CHAPTER - 2

ROLE OF
ENTREPRENEURSHIP
 : 27

CHAPTER - II

ROLE OF ENTREPRENEURSHIP

Synopsis

2.1 Introduction

2.2 Role of Entrepreneurship

2.2.1 Economic Development

2.2.2 Industrial Development

2.3 Meaning of Entrepreneurs

2.4 Meaning of Entrepreneurship

2.5 Characteristics and Qualities of Entrepreneurs

2.5.1 Administrative and Organisation ability

2.5.2 Mental ability / creativity

2.5.3 Clear objectives / Clarity

2.5.4 Business secrecy

2.5.5 Human relations ability / tactfulness

2.5.6 Communication ability

2.5.7 Technical knowledge and willingness to change

2.5.S Capacity to assume risk

2.5.9 Ability to mobilise resources

2.5.10 Desire for responsibility

2.5.11 Self Confidence

2.5.12 Desire for immediate feedback

 LIST OF TABLES

Table No. Pg. No.

2.1 Gross domestic Capital Formation 32

2.2 Per-capital income during last few years 33

2.3 Creation of Employment 35

2.4 Exports of SSI Units 36

2.5 Contribution to Tax 40

2.6 Growth in Industrial Production 44

2.7 Annual Growth Rate in Major Sectors of Industry 45

2.8 Growth Rate of Industrial Production by 46

used-based Classification

2.9 Annual Growth in Agriculture Production 47

2.10 Gross Capital formation in Agriculture 48

 : 28 :

CHAPTER-II

ROLE OF ENTREPRENEURSHIP

2.1 INTRODUCTION

Entrepreneurship lies at the centre of economic

development. The relationship between entrepreneurship and

economic development is similar to the relationship between cause

and effect. It is the spirit of enterprise among people that leads to

the development of particular society. Entrepreneurship is directly

and indirectly responsible for the alround development of the country.

It has not only contributed to the economic development of the

country but also largely contributed for the industrial development

of the country. Even today, entrepreneurship is required in

agriculture, horticulture, sericulture, etc. for the development of

country as a whole. Entrepreneurship, therefore, in our country has

to subserve the national objective. There is an apparent conflict

between social objective and economic imperatives. This conflict

has to be resolved first by the individual entrepreneur in his own

mind and make economic growth, which includes industrial

development, as one of the instruments of attaining the social

objectives. A high sense of social responsibility is thus an essential

attribute of the emergent entrepreneurship in India.

 : 29 :

2.2 ROLE OF ENTREPRENEURSHIP: -

2.2.1 Economic Development

Entrepreneurship plays an important role in economic

system. Economic system determines the nature and scope of

entrepreneurship. Economic system grows and takes shape under

the influence of industrial policy, economic policy, socio-political and

cultural ideas of the people. Entrepreneurship gives a fillip to new

organisational forms and the economy has to adjust to these

demands. There is a direct correlation between the level of economic

development and the level of entrepreneurship. An entrepreneur is

a creator of wealth which is key to economic development.

Entrepreneurship is the most important and

indispensable part of the social and economical growth of any

country - developed, developing or underdeveloped. This

entrepreneurship is very scare source in the country. It has rightly

been said that entrepreneurs are not bom but prepared/ produced.

The entrepreneurship has direct relationship with the people.

Those who take up the challenge to start their own business/

industry are recognised as entrepreneurs. The development of

entrepreneur has been recognised widely as the key to economic

growth, development and human welfare. It has therefore, become

necessary to find out suitable entrepreneurs. To bring out the

 : 30 :

hidden entrepreneurship ability of people, it is necessary to

motivate them. Entrepreneurial skill is very much essential for

industrialisation and to meet the employment. Mr. V. V. Bhatt,

member of Economic Institute of World Bank, Washington has

rightly mentioned that looking historically, to start and maintain

the change in the social and economical growth process, the

contribution of entrepreneur has been recognised as godfather.

According to the German economist, settled in USA., Mr.Joesph

Schumpeter, in the economic growth of any country, the

entrepreneur and entrepreneurship both play a vital role.

Peter Drucker, father of modern management, said

that, in all the countries in the world, the entrepreneurs are between

12% to 15%. This is very low percentage. It is absolutely necessary

to increase this ratio for economic growth. The solution to this

problem is to attract more and more people for entrepreneurship.

