploitation of natural resources. Industrialisation is providing better and more employment opportunities in addition to advantages in international trade. Any economy can develop to its advantage ifit has entrepreneurship. It is necessary to recognise entreprencurial role as a separate and important factor of production. III. QUESTIONS 1. Discuss nature of entrepreneurship. 2. What are innovations that an entrepreneur brings? Discuss with examples. 3. What were entrepreneurship developments in early period ? 4. Explain entreprerneurship during modern period. 5. Discuss the development of term "Entrepreneur" since two 6. Why entrepreneurship is so much centuries. What is current definition ? important ? 7. Discuss how Indian Entrepreneurs 8. have helped the growth of IT industry. Short questions: () Explain current business characteristics. (ü) Define entrepreneurship. (iü) Entrepreneurship developments in middle ages. (iv) How an entrepreneur brings social changes ? (v) Explains farmer as an entrepreneur.  ENTREPRENEURIAL QUALITIES 2.1. INTRODUCTION – How AN ENTREPRENEUR ORGANISES? entrepreneur is $one who undertakes an As per the Oxford English Dictionary the meaning of labour". Entrepreneur is seen differently by enterprise-acting as intermediary between capital asand a creator of industrialisation. Economists also see him different sections of society. Economists ways an a man who is activated primarily by profit motive. The various view an entrepreneur is entrepreneur organises are discussed below: entrepreneur is an individual who takes moderate risks and David C. MeClelland wrote that an an entrepreneur is not characterised by routine tasks brings innovation. McClelland also suggests that or betting. The are managed by usual managers and situations of high risks such as gambling which for decisions preference for moderate entrepreneur exhibits a desire to take personal responsibilities risks and interest in concrete knowledge of business and the possible outcomes. at Cantillon defines the term entrepreneur as "the agent who buys means of production Richard are uncertain a that he is going to sell at prices that certain prices in order to combine them into product explains his concept of entrepreneur at the movement at which he commits himself to his costs". Cantillon fix paying the daily wages to the labourers and by an example of a farmer. A farmer takes risk of any at an unknown future price. For that matter in amount to the landlord and for selling his produce business the risk is inherent due to price fluctuations the markets. things in an entrepreneur as "a creative problem solver interested in sense Everett E. Hagen describes a of area. He is a person who has high need achievement and feels the practical and technological sake a not rebel against the conventional view for increased pleasure when he faces problem. He does it is generally accepted." of rebelling, also he does not accept it because the as "economic agent who unites all means of production... J.B. Say defines an entrepreneur which or the land of the other and who finds in the value of products labour of the one, the capital entire capital that he utilizes and the value of the results from their employment, reconstitution ofasthe wages, the interest and the rent which he pays well as profits belonging to himself." an innovator who introduces new combinations, As per Schumpeter, entrepreneur is basically different forms of innovations are as given below:  16 Entrepreneurship Introduction of New Product N Introduction of New method of production Opening of a New Market V A Exploring New source of supply of raw materials Carrying out of a New type of organisation FIG. 2.I: SCHUMPETER's VIEW OF ENTREPRENEUR Frank W. Young conducted a series of tests and found that entrepreneurs show a tendency to describe any problematic situation as a problem to be tackled with pragmatic efforts. The entrepreneurs will have confidence in their own ability of analysing and solvirng. Germans consider generally an entrepreneur as one with power and property that is one who owns and runs a business. Depending on the level of industrial development each country sees his entrepreneur in different way. In developed country an innovator is called an entrepreneur, but in under developed countries an imitator is also called an entrepreneur." The word entrepreneur also includes small and large business such as small scale industry, pure merchants, processing industry, service industry, irrespective of size, mode of operation and type of busines. An entrepreneur organises different types of industries right from inception has diflerent approaches and call for an in-depth knowledge base. The importance is the entrepreneur starts and operates his own new business. From this view point of entrepreneur and enterprise a manager who manages some function in a company or a Board of Director who is a senior functionary in a company or a gambler who takes high risks are not entrepreneurs. An entrepreneur finds new opportunities in business or more opportunities in an existing busines. He perceives a ned and gathers together the necessary inputs like capital, manpower and materials to satisty that need. Thus an entrepreneur is a originator and organiser of new business venture or brings in innovative changes in an existing business. Hence an entrepreneur is defined as an individual who 15 an innovator, risk taker, gathers all the resources, organises and is a combination of all the skills that are required in each of them. An entrepreneur also anticipates future requirements., vision and strong beliel in his planned enterprise. 