Entrepreneurship_Development-11-98.pdf

INTRODUCTION TO ENTREPRENEUR 1.1 Evolution of the word Entrepreneur The word ‘entrepreneur’ is derived from French word ‘Entrependre’ which means undertaking the risk of enterprise and further it was used to designate an organizer of musical or other entertain...

INTRODUCTION TO ENTREPRENEUR 1.1 Evolution of the word Entrepreneur The word ‘entrepreneur’ is derived from French word ‘Entrependre’ which means undertaking the risk of enterprise and further it was used to designate an organizer of musical or other entertainments. Later in 16th century it was used for army leaders. It was extended to cover civil engineering activities such as construction in 17th century. But it was Richard Cantillon, an Irishman living in France who first used the term entrepreneur to refer to economic activities. According to Cantillon “An entrepreneur is a person who buys factor services at certain prices with a view to selling its product at uncertain prices”. Entrepreneur, according to Cantillon, is a bearer of risk, which is non-insurable. Schum peter gave a central position to the entrepreneur who believed that an entrepreneur was a dynamic agent of change; that an entrepreneur was a catalyst who transformed increasingly physical, natural and human resources into correspondingly production possibilities. Since then the term entrepreneur is used in various ways and various views. 1.2 Meaning of Entrepreneur Entrepreneur is a person who tries to create something new, searches new opportunities, bears risk, unites various factors of production like land, labour and capital carries innovations and from his skill and farsightedness faces unforeseen circumstances and thereby earns profits. Entrepreneurs are the pioneers who are instrumental in the economic development, growth and development of and prosperity of a country. 1.3 Definition of Entrepreneur There are various views about entrepreneur which are broadly classified into three groups, namely risk bearer, organizer and innovator. Entrepreneur as Risk Bear : Richard Cantilon defined entrepreneur as an agent who buys factors as production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. He illustrated a farmer who pays contractual incomes, which are certain to land owners and labourers and sells at prices that are ‘uncertain’. He includes, merchants also who make certain payments in expectation of uncertain receipts. Hence both of them are risk- bearing agents of production. F.H. Knight described entrepreneur to be a specialized group of persons who bears uncertainly. Uncertainty is defined as risk, which cannot be insured against and is incalculable. He made distinction between certainty and risk. A risk can be reduced through the insurance principle, where the distribution of outcome in a group of instance is known, whereas uncertainty cannot be calculated. Entrepreneur as an Organizer : According to J Baptist Say “an entrepreneur is one who combines the land of one, the 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 laborers and what remains is his/her profit”. Say made distinction between the role of capitalist as a financer and 11 the entrepreneur as an organizer. This concept of entrepreneur is associated with the functions of coordination, organization and supervision. Entrepreneur as an Innovator : Joseph A. Schumpeter Peter in 1934 assigned a crucial role of ‘innovation’ to the entrepreneur. He considered economic development as a dynamic change brought by entrepreneur by instituting new combinations of factors of production, i.e. innovations. The introduction of new combination according to him, may occur in any of the following forms. (a) Introduction of new product in market (b) Use of new method production, which is not yet tested. (c) Opening of new market. (d) Discovery of new source of raw materials. (e) Bringing out of new form of organization. Schums Peter also made distinction between inventor and innovator. An inventor is one who discovers new methods and new materials. An innovator utilizes inventions and discovers in order to make new combinations. Hence the concept of entrepreneur is associated with three elements risk bearing, organizing and innovating. Hence an entrepreneur can be defined as a person who tries to create something new, organizes production and undertakes risks and handles economic uncertainty involvement in enterprise. Some more important definitions of entrepreneur 1. According to F.A. Walker : “Entrepreneur is one who is endowed with more than average capacities in the task of organizing and coordinating the factors of production, i.e. land, labour capital and enterprises”. 2. Marx regarded entrepreneur as social parasite. 3. According to Gilbraith : “An entrepreneur must accept the challenge and should be willing hard to achieve something”. 4. Peter F. Drucker defines an entrepreneur as one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the basic tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service. 5. According to E.E. Hagen : “An entrepreneur is an economic man who tries to maximize his profits by innovation, involve problem solving and gets satisfaction from using his capabilities on attacking problems”. 6. According to Mark Casson : “An entrepreneur is a person who specializes in taking judgement decision about the coordination of scarce resources”. 7. Frank Young defined entrepreneur as a change agent. 12 8. According to Max Weber : “Entrepreneurs are a product of particular social condition in which they are brought up and it is the society which shapes individuals as entrepreneurs”. 9. International Labour Organization (ILO) defines “entrepreneurs as those people who have the ability to see and evaluate business opportunities, together with the necessary resources to take advantage of them and to initiate appropriate action to ensure success”. 10. Akhouri describes “entrepreneur as a character who combines innovativess, readiness to take risk, sensing opportunities, identifying and mobilizing potential resources, concern for excellence and who is persistent in achieving the goal”. 1.4 INTERNAL AND EXTERNAL FACTORS OF ENTREPRENEUR Entrepreneur is a person of telescopic faculty drive and talent who perceives business opportunities and promptly seizes them for exploitation. Entrepreneur needs to possess competencies to perform entrepreneur activities. Personal entrepreneurial characteristics Core Competencies Entrepreneurial Activities 1. Initiative Does things before asked for or forced to by events and acts to extend the business to new areas, products or services. 2. Perceiving opportunities Identifies business opportunities and mobilizes necessary resources to make good an opportunity. 3. Persistence Takes repeated or different actions to overcome obstacles. 4. Information gathering Consults experts for business and technical advice. Seeks information of a client or supplier’s needs. Personally undertakes market research and make use of personal contacts or information networks to obtain useful information. 5. Concern for quality State desire to produce or sell a better quality product or service. Compares work his performance favourably with that of others. 6. Commitment to Makes a personal sacrifice or expands extraordinary effort to complete a job, contractual obligations accepts full responsibility in completing a job contract on schedule, pitches in with workers or work in their place to get the job done and shows atmost concern to satisfy the customer. 7. Efficiency orientation Finds ways and means to do things faster, better and economically. 8. Planning Various inter-related jobs are synchronized according to plan. 9. Problem solving Conceives new ideas and finds innovative solutions. 10. Self-confidence Makes decisions on his own and sticks to it in spite of initial setbacks. 11. Experience Possesses technical expertise in areas of business, finance, marketing etc. 12. Self-critical Aware of personal limitations but tries to improve upon by learning from his past mistakes or experiences of others and is never complacent with success. 13. Persuasion Persuades customers and financers to patronize his business. 14. Use of influences Develops business contracts, retains influential people as agents and restricts strategies dissemination of information in his possession. 15. Assertiveness Instructs, reprimands or disciplines for failing to perform 16. Monitoring Develops a reporting system to ensure that work is completed and quality norms. 13 17. Credibility Demonstrates honesty in dealing with employees, suppliers and customers even if it means a loss of business. 18. Concern for employee Express concern for employees by responding promptly to their grievances. welfare 19. Impersonal relationship Places long-term goodwill over short-term gain in a business relationship 20. Expansion of capital base Reinvests a greater portion of profits to expand capital of the firm. 21. Building product image Concerned about the image of his products among consumers and does everything possible to establish a niche for his products in the market. 1.5 CHARACTERISTICS OF AN ENTREPRENEUR An entrepreneur should possess all such characteristics with the help of which he can perform various responsibilities successfully. The following characteristics are :- 1. Innovator Schumpeter differentiates between an inventor and innovator. An inventor discovers new methods and new materials and an innovator is the one who utilizes those discoveries and inventions. Not only this, the entrepreneur further exploits the inventions commercially and thus produces newer and better goods which give him profit and satisfaction. Innovation may occur in the following forms : (i) The introduction of new goods. (ii) The introduction of new methods of production. (iii) The opening of a new market. (iv) The conquest of a new source of supply of raw-material. (v) The carrying out of the new form of organization of any industry. The entrepreneur locates ideas and puts them into effect in the process of economic development. According to Baumol, an entrepreneur is a Schumpetarian innovator and something more than a leader. 2. Risk-taker Risk means the condition of not knowing the outcome of an activity or decision. A risk situation occurs when one is required to make a choice between two or more alternatives whose potential outcomes are not known and must be subjectively evaluated. A risk situation involves potential gain or loss. The greater the possible loss, the greater is the risk involved. An entrepreneur is a calculated risk-tasker. He enjoys the excitement of a challenge but he does not gamble. An entrepreneur avoids low-risk situation because there is a lack of challenge and he avoids high-risk situation because he wants to succeed. He likes achievable challenges. An entrepreneur likes to take realistic risks because he wants to be successful. He gets greater satisfaction in accomplishing difficult but realistic tasks by applying his own skills. Hence, 14 low-risk situation and high-risk situation both are avoided because these do not satisfy the entrepreneur. 