Entrepreneurs initiate, increase and sustain the process of economic

development in the following ways.

a Capital formation

b Increases per capita income

c Generation of employment

d Economic independence

e Balanced regional development

 : 31 :

f Earning foreign exchange

g Increase in purchasing power of people

h Contribution to tax

i Solving unemployment and underemployment

j Harnessing youth vigour

k Increase in national production

(a) Capital Formation:-

Entrepreneurs mobilise the idle savings of the public

through the issue of shares and debentures and collecting deposits

or through issues of industrial securities. Investments of public

savings in industry result in productive utilisation of natural resources.

Thus, entrepreneurs increase the rate of capital formation which is

essential for rapid economic growth. It also helps in the development

of the country. Below given are the figures of capital formation

during last few years.

Capital formation includes investment in India by

Indian investors, foreign countries and investment outside India by

Indian companies is shown in table 2.1.

 : 32 :

Table 2.1

Gross domestic Capital Formation

Year Public Private Increment over its

Rs. Rs. Previous year (%)
(in crores) (in crores) Public Private

1990-91 52,151 83,005 - —

1991-92 56,537 83,531 08.41 00.633

1992-93 62,763 1,06,893 11.01 27.96

1993-94 70,760 1,11,340 12.74 04.16

1994-95 88,415 1,49,649 24.95 34.40

1995-96 89,791 2,22,188 01.55 48.47

1996-97 93,798 2,32,572 04.46 04.67

1997-98 1,08,769 2,56,686 15.96 10.46

Finance India Vol. XII No. 2 January 1999

The Quarterly journal of Indian Institute of Finance

(b) Increase in Per-Capita Incomet-

Entrepreneurs locate and exploit opportunities. They

convert the latent and idle resources like land, labour and capital into

productive form. Entrepreneurs can start new industrial units and also

can introduce new products in the market. They thus, help to increase
 : 33 :

gross national product and net national income in the country and due

to this per-capita income also increases, which is an important yard

stick for measuring economic growth. The data of increase in per-capita

income for last few years is shown in Table 2.2.

Table 2.2

Per-Capita Income During Last Few Years

Year Per-Capita net national Increment over its

product (at current prices) previous year
Rs. in percentage

1990-91 5,366.9

1991-92 6,014.0 12.05

1992-93 6,734.5 11.98

1993-94 7,698.2 14.30

1994-95 8,876.4 15.30

1995-96 10,160.3 14.46

1996-97 11,600.9 14.17

1997-98 12,771.6 10.09

1998-99 14,712.4 15.197

1999-00(Q) 16,047.4 9.07

Note: New series Base 1993-94, Q = Quick Estimates

Source : Central Statistical Organisation

 : 34 :

(c) Generation of Employment:-

Entrepreneurs generate employment opportunities

directly and indirecdy. Directly means self-employment which is the

best way for independent and honourable business or industrial life.

Indirectly means by setting up business units which offer jobs to

thousands of people. Thus, through entrepreneurship one can contribute

in the solving the problem of unemployment in the country, this in

another way solves many other problems which are attached with

unemployment. The details of which are given in Table 2.3.

(d) Economic Independence:-

Entrepreneurship is essential for national self-reliance.

Industrial entrepreneurs help to manufacture indigenous products

which reduces the dependence on foreign countries. Businessmen

by having their own export oriented units, export goods and services

on a large scale and thereby earn a scarce foreign exchange for the

country. Such import substitution and export promotion help to

ensure the economic development. The figures of exports by SSI

 Table 2.3

Creation o f Em ploym ent

Lakh persons as on March 31
*

Year EM PLOYM ENT

Public I Private Public and Private Increm ent over previous
sector sector sector (Total) year o f Em ploym ent

P-.