2.2. CHARACTERISTICS OF ÎNDrVIDUAL ENTREPRENEURSHIP nature or qualities of entrepreneurras an individual are The characteristics or features or essential to contribute to the success of an enterprise. McClelland stated thegualities or characteristics  Entrepreneurial Qualities 17 auccessful entrepreneur as an individual with technical competence, risk taking, high initiative, good dement, intelligence to analyse and solve problem areas, leadership qualities, confidence, positive titude, high level of energy, creativeness, honesty, integrity, emotional stability and fairness. An entrepreneur should have the first hand knowledge of the product, processes and end uses to sound judgment of the planned project. Flexibility, good social behaviour, bring inventive ability and onen mind and desire to take personal responsibilities will fit in the qualities of a true entrepreneur. common characteristics. Though entrepreneurs come from different strata in the society, they have They overcome the resistances and obstacles that stand in the way of making a new enterprise. Figure 2shows the important characteristics of an entrepreneur for the success:an The complementary characteristics that are necessary for success of enterprise are: (1) Long term involvement: The commitment from the entrepreneur for longer period inay be 5 to 10 years is necessary for conceptualisation, building and running an enterprise. Fly-by night operator will not fit in building an enterprise. use the available resources and draw (2) Initiative: The entrepreneur must have initiative to plan of action for all those who are involved in an enterprise. (3) Goal setting: An entrepreneur must be able to set realistic but challenging goals for himself as well as for others in the organisation. (4) Moderate risk taking: An entrepreneur be learner from his failures a and risk taker at every stage of the growth of an enterprise. resources and running an enterprise calls for long hours of (5) High energy level: Managing an entrepreneur be a man of high energy level. work for longer period of time and hence an enterprise many teething problems do occur and (6) Problem Solver: In the initial phases of an entrepreneur should be a creative problem solver to turn difficulties into advantages. up his team, educates them, keeps (7) Team Builder and Motivator: An entrepreneur builds an environment for creative and focused to work high level of motivation and also provide culture. entrepreneur will be a man of high level (8) Mental ability and clarity in objectives: An objectives in mind. intelligence, creative, positive thinking and decision maker with clear a leader an entrepreneur communicates effectively with all (9) Communication Skills: As all who are concerned concerned such as financiers, employees, customers, suppliers and with the new enterprise. warm human relation is an important factor which (10) Good Human Relations: Tactful and brings success to an entrepreneur. Emotional stability and keeping himself as a model to at in the organisation. others. Motivates the employees to put their best performance all levels Classification of Entrepreneurs In the early phases of economic development entrepreneurs will have initiative to start new new techniques and new ventures and find innovative ways to start an enterprise. New products, entrepreneurs who built the modern markets are found out by innovative entrepreneurs. It is innovative open new markets and develops capitalism. The enterprising spirit of the innovative entrepreneurs as imitative entrepreneurs. enterprises. There is a second group of entrepreneurs generally referred The imitative entrepreneurs copy or adopt suitable innovations made by the innovative entrepreneurs. economy specially in The imitative entrepreneurs also contribute to the development of the  I8 Entrepreneurship Ability to Marshall Accepting Goal Setter Resources Challenges Innovator Organiser Risk Taker Management Skills Decision Maker Making Enterprise a Success Characteristics of an Entrepreneur FIG. 2.2 : CHARACTERISTICS OF AN ENTREPRENEUR underdeveloped countries. The adaptation is mainly to suit the local conditions. The imitative entrepreneurs bring industries to the poorer countries. The third type is Fabian entrepreneur. By nature these entrepreneurs are shy and lazy. They follow the set proceedures, customs, traditions and religions. The Fabian entrepreneurs do not venture to take risks. Usually they are second generation entrepreneurs e business family enterprise. in The fourth type is Drone entrepreneurs opportunities that come on their way. They are who refuse to copy or use conventional in their approach and stick to their set practices, products, production methods and ideas. They may