3. Organiser An entrepreneur has to bring together various factors of production, minimize losses and reduce the cost of production. Initially, he may take all the decisions but as the enterprise grows, he starts delegating the authority. He produces that best results as an organizer. Not only this, it is the entrepreneur who has to pick or select the right piece of land, choose the right person and opt for the finance. He must be able to inspire loyalty and hard work amongst the workers to raise productivity and efficiency. In order to expand the business, he must have willingness to delegate authority and trust his sub-ordinates and managers although shaping of long-run policies of the enterprise would remain in his hands. 4. Creative Creatively, as field knowledge, seeks to explain how humans, either individually or collectively, reach solutions that are both novel and useful. Innovation means the effort to create purposeful ventures. Harry Nystrom states that innovation may be defined as radical discontinuous change and creativity is the ability to devise and successfully implement such changes. Successful innovations depend on creativity and one of the most important requirements of an entrepreneur is to be creative as creativity may be taken as the cause and successful innovation as the effect. 5. Motivator McClelland explicitly introduces the need for achievement motivation as a psychological motive and implicitly emphasised the need for achievement as the most directly relevant factor for explaining economic behaviour. Achievement motivation is a drive to overcome challenges, to advance and to grow. An entrepreneur is an achievement-oriented person, not ‘money hungry’. He works for his desire for challenge, accomplishment and service to others. Achievement concerns refers to the accomplishment of excellent, innovative and risk involving tasks. The organizational goal of an entrepreneur can be boosted by inculcating in him the need for achievement. 6. Technical Competent Success of an entrepreneur depends largely upon his ability to adopt latest technology. Technical knowledge implies the ability to devise and use new and better ways of producing and marketing goods and services. An entrepreneur must have a reasonable level of technical knowledge. Technical knowledge is the ability that people can acquire with hard work. An entrepreneur who has a high level of administrative ability, mental ability, communication ability, human relations ability and technical knowledge can be more successful 15 than a person with low level of these abilities. A dynamic entrepreneur must also be interested in changing the pattern of production to suit the requirements. 7. Self-confident It is necessary for an entrepreneur to be self-confident. He should have faith in himself only then he can trust others. In an expanded business, delegation of authority is a must and only a self-confident entrepreneur can delegate his authority. He can seek cooperation of his staff and inculcate a sense of team work in them. 8. Socially Responsible The changing environment calls for a socially conscious entrepreneur who is not threatened by progress of others. On the contrary, he acts in full awareness of social repercussions of his actions. His entrepreneurial ability may create jobs for others. He may invent new products and new manufacturing methods. He may innovate new ways of doing things. All these have social consequences. An entrepreneur should think of projects of social significance and of importance to others. He should expand his entrepreneurial activities, in order to help in creating conditions for social change and for development of business which benefit the society. Such an attitude for others raises the level of entrepreneurship from that of an individual activity to a meaningful social endeavour. 9. Optimistic An entrepreneur should approach his task with a hope of success and optimistic attitude. He attempts any task with the hope that he will succeed rather than with a fear of failure. Such a hope of success enhances his confidence and drives him towards success. 10. Equipped with Capability to Drive Drive is a person’s motivation towards a task. It comprises of such personality traits as responsibility, vigour, initiative, persistence and ambition. An entrepreneur must exert considerable effort in establishing and managing his business. Those entrepreneurs who work hard in planning, organizing, co-ordinating and controlling their business are more likely to have a successful business than the entrepreneur who is lost and haphazard. 11. Blessed with Mental Ability Mental ability that contributes to the success of an entrepreneur consists of overall intelligence, i.e. IQ, creative thinking ability and analytical thinking ability. An entrepreneur must be intelligent, adaptable, creative and he must be able to engage in analysis of various problems and situations in order to deal with them. 12. Human Relations Ability Personality factors such as emotional stability, personal relations, sociability, consideration and tactfulness are important contributors to entrepreneur’s success. One of the most important 16 facets of human relations ability is one’s ability to “put himself in someone else’s place” and to know how the other person feels. This is the ability to practice empathy. The entrepreneur must have good relations with his employees, customers etc. He must be aware of the needs and motivations of customers if he is to adequately train his employees to maintain good customer relations. 13. Communication Ability An entrepreneur must possess the quality of communicating effectively in written and oral communications. Good communication also means that both the sender and the receiver understand and are being understood. 14. Decision-Making An entrepreneur must be clear and creative when it comes to decision-making. He must believe in himself and should be possessing ability to take decisions effectively. Decisions taken should be based on quantitative facts. Decisions which effect organisaton’s future and are likely to be irreversible must be taken with great care. Here are some tips to become a good decision-maker (1) Define the problem, (2) Collect information and relevant data, (3) Begin with a brain storming session and discuss the problem with each other, (4) Never criticize or reject any solution suggested during the brain storming session, (5) Encourage group members to come up with potential solutions, (6) Reduce the number of alternatives to three or four after discussion, (7) Consider each alternative extensively and determine the best to meet your needs and (8) Implement decisions. Decision-making is an art; the more one practices it, better expert he/she becomes. 15. Business Planning The decision to become an entrepreneur is the first step followed by the choice of the product. As the business venture is undertaken, need for planning arises. It is the rigor and thoroughness of the business plan which could be behind the successful entrepreneur throughout his venture’s life. Planning is really nothing more than decision-making, that is, deciding what to do, how to do and when to do. It is vital for the success of a business. As a business person puts it: “Planning is so important today that it occupies a major part of the time of the most respective men in business. Planning allows us to master change. It forces us to organize our expectations and develop programs to bring them about. Planning is the most effective way to draw out the best in all of us-our best thinking, out best interests and aims and to enable us to develop the most efficient way of achieving our maximum goals”. 17 16. A Venture Capital A David Silver, a successful capitalist described an entrepreneur as “Energetic”, single- minded’, having ‘a mission and a clear vision”. He or she intends to create out of this vision a product or service in a field which many have determined is important to improve the lives of millions”. Silver also suggests that entrepreneurs venture out on their own from a sense of dissatisfaction with their organization, but they are not necessarily unhappy with their existing career fields. 17. Visionary Entrepreneurs are visionaries like J.R.D. Tata, Dhirubhai Ambani, Narayanamurthy, Aziz Premji etc. Entrepreneurs have a vision for growth, commitment to constructive change, persistence to gather necessary resources and energy to achieve results. An Entrepreneur is distinguished from a small business person. A person who leaves his job to start an independent business is not an entrepreneur. Constructive change is an essential feature of a visionary. For example, Gulshan Kumar (T-Series) was a venture capitalist and a visionary as well. He has left behind an unequalled legacy of music innovations. Henry Ford created the manufacturing miracle that launched a modern era in industry. An effective visionary performs two key roles : (i) A charismatic role which involves establishing support for a vision and direction. He inspires and empowers his employees for support. Secondly, he plays an architectural role in order to build an appropriate organization structure. He has to look after various functions of management and discharge them effectively. 18. Entrepreneurs make Significant Differences The differences made by the entrepreneurs are significant. They have their own style of dealing with various problems, set backs and uncertainties. They tend to change the existing state of affairs and get the work done without bothering about obstructions and barrers. 19. Ability to Spot and Exploit Opportunities A story is told of a Jeweller who many years ago sent two of his marketing graduates to a remote village to see if they could come up with new product ideas for underdeveloped jewellery market. The first one after exploring the market said, “There is no business here, the residents of the village don’t wear jewellery of any type!” The second one was enthusiastic about the prospects and he said, “This is a great opportunity; the people here haven’t discovered Jewellery yet.” This is how entrepreneurs spot the opportunities which others miss. Mc Grath states that the entrepreneurs are comfortable with ambiguity and they can bring clarity by piecing together previous unrelated messages and signals. 18  The entrepreneurs craft or carve out opportunities for themselves. Their perceptions differ from non-entrepreneurs. There are very few persons who are inventors and entrepreneurs at the same time. Such persons have an edge over those who are only inventors or entrepreneurs. 20. Courage to Face Adversities Entrepreneurs face the adversities boldly and bravely. They refuse to be beaten and become tougher during adverse situations. They have faith in themselves and attempt to solve the problems even under pressure. Every unpredictable situation is a challenge before them which they overcome and survive through. 