Ph

2
Total Total Total Private Public Total
1
i
I
i

1
i

88T9

CN
00
id

tH
r-
ZZS91

cn
CN

r-i

C\
T->
22.59 227.09 36.44 263.53
CO

ZYZ9

v*4
00

cn

i> o
*
CN r-~
r-~ in

00 os

T-H
VO

o CN
23.47 14.34 76.76 229.52 267.33 1.51 1.23
o
00
©

0ZZ61
24.29 63.67 . 14.79 78.46 231.48 39.08 270.56
LLILZ 090 2.21
900 1.20

r-t Os

t-h CN cn
24.77 193.26 63.00 15.50 78.51 231.51 40.26 190 0.44

r-< T-H t—l

00
SO so so

^■4 T—4
00 00
00 •'i- o

Os CN CN
ON CN OS CN CN
99891 25.45 194.45 63.41 15.89 79.30 232.21 41.54 273.75 1.00 0.72

SO
so
1995 26.00 64.30 16.28 80.59 232.97 42.28 275.25 0.10 1.62 0.54

CN
OS
■'t N-
T“* i—*
Os Cs

so
OS
Os
T--*
167.94 26.35 67.20
LVL9 17.92 86.12 235.14 44.26 279.41 -0.19
990 5.62 1.51
1997 168.31 27.28 195.59 19.09 86.86 236.08 46.37 282.45 2.04 1.08

00

00

LT)

00

T—<
Os
NO

Os
27.63 194.18 67.37 20.11 233.92 47.74 281.66 -0.72 0.71 -0.27
o1

o1
t-h
00

o
r—4

6661 0899

tn o
t-h
T“4

<N

«rH T—1
00

NO sd
SO
oO 194.15 20.18 86.98 232.84 48.29 281.13 -0.57
J?
N ote :
(i) includes all establishm ent in the public sector irrespective o f size o f employment and non-agricultural establshm ent in the
Pvt. Sector employing 10 or m ore persons.
r' (ii) excluding Sikkim, Arunachal Pradesh, D adra and Nagar Havali and Lakshadweep as they are not yet covered under the
programme.
Source : Ministry of labour, (D G E & T), Quarterly employment Review
India 1998 O bserver Statistical H andbook - Page No. 277 CO
on
 : 36 :

units are given in Table 2.4.

Table 2.4

Exports of SSI Units

Increase US $ Million Rs. Crores

Year S.S.I. over Exports Exports
previous (including (including
year re-exports) re-exports)

1990-91 9,664 —
18,143 32,553

1991-92 13,883 43.7 17,865 44,041

1992-93 17,785 28.1 18,537 53,688

1993-94 25,307 42.3 22,238 69,751

1994-95 29,068 14.9 26,330 82,674

1995-96 36,470 25.5 31,797 106,354

1996-97 39,249 7.6 33,470 118,817

1997-98 43,946 12.0 33,980 130,101

1998-99 48,979 11.5 33,218 139,753

1999-00(P) 53,975 10.2 37,599 162,925

2000-01 (P) -- — 28,610 129,460

-

P = Provisional E = Estimated
Source : DGCI & S

(e) Balanced regional development:-

With more facilities available in urban areas, there will

be a tendency on the part of entrepreneurs to start enterprises in

and around big cities, causing migration of rural manpower. This

creates an imbalance in growth of urban and rural areas besides

 : 37 :

causing heavy financial burden on the local authority and

government for providing basic and essential amenities like housing,

water, transport etc. for the migrated population.

Entrepreneurship balances the regional development.

Government encourages the entrepreneurs to establish their

business undertakings in backward, rural, hilly and mountain areas.

This way such areas can be developed for industrial and commercial

activities, this in turn, ultimately helps the areas to get employment,

and to remain in touch with the modern changes in the world.

They can improve their standards of living. Government is

providing various types of financial and non-financial assistance

and other infra-structural facilities required by the entrepreneurs

to start business/industrial units. Government directly and indirectly

helps in establishing industrial estates in backward and rural areas

so that there will be a balanced regional development in the country.

Government provide various types of assistance to establish the

business units in backward, rural, less developed, hilly and mountain

areas to the entrepreneurs who initiate their enterprises in such

areas where there is no banking facilities, transport facilities, power

facility, repairs and maintenance facilities, communication facilities,

etc. There are number of places, where only one or few factories

were started. With the passage of time, these places gained

importance and attracted other industries. As a place gains in

 : 38 :

industries, certain facilities usually begin to develop e.g. in public

sector - Steel plants - BHEL, SAIL, in Private sector - Modi, Tata

have put forth unknown places on international map.

In order to achieve a healthy balance in the growth

of rural and urban areas, government policies are now focusing

on the development of rural areas, encouraging entrepreneurs to

start ventures there. If agro-based industries are set up all over the

country, it will provide a better balance of industrial growth.