be termed as the organisation looses market and may Laggards. In such cases be pushed out of the market. The entrepreneurs is shown is figure 2.3: classification of the Entrepreneur Innovative Imitating or Entrepreneur Adoptive Fabian Drone Entrepreneur Entrepreneur Entrepreneur FIG. 2.3: CLASSIFICATION OF ENTREPRENEURS 2.3. INDIVIDUAL FEELINGS, BEHAVIOURAL PATTERNS AND NEED FOR ACHIEVEMENT Apart from functional qualities the entrepreneur must have broad personality contours to devevr  19 Entrepreneurial Qualities.iative and drive. Individually he must be attached at emotional level to the project he conceives. He terested in his people and to build a team culture. He must be encouraging orderliness and economy and possess an art of superintendence and administration. An entrepreneur will have feel of the society where he is working and be identified with the well being of the society. He takes care of all stakeholders, ance society in turn willhave feel for the entrepreneur and his enterprise. The individual entrepreneur will have feel for self-development as well as for others in the team. It will be a continuous learning and relearning exercise. 1The feelings can be summerised as 'spirit of enterprise'. The case study in this book of JRD Tata titled 'A Humanitarian Bharat Ratna' gives the fellow feelings of JRD Tata towards his workmen, officers, other stake holders and humanitarian help extended by him made him a legend. Entrepreneurs in India came from different strata of society. The behavioural pattern of the entrepreneurs had common characteristics. Each of them valued business as a good means to develop sOciety. They choose the path of innovation and overcame the problems, resistances and obstacles that came in the way of doing new ventures. The first in the series of the new industrial entrepreneur was Jamshetji Tata. Allthe entrepreneurs were men of discipline, high integrity and with strong need for achievement. The behavioural qualities of a good entrepreneur are classified as follows: (i) Initiative and drive (ii) Innovative thinking (ii) High sense of achievement (iv) Sets example for himself (v) Hard work (vi) Capacity to take risk (vii) High intelligence and deep knowledge of the project or new venture (vii) Long range vision (ix) Motivation (x) Sound judgement (xi) Leadership qualities (xii) Taking full personal responsibilities (xii) High level of ambition (xiv) Organiser of resources (xv) Target setting and fighting for achievements (xvi) Sociable and flexible in his approach (xvii) Continuous learning by feedback (xviii) Future orientation The need for achievements comes from the socio-economic background of an individual. Business is a game where the achievement orientation and risks both co-exists. McClelland finds that high an entrepreneur. achievement orientation is a critical factor for explaining the economic behaviour of an entrepreneur to success in situations where he has to be The high achievement orientation takes in the particular field. The high evaluated for his own performance to the standards of excellence achievement orientation will make a successful entrepreneur. Achievement orientation can be enhanced are not influenced by money or any such rewards. by proper training. The achievement oriented people 2.4. RIsK TAKING any changes, unforeseen contingencies Risk taking is assuming responsibility by the entrepreneur for  20 Entrepreneurship entrepreneur takes the responsibility of guarante and looses that may occur in a planned enterprise. An and other establishments. salaries to employe to the investors, interest to lenders, rent for the officeuncertainties involved in any new or assured. The venture are when the incomes are not regular an Risk taking is up investment, diversification or expansion of enterrise. deterrent for taking the main functions of an entrepreneur. a In any business the higher are the risks the greater the rewards. An entrepreneur takes calcul amount of risk depending on his own ability, the same. perception of an entrepreneur towards the It is basically a game where an entrenre the factors required for success of the enterprise and entrenrer as a captain of the team to push forward his side of the game for winning. An acts for the ensuing opportunity. introduces new ideas and handles all the uncertainties sar The risks of an entrepreneur change during different phases of the project and are not the are not insurable. The business risks of major nature are for different industries. The risks ne The financial institution have to access the bank-ability of the (a) Financing of the project: th schedules may bring in uncertainties in proposal after necessary checks. Any delays in the project may fail. viability of the project, and thus, the financial plans Rising cost of capital Changing norms of bank credit Shortage of funds Not able to meet the financing deadlines are some of the uncertainties in financing or consumptior (b) Marketing: There is considerable risk due to the possible changes in the taste pattern of the consumers. Sudden price changes Competitors monopolising and changing the market Changes in distribution channels Flourishing black market Government policies favouring importation are some of the areas of risk in marketing (c) Changes in Technology and Production: The techniques of production and new product developments may take away the existing consumers of the item. Arrival of substitute items in the market New equipment for manufacture of the item faster and cheaper Poorer industrial management Inefficient performance against targets Shortage of raw materials and other inputs are few areas of concern An entrepreneur tries to reduce the uncertainties in case of possible future risk and sudden or unforeseen risks. An entrepreneur uses his planning initiatives, judicious approach and skill in handling the risky situations. 