21. Leadership – An essential trait of the entrepreneur Leadership is the process of influencing and supporting others to work enthusiastically towards achieving objectives. It is a critical factor that not only helps an entrepreneur to identify his goals but also motivates and assists him in achieving the stated goals. Without leadership, an organisation would be only a confusion of people and machines, just as an orchestra without a conductor would be only musicians and instruments. Leadership is one of the primary traits of an entrepreneur by which he can influence others to voluntarily seek defined objectives. Leadership, thus, is the catalyst that transforms potential into reality, problems into opportunities, heading towards the achievement of objectives. This role is often seen dramatically when a small scale unit transforms itself into medium-scale and finally it turns into a giant organization. Leadership is equally important in all sizes of organization – be it small, medium or large Wrarren Bennis, the leadership guru, says that effective leadership can’t exist without the full inclusion, initiatives, and the co-operation of employees. Since a small industry is as labour-intensive industry, the entrepreneur must have leadership qualities to influence his workers or employees. Traits of Leadership :- The path to leadership that one takes differs from individual to individual. However, there are a few key traits we can focus on : o High level of personal drive o The desire to lead o Personal integrity o Self-confidence o Cognitive (Analytical) ability o Business Knowledge o Charishma o Creativity o Personal Warmth The traits between leaders and non-leaders may differ at the physical level, intellectual level or personality features could be different as well. 19 1.6 MANAGER VERSUS LEADER : Warren Bennis point out the characteristics of managers versus leader in the 21st century like this : Manager Characteristics Leader Characteristics Administers Innovates A copy An originally Develops Maintains Focuses on people Inspires trust Focus on systems and structure Long-range perspective Relies on Control Asks what and why Short-range view Eye on the horizon Eye on the bottom line Originates Imitates Challenges the status quo Accepts the status quo Own person Classic good soldier Does the right thing Does things right Although a manager has different features than a leader but in small business the entrepreneur has to play the role of both. By creating an environment that encourages personal interaction, the leader and entrepreneur of a small firm can get the best from her/his employees and also offer a strong inducement to prospective employees. Several decades ago, managers were hard- nosed autocrats, giving orders and showing little concern for those who worked under them. Over the years, this style of leadership has given way to a gentler and more effective variety that emphasis as respect for all members of organisation and shows an appreciation for their potential as well. Manager leader entrepreneur frequently seeks some degree of employee participation in decisions that affect personnel and work process. This leadership approach taken upto a level can also be termed as empowerment. By using empowerment, managers go beyond solicitation of employees’ opinion and ideas by increasing their authority to act on their own and to make decisions about the process they are involved with. 1.7 FUNCTIONS OF AN ENTREPRENEUR An entrepreneur has to perform a number of functions right from the generation of idea up to the establishment of an enterprise. He also has to perform functions for successful running of his enterprise. Entrepreneur has to perceive business opportunities and mobilize resources like man, money, machines, materials and methods. The following are the main functions of an Entrepreneur. 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. 20 2. Determination of Business Objectives : Entrepreneur has to state and lay down the business objectives. Objectives should be spelt out in clear terms. The entrepreneur must be clear about the nature and type of business, i.e. whether manufacturing concern or service oriented unit or a trading business so that he can very well carry on the venture in accordance with the objectives determined by him. 3. Raising of Funds : All the activities of the business depend upon the finance and hence fund raising is an important function of an entrepreneur. An entrepreneur can raise the fund from internal source as well as external source. He should be aware of different sources of funds. He should also have complete knowledge of government sponsored schemes such as PMRY, SASY, REAP etc. in which he can get government assistance in the form of seed capital, fixed and working capital for his business. 4. 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 face competition boldly. While procuring machineries, he should specify the technical details and the capacity. He should consider the warranty, after sales service facilities etc. before procuring machineries. 5. Market Research : Market research is the systematic collection of data regarding the product which the Entrepreneur wants to manufacture. Entrepreneur has to undertake market research persistently 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. 6. Determining form of Entreprise : Entrepreneur has to determine form of enterprise depending upon the nature of the product, volume of investment etc. The forms of ownership are also proprietorship, partnership, Joint Stock Company, co-operative society etc. Determination of ownership right is essential on the part of the entrepreneur to acquire legal title to assets. 7. Recruitment of Manpower : To carry out this function, an entrepreneur has to perform the following activities. a. Estimate man power requirement for short term and long term b. Laying down the selection procedure. c. Designing scheme of compensation. d. Laying down the service rules. e. Designing mechanism for training and development. 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 the commissioning stage are to be 21  accomplished by him in accordance with the implementation schedule to avoid cost and time over run. He has to organize various resources and coordinate various activities. This implementation of the project is an important function of the entrepreneur. All the above functions of the entrepreneur can precisely be put into three categories of innovation, risk bearing, and organizing and managing functions. 1.8 TYPES OF ENTREPRENEUR Today various types of entrepreneur are found engaged in different types of activities, not only in industrial activities but also in agriculture and commercial activities. Today we can recognize entrepreneur in industry, service and business sectors which are technically called as ISB sectors. Entrepreneurs are classified in a number of ways as discussed below. Clearance Danhof’s Classifications Danhof classifies Entrepreneur into four types. 1. Innovative Entrepreneur: This category of entrepreneur is characterized by smell of innovativeness. This type of entrepreneur sense the opportunities for introduction of new ideas, new technology, discovering of new markets and creating new organizations. Such entrepreneur can work only when certain level of development is already achieved and people look forward to change and improve. Such entrepreneur are very much helpful for their country because they bring about a transformation in life style. 2. Adoptive or Imitative Entrepreneur : Such entrepreneurs imitate the existing entrepreneur and set their enterprise in the same manner. Instead of innovation, he may just adopt the technology and methods innovated by others. Such types of entrepreneur are particularly suitable for under developed countries for imitating the new combination of production already available in developed countries. 3. Fabian Entrepreneur : Fabian entrepreneurs are characterized by great caution and skepticism, in experimenting any change in their enterprise. They imitate only when it becomes perfectly clear that failure to do so would result in a loss of the relative position in the enterprises. 4. Drone Entrepreneur : Such entrepreneurs are conservative or orthodox in outlook. They always feel comfortable with their old fashioned technology of production even though technologies have changed. They never like to get rid of their traditional business, traditional machineries and traditional system of business even at the cost of reduced returns. Arthur H Cole Classification Arthur H Cole classifies entrepreneurs as empirical, rational and cognitive entrepreneur. Empirical : He is an entrepreneur who hardly introduces anything revolutionary and follows the principle of rule of thumb. 22 Rational : The rational entrepreneur is well informed about the general economic conditions and introduces changes, which look more revolutionary. Cognitive : Cognitive entrepreneur is well informed, draws upon the advice and services of experts and introduces changes that reflect complete break from the existing scheme of enterprise. Classification Based on the Scale of Enterprise Small Scale : These entrepreneurs do not possesses the necessary talents and resources to initiate large scale production and to introduce revolutionary technological charge. Large scale : They possess the necessary financial and other resources to initiate and introduce new technological changes. They possess talent and research and development facilities. Other Classification Following are some more types of entrepreneurs listed by hehavior scientists. Solo Operators : These are the entrepreneurs who essentially work alone, introduce their own capital and if essential employ very few employees. In the beginning most of the entrepreneurs start their enterprises like them. Active Partners : Such entrepreneurs jointly put their efforts and resources. They actively participate in managing the daily routine of the business concern. Entrepreneurs who only contribute their funds but not actively participate in the business are called simple ‘Partners’. Inventors : Such entrepreneurs are creative in character and feel happy in inventing new products, technologies and methods of production. Their basic interest lies in research and innovative activities. Challengers : According to such entrepreneurs, if there is no challenge in life, there is no charm in life. Such entrepreneurs plunge into industry/business because of the challenge it presents. When one challenge seems to be met, they begin to look for new challenges. They convert odds and adversities into opportunities and make profit. Buyers : These are the entrepreneurs who do not like to face the hassles of building infrastructure and other facilities. They simply purchase the existing one and by using their experience and expertise try to run the enterprise successfully. Life Timers : Such entrepreneurs take business as an integral part of their life. Family enterprises, which mainly depend on exercise of personal skill, fall in this category. Industrial Entrepreneurs : Such entrepreneurs engage in manufacturing and selling products. Service Entrepreneurs : Such entrepreneurs engage in service activities like repair, consultancy, beauty parlor etc., where entrepreneurs provide service to people. Business Entrepreneurs : They are also called as trading entrepreneurs which buy and sell goods. 