(f) Earning foreign Exchange:-

Entrepreneurship helps the country to earn foreign

exchange. Due to the heavy demand of handicrafts, pharma­

ceuticals, chemicals, IT, processed food and other indigenous

goods in foreign country, a large amount of foreign currency is

snatched by it. Agricultural products like tea, coffee, wheat, sugar,

cotton, etc. and other industrial and consumer products play an

important role in earning foreign exchange. Government is

encouraging our export businesses and also providing assistance

to the exporters for increasing their exports. Government has

established so many institutions for encouraging the

entrepreneurs to the exportable goods. The figures related to the

export for the last few years are shown in Table 2.4.
 : 39 :

(g) Increase in Purchasing Power:-

Entrepreneurship directly increases the production

of goods and services. At the same time it provides employment,

this in turn, increases industrial income and thereby it increases

purchasing power of individuals. Again this can accelerates the

pace of industrialisation and economic development. Ultimately

it demands a new class of entrepreneurs.

(h) Contribution to tax:-

Tax is one of the sources of the government

revenue. Government collects taxes under various heads of

income. Then government spends it for the welfare of the

country and balance of payment. Government as a result of

this provides more and more incentives to the entrepreneurs to

have their own units, then they have to pay taxes if they earn

profit. They have to pay sales tax, income tax, excise, custom

duties and local taxes, etc. which are the sources of income to

the government. The income from taxes for last few years are

given in Table 2.5.

 : 40 :

Table 2.5

Contribution to Tax

Amount in (Rs.) (in crore)

Year Income & Sales Others Customs Excise

corporation Tax Duties Duty
Tax

1990-91 10,712 18,228 13,625 20,664 24,514

1992-93 16,794 24,031 18,733 23,776 30,831

1993-94 19,183 28,140 20,747 22,193 31,697

1994-95 25,851 33,226 24,635 26,789 37,347

1995-96 32,079 35,693 31,539 35,757 40,187

1996-97 36,801 42,226 33.160 42,851 45,008

1997-98 37,117 45,540 42,242 40,193 47,962

1998-99(RE) 48,480 52,004 46,107 42,648 53,200

1999-OOfBE) 57,760 61,725 55,586 50,369 63,779

RE - Revised Estimate

BE = Budget Estimate, Economic survey 2001-01, S-39

Source :Economic Division, Department of Economic Affairs, Ministry
of Finance

(i) Solving Unemployment and Underemployment:-

Indian economy faces two major problems, (i) capital

shortage and (ii) labour affluent, resulting on widespread unemploy­

ment. To meet this socioeconomic problem, we need to take up

 : 41 :

progammes to promote entrepreneurs who can set up small scale

industries / enterprises, which have the potential of generating

employment five times more than that of large establishments with

the same amount of capital investment. In large establishments also,

there is lot of underemployment, resulting in frustration and job

dissatisfaction among qualified or experienced technical personnel.

Hence government has undertaken schemes for the educated

unemployed and the experienced technicians/ technologists to take

up self-employment. A few such schemes are as follows :

* Prime Minister's "Rozgar Yojana"

* Priyadharshini Scheme of Bank of India (for women)

* National Equity Fund.

* Mahila Udyam Nidhi Yojana

* Refinance scheme of small industrial development of Bank of

India for small and rural entrepreneurs.

(j) Harnessing Youth Vigour

The educated youth are more articulated and are

conscious of their rights. When the state fails to provide them the

opportunity to earn their livelihood, they become frustrated and

channelise their energies to violent and other destructive activities.

One effective way of harnessing the youth vigour is by

entrepreneurial motivation, thereby providing them an opportunity

 : 42 :

for self-employment. The Government of India has taken up several

programmes with this objectives.

(k) Increase National Production:-

National production is mainly to cater to the local and

external needs. To play an effective role in the international market,

we need to work for the opening up of sectors for employment and

wealth generation. As the globalisation process gets incorporated in

Indian industry, our efforts should be not only to produce goods

and services at competitive costs, but to carve out into the export

market. Entrepreneurs need to focus their attention on exports and

simultaneously plan for producing goods and services that will

substitute an imports, thus helping the nation in conserving foreign

exchange, and rendering efficient service to the customers.

With the development of entrepreneurs, there will be

an overall increase in production and productivity both for internal

and international markets.

The above narrated paragraphs prove that there is an

urgent need of entrepreneurship to be developed upto the last extent

so that economic development can take place to its fullest extent.