2.5. RoLE MODELS The entrepreneur is the key individual who is both an innovator and a risk taker is central figure to entrepreneurship. The personality development of the individual and his psychological makeup are  Entrepreneurial Qualities 21 aodulated by the role models, the entrepreneur keeps in his mind, The role model becomes the guiding ar for the entrepreneur. The role models play an important role in development of personality of an otrenreneur. In fact, every individual has his role model in his own life but entrepreneurs have great (eachers, national leaders or entrepreneurs as their role models. The role models influence deeply since childhood and help in finding better solutions when: Disruptions and persistence feeling of dissatisfaction. Turbulence in the environment Rejection and helplessness Confusion of identity Impulsiveness Situations of confusion Feeling of hostility and guilt By talking to his role model or reading his books or even remembering his role model an entrepreneur draws inspiration and thus becomes a source of motivation. Role models are guiding factors that drive the individual towards particular goal and for an entrepreneur it is a source of entrepreneurial zeal. 2.6. FAMILY ENVIRONMENT AND EDUCATION as For emergence of entrepreneurship Schumpeter considers social climate most important. The socio-demographic values mould an entrepreneur. These are : () Family background (i) Education (iii) Previous occupation (iv) Emigration Entrepreneurs are not influenced by any single factors but the quality of entrepreneurship is the result of the interaction and assimilation of different family and environmental factors. many centuries. Indian Indians as a race have proved their entrepreneurship qualities since businessmen in the past were manufacturing quality goods and exporting to various countries. The arts and manufacture of high quality Indian carpets, jewellery, cotton textiles, silk materials, fine were family owned small-scale handicrafts were popular in different countries of the world. These businesses. The caste system in Hindu society has promoted the development of the professional skills were promoting and and growth of business. The business dominant community is Baniyas who can be seen in many parts of organising business enterprises. The Marwari, Jain and Parsee families the country who are engaged in banking, trading and manufacturing businesses. The higher strata of high level of Indian society get more entrepreneurs because of the availability of funds, opportunities, are denied of entrepreneurial opportunities education and social interaction. The lower strata ofthe society a sizeable section of due to historical reasons of discriminations. Hence the caste system has deprived a Indian population from development of entrepreneurial abilities till recently. The economic level of an Tamily also important factor in entrepreneurial development. The high level of living standard gives individual opportunity to get the beriefit an early start by initial investment in education of and resources. a child and develop his personality in self The family members, specially the parents, teach targets and become a leader of men. reliance, eagerness to learn, risk bearing, innovativeness, setting  23 Entrepreneurial Qualities (vii) Keen desire to change the society by adopting new methods and new technologies (vi) Chooses reliable people for his venture and wisely delegates authority (ix) Ability to adjust and adapt to new conditions (x) Ability to inspire loyalty (xi) Except changes as way of life (xii) Equality and justice in decision making (xi) Ready to break age long traditions and accept growth The entrepreneurs discussed earlier are young in age because of the energy and zeal they possess. The women entrepreneurs are generally middle-aged because of the family responsibilities. 