23 Agricultural Entrepreneurs : They engage themselves in agricultural activities like horticulture, floriculture, animal husbandry, poultry etc. Corporate Entrepreneurs : Corporate entrepreneurs undertakes their business activities under legally registered company or trust. Rural Entrepreneurs : Entrepreneur’s selecting rural-based industrial opportunity in either khadi or village industries sector or in farm entrepreneurship are regarded as rural entrepreneurs. According to Kkhadi and Village Industry Commission (KVIC) village or rural industry means any industry located in rural areas, population of which do not exceed 10,000, which produces any goods or services in which fixed investment of an artisan or a worker does not exceed one thousand rupees. Women Entrepreneurs : According to Government of India an women entrepreneur is defined as an enterprise owned and controlled by a woman and having minimum financial interest upto 51% of the capital and giving at least 51% employment to women. 1.9 RELATIONSHIP BETWEEN ENTREPRENEURS AND ENTREPRENEURSHIP Entrepreneurs Entrepreneurship Producer Production Person Process Organiser Organization Innovator Innovation Risk bearer Risk-bearing Motivator Motivation Creator Creation Leader Leadership Imitator Imitation Visualiser Vision Planner Planning Investor Investment The term entrepreneur is often used interchangeably with entrepreneurship, yet they are conceptually different. The relationship between the two is just like the two sides of the same coin. Thus, entrepreneurship is concerned with the performance and coordination of the entrepreneurial functions. 1.10 ENTREPRENEURIAL CULTURE The famous study on culture’s consequences by Greet Hofsted has long proved that there culture-dependent differences in thinking and acting, and at times this cultural differentiation may prove the crucial element in fostering entrepreneurship. Culture both reflects the environment – physical and social – and in turn shapes it. It is important, therefore to understand the relationship between culture and entrepreneurship. The cultural moulding of one’s perception, memory and attitudes indicates the massive impact of different designs for living upon the individual. A convenient shorthand way of referring to the training in the life-ways of a society, which the new member acquires through social interaction, is to speak of the effect of culture upon the individual. But in so speaking, we are merely using a convenient abstraction to point to the myriad ways in 24 which various people (who themselves learn the ways of the group from others) train the new individual in the approved ways. There is no single thing called ‘culture’ which influences a person. The relationship between culture and the individual is intertwined. Culture influences a person in a massive and pervasive way and this makes for the stability of a society and the continuity of its culture; the person also influences his culture and thus makes social change possible. The culture of a society consists, in part, of a particular set of arrangements for solving the problems of the members of the society. Some of these problems are special ones peculiar to the members of a particular society. Others are universal problems common to all human beings – such as meeting biological needs of the members, training the young caring for the sick. There are, of course, many different possible arrangements for solving those problems. From among these possible arrangements, one society adopts one set; a second society, a different set. This is another way of saying that no two cultures are identical. The particular set of cultural arrangements adopted by a society is influenced by the physical environmental factor, as well as man’s attitude and desire to improve his habitat. A society’s culture, in other words, is not entirely determined by the ‘given’ physical environment. Man is not a passive victim of his physical environment. Within limits, he can act on it and transform it to suit his ends. The historically important things with regard to natural resources is man’s attitude towards them. It was not the availability of iron that created the Iron Age in Britain, nor the presence of coal that ushered in the Industrial Revolution, but the initiative of certain men at particular moments in time in finding a sue for these mineral riches of the earth. The modifications or changes that have taken place in mechanical contrivances follow and tangibly employ prior modifications and changes in the purposes of human tool makers and tool users. The conversion of an agricultural parish in England into an industrialized community, the adoption of a new tool or the incorporation of a new technique of production into a small local cultural system has occurred early or late in time, here or there in space, as dictated by human will. Human geography demands as much knowledge of human beings as of geography. The culture of a given society is also influenced by contacts with other cultural groups. Just as there is congruence between the ‘physical surround’ and culture, so is there congruence between the ‘social surround’ neighboring cultures and the culture of any given society. The borrowings of one society from the culture of another are not, however, blind and random scavenging of odd bits and pieces. A society borrows only those cultural ways that are seen by its members as helpful in solving the problems they face; that are seen, in other words, as a means of reaching their goals. However, the impact of social surround is a slow and complex process that is determined, among other things, by strength of the cultures, the value system and the attitude of people towards change. Education plays an important role in determining attitudes. Perhaps, this is the reason why providing education for all is a central pillar of the Millennium Development Goals stipulated by the United Nations. The relationship between quality education and economic growth is now a proven fact. A few cases provided hereafter may be relevant at this stage. The Chotanagpur region 25 of the Jharkhand state, which was earlier the southern part of the erstwhile Bihar state was one of the first regions to have acquired industrial status in independent India. The mineral-rich region had attracted the attention of our first Prime Minister Pt. Jawaharlal Nehru and a number of large industries came up in the region. Along with large public/private sector undertakings like HEC, SAIL, IISCO, HSCL, FCL, PDIL, TISCO, the central as well as state governments promoted growth of small scale industries and entrepreneurs were encouraged to set up units. With the nationalization of coal mines in the early 1970s this process gained further impetus. Thus, four major industrial area development authorities were created around the four industrial cities of Ranchi, Jamshedpur, Bokaro and Dhanbad. These were Ranchi Industrial Area Development Authority. Adityapur Industrial Area Development Authority, Bokaro Industrial Area Development Authority and New Kandra Industrial Estate, respectively. The objectives of these area development authorities were manifold. The state government wanted to enhance the pace of industrialization, exploit the natural resources of the region judiciously and catalyze economic growth and regional development. Many small scale units were set up on the region. Some were ancillaries to the existing large industries and some were set up to use the natural resources, particularly coal and other minerals available as raw material. This period saw rapid industrial activity in the region. It is to be remembered that today’s highly developed regions like Gurgaon and NOIDA were not even planned then. In the 1980, the Government of Uttar Pradesh (UP) decided to develop the industrially backward eastern region, and a number of strategic initiatives like incentives to set up units in zero industrial areas were announced. Land, finance, etc. were made available and industrial estates around industrially backward districts like Varanasi and Jaunpur were developed. Thus, Ramnagar Industrial Estate in Varanasi District and SathariaI industrial Development Authority in Jaunpur were created. Many units came up. It was much later that NOIDA started coming up, after the government of UP decided to use the proximity of the region to Delhi as a strategic advantage. The Haryana Government’s plan of developing Gurgaon came even later. However, as things stand today, the industrial area development authorities of Jharkhand and industrial estates of eastern UP are in shambles, while Gurgaon has become a leading industrial hub of the country, overtaking even NOIDA. A systematic observation of the industrial development process in and around the regions mentioned above will suggest that for entrepreneurship to flourish mere government support in terms of incentives is not enough. Nor, also, is the abundance of natural resources in the region. There is an entrepreneurial culture that is needed which includes many more things. It was this that was missing in eastern UP and Jharkhand. Why the attempts to industrialize Jharkhand and eastern UP failed and why NOIDA and Gurgaon grew has to be understood. The difference lies in the cultures of these regions While Jharkhand and eastern UP represent stifling cultures, NOIDA and Gurgaon represent facilitative cultures. In stifling cultures, entrepreneurs set units to misuse the finance and other incentives that are offered, the political establishment is exploitative, the support system is rudimentary and the social 26 system is indifferent. Thus, all the stakeholders lack commitment. And without commitment the result is what we saw, efforts and intentions do not yield results. Attempts have been made by researchers to find out the basic elements of the entrepreneurial culture. While opinions vary and views are myriad, there is a wide agreement on the fact that entrepreneurship flourishes in some societies much more than in others. In India, for instance, Sindhi, Marwari, Gujarati and Punjabi cultures have thrown up many more successful entrepreneurs than others. This, however, is not to rule out the growth of entrepreneurship in other cultures. Rather, it is to identify the elements of successful entrepreneurial cultures and inculcate them in other cultures. But this is easier said than done. There is a need to study and understand the entrepreneurial culture, identify the elements of cultures and inculcate them in other cultures. 