2.2.2 Industrial Development:-

Entrepreneurship has not only contributed to the

economic development of the country but it has also largely

 : 43 :

contributed to the industrial development of the country. The

success or progress of any country, today, largely depends on

industrial development of that nation. Entrepreneurship has

initiated, increased and sustained the process of industrial

development in India in following ways :

(a) Increase in industrial unit production

(b) Improvement in standard of living

(c) Use of advanced technology

(d) Expansion of market

(e) Use of natural resources

(f) Development of new industries and ancillary units

(g) Innovation through research and development

(a) Increase in Industrial Unit Production:-

Entrepreneurship helps in establishing new industrial

units, at the same time also assists the industrial units to increase

their production. Today India has regain self-sufficiency in many

products due to entrepreneurship development. The process of

developing new entrepreneurs is going on and they will adopt new

technology, that will improve the quality of their products and will

find out new products or substitute products in the market. As

soon as new entrepreneurs set up new industrial units employment

 : 44 :

opportunities and production of new products are going to take

place. This, in turn, increases the additional output in industrial

world. Entrepreneurship development programme assists the

manufacturers in increasing their output. It provides knowledge

to entrepreneurs about the latest technological development and

also assists them in making fuller utilisation of natural and other

resources available to them. It is the entrepreneurship development

due to which modernisation and renovation take place in the

industry. The percentage increased in industrial production since

last few years are shown in Table 2.6.

Table- 2.6

Growth in Industrial Production

Year Industrial Production % change over

previous period

1996-97 129.1 5.6

1997-98 139.5 6.7
1998-99 145.2 4.1

1999-00 154.7 6.5

2000-01 159.6# 5.7#

-----
Source: The Economic times- Economic Survey 2000-01, 24th Feb.,
2001, Pg. VII

Note : # April -Dec., 2000,Index of Industrial Production 1993-

94=100.
 : 45 :

Some other observations regarding growth rate in

industry are shown in Tables 2.7 and 2.8.

Table 2.7

Annual Growth rate in Major Sectors of Industry

Period Mining Manufacturing Electricity General

(Weights) (10.47) (79.36) (10.17 (100)
1994-95 9.8 9.1 8.5 9.1

1995-96 9.7 14.1 8.1 13.0

1996-97 -1.9 7.3 4.0 6.1

1997-98 6.9 6.7 6.6 6.7

1998-99 -0.8 4.4 6.5 4.1

1999-00 1.0 7.1 6.6 6.6

Index of Industrial Production 1993-94 = 100

Source: Economic Survey 2000-01, page 132

From the above Tables 2.7 and 2.8, we can observe

the growth rate of Industrial production by classifying industry

into various sectors or by classifying it on used-based.

The production in cottage industry in the year 1991 -

92 was 168 millions tonnes which was increased by 17 millions tonnes

and reached at 185 millions tonnes in the year 1995-96.

 Table 2.8
G row th rate o f industrial production by used-based classification
(Base : 1993-94 = 100)

Sectors Weight 1995-96 1996-97 1997-98 1998-99 1998-99 April Dec

1999-00 2000-01
00

r-H
SO

d
00
T-t
Basic goods 35.5 3.0 6.9 5.3 5.2

00
IT)
Capital goods 9.3 5.3 11.5 12.6 6.9 7.5 3.2

T—
d

o
*
00
00

oo
00
o
Interm ediate Goods 26.5 19.4 4.7

Consumer Goods 28.7 12.8 6.2 5.5 2.2 5.7 5.0 8.5
of which (Consumer

sq
/-—N
Durables) (5.4) (25.8) (7.8) (5.6) (14.2) (14.0) (17.5)

(Consumer
Non-Durables) (23.3) (9.8) (6.6) (4.8) (1.2) (3.2) (2.2) (5.7)

IIP (Index o f Indl.

VH

Tt"

Prodn.) 100.0 13.0 6.1 6.7 6.6 6.4 5.7

N ote : The indices for April 1998 onwards are based on revised weights.
Source: Econom ic Survey 2000-01, page No. 132. "it
<0
 : 47 :

The increase in agricultural production can be seen

from the table 2.9.

Table 2.9

Annual Growth in Agriculture Production*

Year Index of Agriculture % Change

production

1994-95 165.2 5.0

1995-96 160.7 - 2.7

1996-97 175.7 9.3

1997-98 165.3 - 6.1

1998-99 178.1 7.7

1999-00 176.8 (P) - 0.7 (P)

2000-01 170.6 (P) - 3.5 (P)

*Index of agriculture production (of 46 crops, including plantation)

with base triennium ending 1981-82 = 100.