2.8. MoTIVATION The factors that inspire an entrepreneur are entrepreneurial motivation. Earning money is an important motivation for any entrepreneur. It must be added here that money is not alone that inspires an entrepreneur. here are other factors which brings the entrepreneurial ambitions. The motivating T factors are broadly classified into two categories : (a) Internal Factors : Internal factors consists of : Family background Educational background Training and work experience A desire for achievement A desire to head a manufacturing unit (b) External Factors : External factors consists of: Availability of inputs or raw materials Demand of the product and large profits Availability of finances Availability of technology and or marketing - Short supply of the product in question Government initiatives for assisting the industry Ready availability of sick units at cheaper prices in this chapter. The critical Among the above individual factors, some have already been dealt is a compelling motivating force. factor of training and work experience or occupational experience The occupational training and experience in the areas of manufacturing, marketing, consulting and the like give the entrepreneur first hand knowledge about the details of the product, the nature of the areas. The experience gives industry, the fine points of the technology and the problems in marketing or entrepreneur the confidence to take risks. Generally the senior higher level executives have need for rung of occupations. The entrepreneurs also are motivated by higher achievement than men in lower their success or achievements of higher level in their previous professions. seen that the government On analysing the relative importance of the external motivating factors, it is for the entrepreneurs. policies for growth of certain industries becomes the most significant factor prime motivators. Availability of infrastructure and finance assistance will be the  24 Entrepreneurship are also classified in three categories based onthe compuls e motivations The entrepreneurial as the facilities and the ambitions under: (1) Factors of comnpulsion: present job Not satisfied with the Unemployment skills Make use of the professional Availability of idle funds Family unit Revival of sick unit (2) Facilitating factors: Inspiration from other entrepreneurs Past experience and training Influence from seniors or advisers Inherited property : (3) Entrepreneurial ambitions To develop family business To secure living or self employment or Fulfil desire of parents self To make money To gain social status Selfemployment To use creative talent Need for achievement 2.9. MINORITY STATUS The local conditions and ti Indian businessmen had the entrepreneurship qualities abundance. in historical reasons did offer sufficient scope for development of entrepreneurship qualities in them. Ii over the centuries in different countie large number of traders of Indian origin settled and flourished many middle-east countries, Mauritius and so ol like Malaysia, Singapore, Burma, Kenya, Uganda, ano The minority status of these immigrants to the other countries brought the hard work Marwe entrepreneurial urge to struggle and build a name for them. The entrepreneurial development in and Gujarati communities in cities like Mumbai, Kolkata, Kanpur show that the minority status or u small communities in large cities was one of the impotant reasons. As on date the entrepreneurial spirit in United States of America is contributed in a large me by the expatriates from various countries. USA gives since last five decades opportunities tor ne and young entrepreneurs. The small group of expatriates who have migrated from Europe, China India are able to build up new organisations in USA. The minority status of these expatriates s important reason for the expatriates to work harder and in develop entrepreneurial qualities in e  Entrepreneurial Qualities 25 so. ENTREPRENEURS AND MANAGERS Any enterprise needs entrepreneurs to start the enterprise and run it. It also needs managers for the managerial role required for running day to day operations of the enterprise. Generaly the Chief Executive and his team at top level play the role of entrepreneurs whereas the group of officers in the nanisation in middle level as well as lower level plays the role of managers. A professional manager takes care of the general functions of running an organisation such as strategic planning, operation nlanning, organising the resources, staffing, coordination, motivation and controlling work in the organisation. The protessional manager is driven by a plan to achieve the pre-determined targets to build the onganisation and develop it. A manager uses managerial tools to achieve the targets like the yolume of production, the profit or growth of an organisation. He contributes on day to day operations in achieving the quality of goods produced, makes efficient use of the resources and enhancement of the standards. A manager is appointed by the organisation and paid as per the employment contract. An entrepreneur is not a paid manager. He is great motivator to start his new business and also manage it successfully. He is the investor and takes risks in the enterprise. He is an innovator and a manager and works for his satisfaction and he is happy to get positive results. An entrepreneur appoints a manager for carrying out some of his functions, whereas the reverse is not true. An entrepreneur may also perform duties of a manager in getting done his creative activities and satisfying need of achievement. An entrepreneur takes a venture for his personal satisfaction, whereas a professional manager has functions like setting targets, following rules, procedures, attainment of set targets. Any failure of an enterprise may be a huge loss in the career of an entrepreneur. In case of professional managers the failures may mean little. The distinction between an entrepreneur and with professional/ traditional manager is detailed in two separate tables as: EE Table 2.r DISTINCTIVE FEATURES OF ENTREPRENEURS AND PROFESSIONAL MANAGER Entrepreneur Professional Manager 1. 