1.11 DEVELOPING ENTREPRENEURIAL CULTURE India can make rapid strides if entrepreneurship gets due importance in national economic policies. The growth of Japan, South Korea, Singapore and other leading Asian economies can largely be attributed to entrepreneurship. The point to be noted here is that a culture for facilitating entrepreneurship is to be fostered How to do this is perhaps to be learned from those who have realized it. Culture, like personality, has both content and pattern. Just as mere testing of the separate traits of an individual does not describe his personality, so the mere listing of the separate institutionalized ways of a society does not describe its culture. Two cultures, just as two personalities, may contain highly similar elements and yet be extremely unlike one another in pattern. It is this pattern, the arrangement of elements, that is critical. Just as in diamond and coal, the basic element carbon is same but the arrangement of molecules does the trick. Developing entrepreneurship is thus a difficult task given the fact that you need a facilitative culture. Industries fail to flourish in Jharkhand, Bihar and eastern UP despite government efforts. The entire set of social, psychological, political, legal and economic environment needs to be taken into account. Delineating areas, outlining policies and announcing incentives may not be enough as has been proved in the cases mentioned above. A culture needs to be created. There is need to learn from the experiences and experiments of other cultures. In India, the problem is diversity. There is so much diversity that a one-size-fits-all intervention will not work. Down south, the knowledge-based industry and its servicing has thrown up many entrepreneurs. Chennai and Hyderabad have seen rapid growth. East on the other hand is sluggish; rather the growth in Bihar, Jharkhand and eastern UP is negative, West Bengal being no better. Jharkhand is a classic case to prove how absence of entrepreneurial culture stifles growth. The state has abundance of natural resources, and industrial background running back to late sixties and availability of finances, yet it is ranked amongst the worst states in the country. In fact, the Honourable High Court of the state has been constrained to observe time and again that Jharkhand is going the Bihar way. These remarks made by a highly responsible agency of the state sum up the quality of governance of the state. This quality, incidentally, is a crucial determinant of an 27 entrepreneurial culture because other determinants like infrastructure and law and order are dependent on it. Another important aspect is the social-cultural milieu. But more than their presence it is their interaction that is critical. What makes an economy tick ? This, perhaps, is the most relevant economic question for us in present times. Particularly, because many in India see this country emerging as an economic superpower in the next few decades. The popular one word answer to this vital question should be entrepreneurship. Both the theory and evidence suggest that entrepreneurial activities play a pivotal role in economic growth, small and medium enterprises being the crucial determinants. It is precisely because of this that the Government of India as well as different states are so keen to encourage entrepreneurship. In fact, the various state governments are boasting about their open arm policy towards entrepreneurs. Finances are available, policy measures are initiated and technical support is being extended. Despite these, however, growth of entrepreneurship is not satisfactory. But why does the entrepreneurship that steered growth in the West, Association of Southest Asian Nations (ASEAN) countries and Japan fail to click in India. Small and medium enterprises have not shown the competitiveness and the character that boosts the economic development. The reason in one simple word is culture – entrepreneurial culture. This has to be systematically developed. The Jharkhand example sums this up very well. This new state has the potential to be a leading state of the country. But it is a laggard. The same can be said of Bihar and eastern UP. To develop entrepreneurial culture, policy initiatives have to take a culture-specific view. What works in one region may not necessarily work in another region. A holistic approach is required for developing an entrepreneurial culture, where the society at large is involved in entrepreneurial development. It is the social environment that ignites young minds towards achievement orientation. 1.12 CONCEPT OF ENTREPRENEURSHIP Entrepreneurship can be defined as the propensity of mind to take calculated risks with confidence to achieve a pre-determined business or industrial objectives. That points out the risk taking ability coupled with decision making. The word ‘entrepreneurship’ typically means to undertake. It owes its origin to the western societies. But even in the west, it has undergone changes from time to time. In the early 16 th century, the term was used to denote army leaders. In the 18th century, it was used to denote a dealer who buys and sells goods at uncertain prices. Towards 1961, Schumpeter, used the term innovator, for an entrepreneur. Two centuries before, the concept of entrepreneurship was shady. It is only in the recent years that entrepreneurship has been recognized widely all over the world like in USA, Germany, Japan and in the developing countries like ours. Gunnar Myrdal rightly pointed out that Asian societies lack entrepreneurship not because they lack money or raw materials but because of their attitudes. Till recently, in the west, the entrepreneurship is mainly an attribute of an efficient manager. But the success achieved by entrepreneurs in develoing countries demolishes the 28 contention that entrepreneur is a rare animal and an elusive character. In India the definition of an entrepreneur being the one who undertakes to organize, own and run a business has been accepted in a National Seminar on entrepreneurship organized in Delhi in 1975. Still there has been no consensus on the definition of entrepreneurship and qualities of entrepreneurship. Incidentally, entrepreneurship has engaged the attention of sociologists, psychologists and economists. Sociologists analyse the characteristics of an entrepreneur in terms of caste, family, social status etc. Psychologists analyse their attributes on the basis of their personality traits such as need for achievement, affiliation and power, risk taking, decision making, creativity, leadership etc. The economists analyze them on the basis of occupational background, access to capital, business and technical experiences. 1.13 DEFINITIONS OF ENTREPRENEURSHIP McClelland identifies two characteristics of entrepreneurship. Firstly, doing things in a new and better way (Schumpetrian’s innovator). Secondly, decision making under uncertainty (Cantillon’s entrepreneur). McClelland emphasized that entrepreneurial manager should have a high need for influencing other (need for power), a low need to establish emotional relationships (low need for affiliation) and a high capacity to discipline one’s own self (inhibition). In other words, entrepreneurship means the function of creating something new, organizing and co-ordinating and undertaking risk and handing economic uncertainty. “Entrepreneurship is meant the function of seeing investment and production opportunity, organizing an enterprise to undertake a new production process, rising capital, hiring labour, arranging for supply of raw materials and selecting top managers for day to day operations of the enterprise”. - Higgins “Entrepreneurship is essentially a creative activity or it is an innovation function. The process of innovation may be in the form of (a) Introduction of a new product (b) Use of a new method of production (c) Opening of a new market (d) The conquest of new source of supplying raw material (e) A new form of organisation” - Joseph A. Schumpeter “Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed, what constitutes knowledge in practice is largely defined by the ends, that is, by the practice”. - Peter F. Drucker 29  “Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or organize a profit-oriented business unit for the production or distribution of economic goods and services”. - A. H. Cole “Entrepreneurship is that form of social decision making which is performed by economic innovators”. - Robert K. Lamb “Entrepreneurship connotes innovativeness, an urge to take risk in face of uncertainties, and an intuition, i.e. a capacity of seeing things in a way which afterwards proves to be true”. - V.R. Gaikwad “Entrepreneurship is the investing and risking of time, money and effort to start a business and make it successful”. - Musscleman and Jakson 1.14 IMPORTANCE OF ENTERPRENEURSHIP Entrepreneurship being an intangible factor is the moving force and development is the consequence. It has an important role in the context of a developing nation like India which is confronted with major socio-economic problems. Entrepreneurship can play an important role not only in the industrial sector of a country but in the farm and service sectors also. India is being attacked by baffling problems of over population, unemployment, under- employment, poverty and the like. entrepreneurship is consistently equated with the establishment and management of small business enterprises and setting up these units is the solution to these baffling problems. Concentration of economic power, regional imbalances, exploitation by monopolists, and many other giant problems find their solutions in the development of small scale industry which is another name of entrepreneurship in the developing countries. Mahatma Gadhiji also asserted the same. Entrepreneurship has not grown much in India but it is gaining importance fast. The factors which retard the success of Entrepreneurship in India are inadequate infrastructural facilities shortage of capital, technical knowledge and transport, absence of cheap and good quality raw material and shortage of power, etc. The government has been taking significant steps to encourage entrepreneurship as entrepreneurship is the only solution to various problems of developing countries. Entrepreneurship caught strong waves during the last three decades and became a worldwide movement spreading across countries, regardless of their level of development. Even in Europe and United states, revival of small business has been seen for more than a decade. Constant change and innovations are simply a necessity of entrepreneurship and is becoming essential to survive in a global economy. An American magazine. “The Economist’ (1999) recently put it, “Innovation has become the industrial religion of the late 20th Century”. It is being increasingly realized that today’s managers and businessmen need not only managerial skills but entrepreneurial skills as well. Entrepreneurship needs to be demystified and transformed into a skill by teaching and practicing. Skill of entrepreneurship knows how to turn an ordinary corporation, managed in a 30 routine manner, into an entrepreneurial organisation. People within the organisation can be trained to: (i) defect the opportunities; (ii) peruse the opportunities and rewarded; (iii) to lesson the consequences of failing; Entrepreneurship plays a premium mobile role in promoting development of an economy. Hence, it is said that an economy is the effect for which entrepreneurship is the cause. Various levels of economic development across the countries and even within the country are attributed to their differences in entrepreneurship development. 