P = Provisional

Source : The Economic times, Economic Survey 2000-01

Tuesday, 24th Feb. 2001, page No. VII

At the same time investment in agriculture can also

be highlighten in the table 2.10.

 Table 2.10

Gross capital formation in Agriculture (at 1993-94 prices)

(Rs. crore)
j Per cent share

U
£
Total Public Private Investment in agriculture as

s .....
Public Privage Public Private
VO

1993-94 13,523 4,467 9,056 33.0 67.0 3.4

rH
SO

1994-95 14,969 4,947 10,022 33.0 67.0 3.3

1995-96 15,690 4,848 10,842 30.9 69.1 1.6 2.8

VIL

o
in
CO

t-H
t
1996-97 16,176 4,668 28.9 1.5 2.3

1997-98 15,953 3,979 11,974 24.9 75.1 1.7

VI
1998-99 16,384 3,846 12,538 23.5 76.5
1
"

T“*

in

1999-00* 18,656 4,668 13,988 25.0 75.0

*Quick Estimates
Source : Economic survey : 2000-01, Government o f India,Page No.167 *
00
 : 49 :

Agricultural production, industrial production, SSI

sector production, etc. increased due to the entrepreneurship. Thus,

on account of entrepreneurship industrial, agricultural and SSI

sectors developed with increasing rates year after year.

(b) Improvement in standard of living :

Entrepreneurs set up industries in backward areas,

which removes the scarcity of essential commodities, they introduce

new products and provide new employment opportunities, and,

thereby more and more people get employment in various industrial

units which results into increment in personal income, family income

and per capita income, and ultimately raises the standard of living

of people. Large number of varieties of goods could be offered at

lower rates as large number of small entrepreneurs enter in the field

of industrial world.

(c) Use of advanced technology

Development of science and technology has resulted

into new production methods and qualitative production of varieties

of products at lower rates. Advanced technology has changed the

nature of the national and international competition, imports and

exports of various goods. Talented entrepreneur is able to search

new technology which is important for industrial and economic

development of the country.

 : 50 :

(d) Expansion of Market

Today's global world become a small village and also

a global market and therefore there exists a global alround

competition in today's business world, it is, therefore, very difficult

to stay in the market. Only the products of good quality can survive

and courageous and creative entrepreneurs are able to face such

situations. If one wants to stay in the market then he has to

increase his sales and it is very tough to increase sales in today's

market. But if entrepreneurs make necessary changes through

innovation in characteristics of the products and lowering

comparatively the prices of their products, they can then stand in

the market. Entrepreneurs can expand their markets if they

manufacture their products according to the customers' demand.

Once if they enter in it, then slowly and gradually will expand the

market of their products.

(e) Use of Natural Resources:-

If the natural resources of the country are fully

utilised then the country can make a good progress - industrial

and economic. Entrepreneurs use variety of resources optimistically

and economically, which will then help in overall progress of the

country. R & D, can help entrepreneur to find out and explore

new resources.
 : 51 :

(f) Development of new industries and ancillary units:-

In any country its industrial development become

possible through entrepreneurs. By installing new industries the

entrepreneurs not only develop the country industrially but also

economically . Over and above this the use of advanced technology

and research and development can also contribute to the industrial

development of the country. When big industries come into existence

they also give birth to small and other ancillary industries on which

the former have to depend for their raw-materials requirement and

other services. The momentum of an early start by industrialists in

particular area which is backward and/or remote area will be

developed slowly and gradually. There are number of places where,

only few factories were started, with the passage of time these

places gained importance and attracted other industries. At the

same time at these places certain other facilities usually begin to

develop, like road, transport, communication, power, repair and

maintenance and insurance. These all facilities turn into the

development of the labour market.

(g) Innovation through research and development:-

New class of entrepreneurs nowadays exploit the new

advanced technology for manufacturing new products. It may be

totally new product or differences or changes in a existing products
 : 52 :

like increase in size, change of colour, design, shape, packing, etc.

This is possible through research and development. The old

entrepreneurs have fixed ideas and notion, they were not ready to

change their methods and adopt new technology and changes while

the new class of entrepreneurs is ready to make changes and produce

new and variety of products. As our country is on the path of

developing economically and industrially, research and development

institutions and departments are also set-up by the big industrialists

and associations of various industries. Those industrialists who are

not in a position to have their own research and development

department in their own industries, they can avail the services and

facilities of these research and development institutions.