1.Setting of objectives Visionary 2. Planner 2. Policy formulation 3. Risk-taking 3. Strategic Planner 4. Perception of an opportunity 4. Formal communication 5. Tactical Planner S. Organising 6. Interpersonal communication 6. Motivating 7. Determined 7. Controlling 8. Idealist 8. Administrator 9. Negotiating 9. Skilled, knowledgeable 10. Trouble-shooting 10. Confident to an extent 11. Committed 11. Specialist 12. Innovator 12. Loyal 13. Making it a growing concern 13. Planner 14. Motivator 14. Implementor 15. Demands effectiveness 15. Demands efficiency  26 Entrepreneurship Table 2.2 ENTREPRENPIR DIsTINCTIVE PEATUREs oP TRADITIONAL MANAGERS AND THE Entrepreneur Managers Wants Freedom, goal-oriented, self-reliant, Primary promotion and traditional corporate Want rewards. Power motivated. and self-motivated. Motive repor Gets hands dirty. May upset employees Action Delegate action, supervising and by suddenly doing their work. ting take most of energy. Knows business intimately. More businest Skills and Professional training. Often business acumen than managerial or political skill.O6 training school trained. Abstract analytical technically trained if in tcchnical business tools, people-management, and May have former P & Lresponsibility political skills. in corporation. or her Self-confident, optimistic, courageous. Courage and Sees others in charge of his Destiny destiny. Can be forceful and ambitious, of others' ability but may be fearful in case ofoptimism. Primarily on technology and Attention Primarily on events inside market place. corporation Entreprencurial small-business, Family members worked for Family professional or agricultural Background large organisations. background. Poor relations with father. Relationship Independent of mother, good relations with Parents with fathe, but slightly dependent. background in some early Socio-econo Middle-class background. 4Lower-class studies, middle-class in more mic Back recent ones. ground some Less well educated in earlier studies, Educational Highly educated. graduates work but not Ph.D. Level as Transactions and deal making basic Relationship Hierarchy as basic relationship. relationship. with Others year growth business of in Respond to quotas and Budgets, End goals of 5-10 Time Takes action now to weekly, monthly, quarterly, annual view and objectives. Orientation move the next step along way. planning horizons, the next promotion or transfer. an orange crate if jobis Cares about status symbols Happy sitting on Status (decent office, etc.) getting done. Invests, heavily, but Careful Like moderate risk. Risk expects to succeed. products that often Market Has market studies done Creates needs. Creates research-potent be tested with market Research to discover needs and guide can't  THE ENTREPRENEURIAL PERSPECTIVE 3.I. INTRODUCTION as a separate and important factor of production has been recognised The entrepreneurial role industrial revolution. The entrepreneurship has been analysed time and again by since the days of an the scientists consider social psychologist, each of economist, sociologist, political scientists and see him as an essential element in generating investment entrepreneur from their own angle. Economist see him as a as an energizer in modernisation of societies, psychologist opportunities, sociologist as a character of economic development and political entrepreneurial man and try to decipher him system. Over the years the entrepreneurship has developed scientists consider him as a child of political vision he entrepreneur has to use his skills and originality for attaining the both as art and science. An to combine the has to use his left brain and right brain attributes suitably are given in has set for himself. He and right-brain attributes use for results. The left-brain resources and put them to optimum Table 3.1. Table 3.I LEFT-BRAIN AND RIGHT-BRAIN ATTRIBTES Right Hemisphere Left Hemisphere and unfocu ssed on specific on specific problem Unconscious-Unaware Conscious - Aware and focused issues linearity Non-rational- Special imaging without direction issues; Rational- Conscious modelling of Intuitive- Total experiences and emotions allowed - Analytical Use of knowledge in discrete to influence one's ideas applications to evaluate issues Synthesizing – Illogical reasoning and fantasizing Logical - Deductive reasoning to establish to create analogies Academy relationships Mythology and Implications for Manage-ment and Training." Source: Terence Hines, "Left Brain/Right Brain 4 (1987). of Management Review, Vol. 12, No. working are seen in entrepreneurs depending on their style of on Different kinds of personalities venture. The classification of the entrepreneurs based planning and the basic attitude towards their 3.1 below: theirattributes is detailed in Box  32 Entrepreneurship Box 3.I EIGHT ENTREPRENEURIAL PROFILES (1) Shotgun : Quicklyidentifies new promising business but rarely followed up venture to create (2) Simple : Thinks everything is simple. He thinks easy solutions..Usually great sales (3) Know all : In love with his own idea and knows all. This does not allow 2nv person (4) Teacher : Well grounded in theory but lacks real world experience (5) Perfectionist: Perfect entrepreneurial type. He likes having all things under his control. Ca handle difficult situations (6) Underdog : Not comfortable with actually transfoming invention into tangible busina success. He attends seminars and discusses problems (7) Cheat : Does not have right or ethical motives (8) Inventor : Who is more concerned with invention rather creating and expediting business processes 3.2. THEORIES OF ENTREPRENEURSHIP The definition of entrepreneurship involves creation of value through fusion capital, of risk taking. technology and human talent. It is a multi- dimensional concept. The distinctive or features, characteristics or dimensions of entrepreneurship are summarised in the nine theories propounded by different eminent thinkers are summarised below: (1)Innovation: Schumpeter defines entrepreneurship as "a creative activity". An innovator who brings new products or services into economy is given the status of an entrepreneur. It is essenti ii here to differentiate between an invention and an innovation. The difference between these terms is brought out clearly in Fig. 3. I. An entrepreneur is a problem solver in his business opportunities in problem solving and visualisies innovation and a potential of profit opportunity. The innovation may be in the form new method of of (4)(G0) The creation of Results in Invention something new new knowledge The transformation Results in Innovation of an idea or new products, Resources into services, or useful application processes FiG. 3.I : INVENTION VERSUS INNOVATION  The Entrepreneurial Perspective 33 manufacturing, new products, new source of raw-material or new Instead a markets or combination of these. of doing business in routine way an entrepreneur does things in a new and better ways. Schumpeter has introduced a concept of innovation as key factor in entrepreneurship in addition to assuming risks and organising factors of production. Wilken has added the concept of the changes that an entrepreneur brings: Expansion of goods, products. Productivity of factors of production such as finance, labour, material. Innovation in production such as, technology, process changes and increase in human resource productivity. Innovation in marketing area such as the composition of the market, size of the market and new markets. (2) A function of high achievement: According to McClelland the characteristics of entrepreneur has two features - first doing things in a new and better way and second decision making under uncertainty. McClelland emphasises achievement orientation as most important factor for entrepreneurs. Individuals with high achievement orientation are not influenced by considerations of money or any other external incentives. Profit and incentives are merely yardsticks of measurement of success of entrepreneurs with high achievement orientation. The achievement orientation can be taught and increased by deliberate efforts. The struggle to achieve more and more is taught to children by their parents. The individuals with high achievement orientation take calculated risks and can make decisions where there are incomplete information or have tolerances for ambiguity. Psychologists call this behaviour as Type A behaviour. (3) Organisation Building Function: Harbison in his famous essay "Entrepreneurial Organisation - Factor in Economic Development" explained that entrepreneurship is a skill to build an organisation. Entrepreneur should have capabilities to organise people and build a coherent group to harness the new ideas. An entrepreneur also develops more innovators and thus he gives a multiplier effect in the a organisation. As per Harbison an entrepreneur need not be innovator a man with ideas for the a products, he should be good leader with excellent administrative capabilities and an organisation a builder. Harbison's view of entrepreneurship is emphasis on 'managerial skills'. As such, he takes totally different view from that of Schumpeter's. As per Harbison innovation will not bring any economic an organisation. development if an entrepreneur does not create as that the entrepreneur (4) A Function of Group Level Pattern: Young defines entrepreneurs as entrepreneurs. Young stresses characteristics are found in small groups wherein individuals develop the importance of family background, experience and group behaviour in development of entrepreneurs based on entrepreneurship qualities. Young arrived at the group level pattern behaviour of his studies known as Thematic Appreciation Test (TAT) on groups of entrepreneurs. in his publication sociological (5) A Function of Managerial Skills and Leadership: Hoselitz aspects of economic growth defines entrepreneurship as managerial skills and leadership qualities. business leaders in Hoselitz emphasises ability to lead and manage from an entrepreneur. He i