1.15 EATURES OF ENTREPRENEURSHIP Entrepreneurship is the tendency of a person to organize the business of his own and to run it profitably, using various traits like leadership, decision making, innovation, managerial caliber etc. Entrepreneurship is a set of activities performed by an entrepreneur. In a way, entrepreneur precedes entrepreneurship. The main features of entrepreneurship as are follows: (i) Economic Activity : Although classical economists like Adam Smith and Richard Cantillon and many others didn’t recognize entrepreneurship as an economic activity but since last few decades entrepreneurship s catching up and is primarily becoming an economic function because n involves creation and operation of an enterprise. Cantillon also pointed out that entrepreneurship involves conscious decision making about resource allocations. It also implies seeking the best opportunities for using resources for their highest commercial yields. Adam Smith viewed that there was no difference between an entrepreneur and an industrialist. He agreed that economic change could be brought through entrepreneurs. Entrepreneurship is a continuous economic process which recognize the need to change and entrepreneur is a key person to initiate any change. (ii) Innovative Activity : Innovation is the process of doing new things. Drucker elaborates: “Innovation….. is the means by which the entrepreneur either creates new wealth-producing resourses or endows existing resources with enhanced potential for creating wealth.” Entrepreneurship is innovation where new products, services, ideas and information is produced, new efficient production techniques are introduced by the firms, new market opportunities are identified and better ways of meeting existing demands are looked into. Whenever a new idea occurs, entrepreneurial efforts are essential to convert the idea into practical application. According to Schumpter, innovation may occur in any of the following ways : (a) The introduction of a new good with which the customer is not yet familiar. (b) The introduction of a new method of production which is not tested by experience in the branch of manufacture concerned; 31  (c) The opening of a new market the customers are not yet familiar with the product and the market for that innovative product has not previously been entered; (d) The conquest of new source of supply of raw-material irrespective of the fact whether that source already exists or it has been created. (e) The creation of a new organization of an industry a new innovation may create the monopoly for that product or break the monopoly of similar existing product. iii. A function of High Achievement. People differ not only in their ability to do but also in their will to do, or motivation. The motivation, in turn depends on the strength of their motives sometimes defined as needs, wants, drives or impulses within the individuals. McClelland identified two features of entrepreneurship (a) doing things in a different and better way (b) decision making under uncertainty. He found that looking at the history of industrial development, money of the pioneers who built up industrial empires are strongly motivated by need for power and achievement. Thus, people having high need for achievement and power are more likely to succeed as entrepreneurs and this is a very critical factor that leads one towards entrepreneurship. Researches also show that stable personality characteristic like motive are laid down in childhood. iv. Creative and Purposeful Activity. Creativity is “the ability to bring something new into existence”. The definition emphasizes on “ability” and not the “activity” of bringing something new into existence. A person may conceive of something new and also visualize its usefulness but unless he takes necessary action to convert it into reality, his ideas will not be termed as creative. Innovation is the process of doing new things. Innovation, therefore, is the transformation of creative ideas into useful applications but creativity is a prerequisite to innovation. Entrepreneurship is virtually a creative and a purposeful activity. The entrepreneur passes through the five stages during the process of entrepreneurship viz. idea germination, preparation, incubation, illumination and verification. Earning profits is never the sole objective but to introduce something new and creative is the purpose of entrepreneurship. The benefits of his creativity are enjoyed by people at large, e.g. Internet benefits are being enjoyed by more than 50 million people world over. v. Entrepreneurship : An Organising function. J.B. Say describes entrepreneurship as an organizing function whereby the entrepreneur brings together various factors of production, ensures the continuing management and renders risk-bearing functions as well. According to J.B. Say, an entrepreneur is one who combines the land of one, the 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, wages to labourers and what remains is his profit. Thus, J. B. Say clearly distinguishes between the role of a capitalist as a financer and the entrepreneur as an organizer. Marshall also advocated the significance of organization among the services of special class of business undertakes. 32 vi. Entrepreneurship : A function of risk-bearing. Richrd Cantillon, an Irishman living in France is credited with giving the concept of entrepreneurship. Cantillon described in his book published in 1755, an entrepreneur as a person who buys things at a certain price and sells them at an uncertain price. Thus, he makes decisions about obtaining and using resources while consequently assuming the risk of enterprise. Thus, Cantillon conceived of an entrepreneur as a bearer of non-insurable risk. According to him, risk-bearing forms an unique constitutive function of entrepreneurship. 1.16 GROWTH OF ENTREPRENEURSHIP IN PRE-INDEPENDENCE PERIOD Entrepreneurial growth in India is as old as Rigveda but there was no manufacturing as such before 1850. This manufacturing entrepreneurship was too confined to cottage & small scale industry. But it could not grow further due to various reasons such as lack of political unity, capital, network of custom barriers, existence of multiple systems of currency. Emergence of entrepreneurial class is as old as our ancient history itself dating back to the pre-vedic period when the Harappan culture flourished in India. However, history of entrepreneurship and emergence of entrepreneurial class in India may be viewed under the following periods : 1. Period 1 : Entrepreneurship in ancient period 2. Period II : Entrepreneurship in pre-independence era i.e. before 1850. 3. Period III : Entrepreneurship between 1850-1947 4. Period IV : Entrepreneurship after 1947 & onwards i.e. post independence period. 1. Period I : Entrepreneurship in Ancient Period : As per the ancient literature, the ancient Indians took up a variety of commercial vocations akin to present day entrepreneurial activities. The arrival of Aryans opened the first phase of entrepreneurship, with their innovative new crafts and occupations, evolving division of labour for the new handicrafts, breeding of cattle, & cultivating land which were nearly non-existing before them. The ancient literature like Manusmriti gives a more clear picture about the entrepreneurial class of people during pre-vedic period. According to him, vaisyas were the specialized class of people carrying entrepreneurial activities in agriculture, industry & banking sector. During the Gupta & Post-Gupta period, agriculture, crafts and handicrafts comprised the basic sources of occupation for the people. 2. Period II : Entrepreneurship in Pre-independence Era before 1850 AD : During the pre-independence period, agriculture was the main occupation of the people of India. Besides agriculture, the bania, Parsis, Cherriars & Gujaratis etc., specialized in the manufacturing of handicrafts, metal works, stone carving & jewellery designing etc. had dominated the industrial entrepreneurship sector in rural areas. These communities actually laid the foundation of entrepreneurship by carrying out trade & commerce activities initially & later by establishing manufacturing centers. 33  British colonialism in India dealt a severe below to the Indian entrepreneurship & industrial revolution in Great Britain reduced India to the status of material supplier for consumer market for the finished products manufacture in Britain. Due to lack of support from the British Government and its discriminatory policies towards Indian made products, the industrial entrepreneurship suffered a great deal. 3. Period III : Entrepreneurship during 1850-1947 : The mid nineteenth century opened up path for rapid industrialization with the introduction of railways in 1853, development of other infrastructural facilities like roads, ports etc. The eastern part of the country witnessed entrepreneurship mainly due to Europeans who engaged in export-oriented industries, like jute, textiles, tea, coal etc. whereas in the western part, entrepreneurship was mostly among the Indians. It is observed that during the last decades of the 18th century, the Parsis along with Marwaris & Gujaritis trading castes, took to entrepreneurial behaviour. The adoption of the concept of swadeshi & boycott in 1905 to counter the discriminatory policies o the British Government encouraged the Indians to plunge into entrepreneurship. Jamshedji Tata established his first iron & steel industry with the help of ‘swadeshi contribution’. Due to the swadeshi movement which emphasized on manufacturing & using indigenous goods by the Indian’s, indigenous entrepreneurship developed in many types of activities such as textiles, soap, matches, oil, tanneries, potteries, banking, insurance etc. As such, indigenous entrepreneurship grew at a rapid pace with emergence of entrepreneur classes such as Parsis, Marwaris & Gujaratis in the country on the eve of independence of India. 4. Period IV : Entrepreneurship in 1947 & onwards – Post-Independence period : In the post- independence period, the Government identified the need for rapid industrialization with the establishment of heavy & basic industries. The post independence period witnessed the emergence of Marwaris as big investors and industrialists. Before independence, where the Marwaris controlled only 6 companies, after independence, they had 618 directorships which rose to 1/4th of the total in 1951. The Monopolies Inquiry Commission in 1964 has mentioned in its report that the Marwaris accounted for 10 large industrial houses out of a total of 37 showing the strength of the Marwaris in the growth of entrepreneurship during this period. The Marwaris community emerged as a giant entrepreneurial class in the post-independence period. The house of Birla, Singhania, Bajaj & others have created their image in the industrial market in the field of industrial development in India. 1.17 THEORIES OF ENTREPRENEURSHIP Entrepreneurial history is left to be interdisciplinary in approach and, thus, it is difficult to label entrepreneurship as purely a theory of economics or sociology or psychology or a anthropology. The concept of entrepreneurship is as old as civilization while the theories of entrepreneurship have been evolved from over a period of more than two centuries. 