Entrepreneurs in our country, thus, have contributed,

contributing and will contribute to a great extent to the industrial

and overall economic development of the country.

2.3 MEANING OF ENTREPRENEUR:

An entrepreneur is one of the important segments of

economic growth. Basically, an entrepreneur is a person who is

responsible for setting up a business or an enterprise. In fact, he is

one who has the initiative skill for innovation and who looks for

high achievements.
 : 53 :

A good entrepreneur is one who is capable of inspiring

confidence in people, and has the ability to motivate them to
work with him in fulfilling the economic goals set by him.

The term entrepreneur is defined in a variety of ways.

According to Joseph A Schumpeter, "The entrepreneur in an
advanced economy is an individual who introduces something new
in the economy - a method of production not yet tested by
experience in the branch of manufacture concerned, a product
with which consumers are not yet familiar, a new source of raw-
material or of new markets and the like"*

Moreover, J.B. Say, opined that "an entrepreneur is

the economic agent who unites all means of production, the labour
force of the one and the capital or land of the others and who
finds in the value of the products - the re-establishment of the
entire capital he employs, and the value of the wages, the interest,
and the rent which he pays as well as the profits belonging to
himself'12.

1. Desai Vasant, Dynamics of Entrepreneurial Development and

Management, 1997 pp. 16-17.

2. Ibid, p. 16
 ; 54 :

But, Peter Drucker defines, an entrepreneur as one

who always searches for change, responds to it and exploits it as an

opportunity. Innovation is the specific tool of entrepreneurs, the

means by which they exploit changes as an opportunity for a
different business or services"^

Robert D. Hisrich says that the entrepreneur is, ’’the

person who is going to establish a successful new business venture

must also be a visionary leader - a person who dreams great

dreams"^- Whereas E. E. Haggen considered, "an entrepreneur is

an economic man who tries to maximise his profits by innovations.

Innovations involve problem-solving and the entrepreneur gets

satisfaction from using his capabilities in attacking problems"^.

Thus, the term entrepreneur has been defined in

various ways an innovator, a risk taker, a resource assembler, an

organisation builder, and so on. In broad sense, we can say that

entrepreneur is one who lives in the society, perceives a need and

then bring together the manpower, materials and capital required

to satisfy that need. An entrepreneur either establishes a

3. Ibid, p. 21.

4. Ibid, p. 21

5. Ibid, p. 21
 : 55 :

new business venture or carries out productive changes in an existing

venture. He is one who organises, manages and assumes the risks

of business or enterprise. Entrepreneur may be an independent

operator or who works as a part of team or in a partnership.

Entrepreneur is a person capable of doing something new in a

better way in industrial/business world. He may be a man or woman,

rural or urban young person. He has no relation with caste, creed

and provincial boundaries. A person capable of being an entrepreneur

can become an entrepreneur.

2.4 MEANING OF ENTREPRENEURSHIP :

The word 'entrepreneurship' has been derived from a

French root which means "to undertake". Entrepreneurship refers

to a process of action an entrepreneur undertakes to establish his/

her enterprise. It is a creative and innovative response to the

environment. Entrepreneurship is the propensity of mind to take

calculated risks with confidence to achieve a pre-determined business

or industrial objectives.

Entrepreneurship is not a matter of heritage, it is

entirely a manifestation of such potentialities that any individual

born in any caste, community and class can have.

Entrepreneurship involves a few major decisions. They can be

identified as follows :
 : 56 :

1. Firm decision to become an entrepreneur.

2. Identification and selection of an opportunity.

3. Business plan formulation and its implementation.

4. Entrepreneurship continuum.

Entrepreneurship is a multi-dimensional task defined

differently by different authorities.

A. H. Cole defines entrepreneurship as, "the purposeful

activity (including an integrated sequences of decision) of an

individual or a group of associated individuals undertaken to initiate,

maintain or aggrandise a profit oriented business unit for the

production or distribution of economic goods and services" ^■

Similarly Higgins says that entrepreneurship is meant, the function

of seeking investment and production opportunity, organising an

enterprises to undertake a new production process, raising capital,

hiring labour, arranging the supply of raw material, finding site,

introducing new technique and commodities, discovering new

sources of a raw-material and selecting top managers for day to

day operations of the enterprise. Moreover, Peter Drucker and

Joseph Schumpeter - authorities on entrepreneurship have described

the concept of the entrepreneurship in very wide manner. Accordingly

6. Ibid, p. 53
 : 57 :

Peter Drucker says that "an entrepreneur is one who always searches
**7

for change, responds to it and exploits it as an opportunity"'.