34  Theories of entrepreneurship can a broadly be classified into four categories : (i) The economist’s view (ii) the sociologist’s view (iii) The psychologist’s view (iv) The anthropologist’s view Economic Theory Economics is the social science that deals most directly with contemporary economic reality. Economists have done little work on entrepreneurship and therefore, have tended to be in minority. Economists like Adam Smith and David Richard assigned no significance to entrepreneurial role in economic development. Richard Cantillon (1755) was the first person to recognize the role of entrepreneurs in economic theory. He stated that, “the farmer is an entrepreneur who promises to pay the land owner for his farm or land, a fixed sum of money without assurance for the profit he will derive from his enterprise”. He described an entrepreneur as a person bearing risk. He makes profit by buying good at a known price and by selling at an increased higher price but there is always an element of uncertainty in market. Hence, entrepreneur is always at a risk of bearing losses if he would be unable to sell the goods at a higher price. Cantillon stressed on the economic function of entrepreneur over his social status or his personality. JB Say broadened the definition and role of an entrepreneur to include the concept of combining factors of production, also noting that the entrepreneur must have special personal qualities. The economic theory of entrepreneurship centres around Joseph Schumpeter which is versatile and multi-disciplinary. J. Schumpeter (1934) added the concept of innovation to the theory of entrepreneurship. He visualized the entrepreneurs as the key figure in economic development because of his role in introducing innovations. For Schumpeter, the ability to identify new opportunities in the market is a central entrepreneurial activity which creates disequilibrium in the economy. He states that the entrepreneur is the bearer of the ‘mechanism for change’. Changes can occur from inside and outside the economy. Joseph, in one of his books, attempts to develop a number of economic theories of interest, capital, credit, profit and the business cycle by relating them to the theory of entrepreneurship. He centres the whole new economic theory around the entrepreneur rather than just a theory of the entrepreneur emphasis the vital role played by the entrepreneur in an economy. ii. Sociological Theory Sociologists suggest that entrepreneurship can be conceptualized as a social movement an entrepreneurs exist not only in the economy but in other spheres of society as well. S. M. Lipset argues that cultural values deeply affect entrepreneurship and the level of economic development. Mark Granovetter points that family ties may create an obstacle for a businessman if he cares for his family too much; but the same strong family feelings can turn into an advantage once the businessman has emigrated – as long as the distant family members stay behind. He also discusses the role of trust in entrepreneurial ventures. According to him, in social groups and societies where 35 people are isolated from each other, it may be difficult to develop the kind of confidence that is absolutely necessary to start a firm or otherwise cooperate in economic matters. Thus, Mark Granovetter emphasizes the role played by society and family-members in growth of entrepreneurship. According to Cochran, the entrepreneur represents society’s model personality. His performance depends upon his own attitudes towards his occupation, the role expectations of sanctioning groups and the occupational requirement of the job. Society’s values are the most important determinant of attitudes and role expectations. Everett. E. Hagen in his book ‘On The Theory of Social Change’ (1962) argues that people who have grown up in certain minorities develop a much stronger psychological propensity for entrepreneurship than who have not. Hagen’s theory may well contain a grain of truth but his approach is discredited by others. Hagen also concluded that entrepreneurs have emerged from certain communities and castes. Thus, Hagen disregard the complicated institutional environment that surrounds the entrepreneur. iii. Psychological Theory Psychological theory of entrepreneurship has a fairly high status among social scientists who study entrepreneurship because it is very difficult to single out one or several psychological traits as typical for the entrepreneurial personality. However, advocates of this theory assert that entrepreneurship is most likely to emerge when a society has sufficient psychological characteristics. Joseph Schumpeter states that the entrepreneur is mainly motivated and driven by three things : (i) the dream and the will to found a private kingdom; (ii) the will to conquer; (iii) the joy of creating; J. Schumpeter’s formulation can be translated as : (i) the desire for power and independence; (ii) the will to succeed; (iv) the satisfaction of getting things done. According to him, money is not what ultimately motivates the entrepreneur. ‘Entrepreneurs’, according to Schumpter, ‘are certainly not economic men in the theoretical sense’. Thus, he supports the psychological theory and not the economic theory He asserts that what matters is the behaviour, and not the actor. 36  According to David Mc Clelland’s book The Achieving Society (1961), entrepreneurship has to do with an individual’s so called need for achievement (referred to n-Achievement). He identified three features of entrepreneurs that were related to their need for achievement : (1) desire to accept responsibility for solving problems, setting goals and reaching the goals; (2) a willingness to accept moderate risks; (3) a desire to know the outcomes of their decisions. It was widely believed that a high achievement motivation has a strong likelihood of predicting entrepreneurial behaviour. Individuals with high achievement motive tend to take keen interest in situations of high risk, desire for responsibility and a desire for a concrete measure of task performance. iv. Anthropological Theory Fredrik Barth made his first attempt to develop an anthropological theory of entrepreneurship. According to Barth, entrepreneurship has essentially to do with connecting two spheres in the society, between which there exists a difference in value. Something which is cheap in one sphere, may be expensive in another sphere. Barth, one of the leading anthropologists of the world, states that entrepreneurial behaviour means to connect two different spheres in the society, between which there is a huge discrepancy in value. Each of the above theories is incomplete and none of them is right or wrong. Theories of entrepreneurship are inter-disciplinary and are influenced by a multitude of factors. It is the integration of external environment, achievement motivation, ability and ambition which largely determines whether an individual become an entrepreneur or not. 1.18 PROBLEMS IN GROWTH OF ENTREPRENEURSHIP Entrepreneurship is a skill, the resultant of a mix of many qualities, traits and competencies. Entrepreneurship must be a cluster of many entrepreneurial people devoted to their respective ventures. Entrepreneurship is nothing unless entrepreneurs give a creative response to the environment and undertake to establish their enterprise. But devoted, imaginative, hard-working creative and competent entrepreneurs are not enough to further the process of entrepreneurship. Entrepreneurship refers to a process of actions taken by entrepreneur in a specific environment. We can say that entrepreneurship is sum total of entrepreneur and his environment. We have studied both the aspects of entrepreneurship – and environment. Let us now study that what is obstructing the growth of entrepreneurship. It is poor entrepreneurs or unhealthy environmental factors or both? Undoubtedly, entrepreneurship growth in India is slow as compared to other countries. Women’s entrepreneurship is still slower and rather negligible. As far as development of entrepreneurship is concerned, the factors responsible for its slow growth are : (i) Incompetence and poor management; (ii) Low level of commitment; (iii) Restriction imposed by custom and tradition; (iv) Involvement of high risk; 37  (v) Socio-cultural rigidities; (vi) Lack of motivation; (vii) Lack of infrastructural facilities; (viii) Lack of communication network; (ix) Absence of entrepreneurial aptitude; (x) Low status of businessmen; (xi) Market imperfections; (xii) Legal formalities involved to set up a unit (xiii) Low quality products (xiv) Low package of salaries to employees The reasons or the obstacles are many. An enthusiastic entrepreneur starts his venture with determination but generally ends up with a sick unit. Incompetence of entrepreneur and environmental factors, both are responsible for his failure. Financial institutions are liberally sanctioning loans but the permission to commence production is not given in time resulting into heavy interest and debt burden. Entrepreneurs have to wait for months to get power connection for their unit making this financial position still more grave and pathetic. Although the government has simplified the loan procedures to a great extent but realities are different from theory. The stimulation of entrepreneurship is a function of both internal and external variables. There is no dearth of men with the right blend of vision and practical sense to become successful entrepreneurs. But how to identify such persons without a mistake The magnitude of industrial sickness proves and self-explains the causes of poor growth of entrepreneurship. Everyone cannot become demonstration model like Shehnaz Hussain or Dhirubhai Ambani or like. The right type of climate has to be generated. Once it is existing, entrepreneurship becomes a way of life. A mischievous child cannot be disciplined in a day, similarly, entrepreneurship cannot grow overnight. Growth also depends upon level of development. Robert L. Garner quotes, “Development is a state of mind. People have to develop themselves before they can change their physical environment and this is a slow process….. it involves changes in relations between classes and races. It requires improvement of governmental organizations and operations; the extension of social institutions, school, courts and health services. Habits of thoughts and conduct are the most stubborn obstacles to development’.” Similar are problems in the growth of women entrepreneurship. Various problems obstruct the growth of women entrepreneurship. To name a few, various social factors includes 38  (i) lack of education; (ii) dual role of women; (iii) lack of independence; (iv) family burden; (v) responsibility of rearing the children and their home work; (vi) unfavouring family background (vii) lack of cooperation from spouse and other family members. Similarly, economic factors could be the (i) lack of mobility; (ii) problem of getting the loan sanctioned; (iii) exploitation; (iv) shortage of finance; (v) lack of technical know- how (vi) non- availability of power and raw-material; (vii) insufficient intrastructural facilities etc. 1.19 DIFFERENCE BETWWEEN ENTREPRENEURSHIP AND INTRAPRENEUR Basis of difference Entrepreneur Intrapreneur 1. Ownership Entrepreneur is owner of the Intrapreneur is dependent on enterprise. entrepreneur who performs the task of innovation. 2. Status An entrepreneur is independent in his The intrapreneur is dependent upon operatons. entrepreneur. 3. Capital formation Entrepreneur himself forms capital Intrapreneur does not form capital 4. Risk Entrepreneur bears the risk involved An intrapreneur does not fully bear in an enterprise the risk involved in an enterprise. 5. Operation An entrepreneur operates from Intrapreneur operates from within the outside organisation. 6. Guarantee of Entrepreneur gives guarantee to the Intrapreneur himself is a manager, so investment investors for their investment he manages from within. Question of guarantee does not arise. 7. Management Entrepreneur manages the enterprise Intrapreneur is a professional from outside. manager. 8. Professional Entrepreneur need not possess Intrapreneur must possess qualification professional qualification professional qualification. 1.20 TYPES OF ENTREPRENEURSHIP There are various types of entrepreneurship which are as follows :- (i) Small business entrepreneurship Today, the overwhelming number of entrepreneur and startups in the United States are still small business. There are 5.7 million small business in the U.S. They make up 99.7% of all companies and employ 50% of all non-governmental workers. 39  Small businesses are grocery stores, hair dressers, consultants, travel agents, internet commerce store fronts, carpenters, plumbers, electricians, etc. They are any one who runs his/her own business. They hire local employees or family. Most are barely profitable. The definition of success is to feed the family and make a profit not to take over an industry or build a 100 mn business. As they can’t provide the scale to attract venture capital they fund their business via friends/family or small business loans. (ii) Scalable startup entrepreneurship Unlike small business, scalable startups are what silicon valley entrepreneurs and their venture investors do. These entrepreneurs start a company knowing from day one that their vision could change the world. They attract investment from equally crazy financial investor – venture capitalists. They hire the best and the brightest. Their job is to search for a repeatable and scalable business model when they find it, their focus on scale requires even more venture capital to fuel rapid expansion. Sealable startups in innovation clusters make up a small percentage of entrepreneurs and startups but because of the outsize returns, attract almost all the risk capital. (iii) Large company entrepreneurship Large companies have finite life cycles. Most grow through sustaining innovation, offering new product that are variants around their core products, shares in customer tastes, new technologies, legislation, new competitors, etc. can create pressure for more disruptive innovation – requiring large companies to create entirely new products sold into new customers in new markets. Existing companies do this by either acquiring innovative companies or attempting to build a descriptive product inside. Ironically, large company size and culture make disruptive innovation extremely difficult to execute. (iv) Social entrepreneurship Social entrepreneurs are innovators who focus on creating products and services that solve social needs and problems. But unlike scalable startups their goal is to make the world a better place not to make market share or to create to wealth for the founders. They may be non-profit, for profit, or hybrid. 1.21 ENTREPRENEURIAL TRAITS OR COMPETENCIES. There has been a controversy on what it takes to be a successful entrepreneur. Some people argue that entrepreneurs are born with the right personality attributes and others insist that any one can be taught to be an entrepreneurs. In view of above controversy in order to understand clearly what it takes to be a successful entrepreneurs research institutions and behavioural scientists through their research studies have tried to resolve the interiorly on what makes a successful entrepreneur. Following is a lot of major competencies as identified by the Entrepreneurship Development Institute of India (EDI) Ahmedabad. 40 1. Initiative :- The entrepreneur initiates a business activity i.e. he takes the first step to start an enterprise. He takes initiative that goes beyond enterprise establishment or the demand of the situation. For example, he does things before being asked or forced by the situation. 2. Passion :- The entrepreneur should possess passion for his enterprise. He therefore, develop more than a casual interest in the enterprise so that the could overcome various hurdles and obstacles coming on the way of starting an enterprise. Available evidence indicate that without passion or consuming interest, business will not succeed. Such a personal or emotional or consuming commitment to do some thing by giving full try is an example of ‘passion’. 3. Tenacity despite failure Because of the hurdles and obstacles that must be overcome, the entrepreneur must be persistent and must not give up easily. Many successful entrepreneurs succeeded only after they had failed several times. It has been said that successful entrepreneurs do not have failures. They have learning experiences. 4. Self-confidence Entrepreneur is a strong believer in his strength and abilities. He believes that he possesses the ability to accomplish whatever he sets out to do and achieve. The confidence is not unfounded however. The entrepreneur who believes that “He can” becomes successful. 5. Sheer grit and strong determination The life history of successful entrepreneurs reveals that they are characterized by self motivation and strong determination in their goal. They act out of choice. They are never victim of fate. The entrepreneur believes that the success or failure depends on his own actions. This quality is known as “internal locess of control’. A person who believes that fate and other outside factors determine success has an external locus of control and is not likely to succeed as an entrepreneur. 6. Creativity One of the reason that entrepreneurs are successful is that they have imagination and can envision alternative scenarios. They have the ability to recognize opportunities that other people do not see. Here again let us take the example of Henry Ford. 7. Change Seeker To the most of people change is often frightening and is something to be avoided. But, successful entrepreneurs see change as normal and necessary. Therefore, they search for change, respond to it and exploit it as an opportunity. In fact, this exploitation of change is the basis of innovation. In economics, change is considered a prerequisite for improvement and development. 8. High need for achievement Many studies have shown that the successful entrepreneurs have ‘high need for achievement’ than the general population. David. C. McClelland considers it the most crucial 41 element to become an entrepreneur. It is the high need for achievement which makes entrepreneurs act on their ideas. The achievement motive is converted into drive and initiative that results in accomplishment. 9. Team spirit Successful entrepreneurs build team and work with teammates. In simple words, team is a group of individuals who work in a face-to-face relationship to achieve a common goal. They share collective accountability for the outcome of the team’s effort. Working in teams creates synergy and achieves success in its endeavours. While appreciating the role of team spirit in success. Henry Ford’s view seems worth citing “Bringing people together is beginning, keeping people together is progress and working with people is success”. 10. Information Seeker. A successful entrepreneur always keep his eyes and ear open and is receptive to new ideas which can help him in realizing his goals. He is ready to consult expert for getting their expert advise. 11. Quality Consciousness. Successful entrepreneur always keep his eyes and ear open and is receiptive to new ideas which can help him in relishing his goals. He is ready to consult expert for getting their expert advise. 12. Proper Planning. Successful entrepreneurs develop or evolve future course of action keeping in mind the goals to be realized. They believe in developing relevant and realistic plans and ensure proper execution of the same in their pursuit of attaining their goals. 13. Problem Solver. Successful entrepreneurs take problem as a challenge and put in their best for finding out the most appropriate solution for the same. They will first of all understand the problem and then evolve appropriate strategy for overcoming the problem. 14. Assertive. An assertive person knows what to say, when to say, how to say and whom to say. He believes in his abilities and ensures that others fall in line with his thinking, aimed at promoting the interests of the organization. 15. Effective Monitoring. Top performers ensure that everything is carried out in their organizations as per their wishes. They ensure regular monitoring of the working so that the goals of the organization are achieved in best possible manner. 16. Employees Welfare. Future of the organisation depends on its employees. If the employees are dedicated, committed and loyal, the organization is bound to perform well. A successful entrepreneur tries to promote organization’s interests through promotion of interests of the workers. He takes personal interest in solving problems confronting workers and generates the feeling that there is interpendence of the interests for workers and the management. 1.22 MEANING OF MOTIVATION 42  Motivation is the inner urge of a person that ignites and sustains behaviour to satisfy need of himself as well as of the society. Motivation has been derived from the Latin word “Motive” which implies the inner state of mind that activates, provokes and directs our behaviour towards the goal. 1.23 DEFINITON OF MOTIVATION According to Mcfarland, “Motivation refers to the way in which urges, drives, desires, striving, aspirations or needs, direct or explain the behaviour of human beings”. Thus entrepreneurial motivation may be defined as the process that motivates an entrepreneur into action and induces him to follow the course of action till the goals are not achieved finally or till the establishment of an well-established enterprise. In a nut shell motivation includes motives, behaviours and goals. “A motive is an inner state that energies, activates or moves and that directs behaviour towards goals”. – Bernard and Steiner “Motivation is getting people to do. What you want them to do, because they want to do it”. – D.D. Eisenhower “A willingness to expend energy to achieve a goal or reward. It is a force that activates dormant energies and sets in motion the action of the people. It is the function that kindles a burning passion for action among the human beings of an organization” – C.B. Memoria “Motivation represents an unsatisfied need which creates a state of tension or disequilibrium, causing the individual to make a goal directed pattern towards restoring a state of equilibrium by satisfying the need”. – Vitiles 1.24 NATURE OF MOTIVATION Based on above definitions the following points of nature of motivation emerge : 1. Motivation refers to the internal feelings of an individual or individual’s motives. 2. These emotions, feelings or desires of a person prompt him to work more. 3. Unsatisfied needs of an individual disturb his equilibrium, forcing an individual to resort to a goal directed approach. 4. Motivation activates and channelises dormant energies of an individual towards productive action. 5. Motivation is linked to satisfaction. Satisfaction is the felling of contentment a person experiences out of need fulfillment. 6. An individual is motivated in totality and not in parts. 1.25 TYPES OF MOTIVATION 43  In order to extract more out of his subordinates a manager will be required to motivate them for performing better. This can be done either by offering them reward for more work or by instilling fear among them in the form of punishment. Motivation can be of two types and these are :- 1. Positive Motivation. Workers are tempted