Entrepreneurs innovate and innovation is a specific instrument of

entrepreneurship. It creates resources. Successful entrepreneurs create

new values or increase the values of what already exists. They convert

a material into resources or combine existing resources in new or

more productive configuration. Thus, according to him,

entrepreneurship increases the value and satisfaction obtained from

resources by the consumer. Similarly, Joseph Schumpeter says that

an entrepreneur is one who innovates i.e. carries out new

combination or enterprise. They foresee the potentially profitable

opportunity and try to exploit it. Entrepreneurs are especially

motivated and talented class of people and key figures in

development. According to him entrepreneurship is essentially a

creative activity. It concerns in doing such things as are generally

not done in the ordinary course of business. Schumpeter's concept

of entrepreneurship is both wide and narrow. It is wide in the sense

that it includes not only the independent businessman but also

company directors, and managers who actually carry out innovative

functions. It is narrow to the extent that individuals who merely

operate an established business without performing innovative

7. Dr. C.B.Gupta, Entrepreneurship Development in India,

1997, p.130
 : 58 :

functions are excluded. Innovation involves problem solving and

the entrepreneur is problem solver. An entrepreneur gets satisfaction

from using his capabilities in attacking problems. Innovation may

occur in the following forms :

1. Introduction of a new product with which consumers are

not yet familiar or introduction of a new quality of an

existing product.

2. Introduction of a new method of production, that is not

yet tested by anyone in the industrial world, and can also

exist in a new way of handling a commodity commercially.

3. Opening of a new market.

4. Carrying out of the new organisation of any industry, like

the creation of a monopoly position or breaking up of a

monopoly position.

5. The conquest of a new source of supply of raw-materials

or semi-manufactured goods.

Thus, entrepreneurship refers to a set of attributes

which the entrepreneurs possess, and a set of activities which they

perform in relation to the expansion of their units. It is a creative

and innovative activity.

 : 59 :

2.5 CHARACTERISTICS AND QUALITIES OF

ENTREPRENEURS
 : 60 :

2.5.1 Administrative and Organisation Ability

The ability of building a sound organisation is the

most critical skill needed for industrial development. The organisation
builder must be able to harness the new ideas of different innovators

to the best in his organisation. He must be able to select, train and

develop persons who can properly manage and control the labour

force. He should have the capacity to pick and choose the right

person and to wisely delegate authority in order to multiply himself.

A true entrepreneur must be able to inspire loyalty and hard work

to raise productivity and efficiency. He requires high level of

education, experience and training among the members of the

managerial team.

2.5.2 Mental ability/creativity

Mental ability consists of intelligence, an analytical

approach and creative thinking. An entrepreneur must be reasonably

intelligent, and should have creative thinking and must be able to

engage himself in the analysis of various problems and situations in

order to deal with them. The entrepreneur should anticipate changes

and study the various situations under which decisions have to be

made.
 : 61 :

2.5.3. Clear Objectives / Clarity

An entrepreneur should have a clear objective as to

the exact nature of the business, the nature of the goods to be
produced and subsidiary activities to be undertaken. A successful
entrepreneur may have the objective to establish the business, to
make profit or to render social services.

2.5.4 Business Secrecy

An entrepreneur must be able to guard business

secrets. Leakage of business secrets to trade competitors is a serious
matter which should be carefully guarded against by an entrepreneur.
An entrepreneur should be careful and competent to make a proper
selection of his assistants for this purpose.

2.5.5 Human relations ability / Tactfulness

The most important personality factors contributing

to the success of an entrepreneur are emotional stability, personal
relations, consideration and tactfulness. An entrepreneur must
maintain good relation with his customers if he is to establish
relations that will encourage them to continue to patronise his
business. He must also maintain good relations with his employees
if he is to motivate them to perform their jobs at a high level of
efficiency. An entrepreneur who maintains good human relations
with customers, employees, suppliers, creditors and the community
 : 62 :

is much mote likely to succeed in his business than the individual

who does not practise good human relations.

2.5.6 Communication ability

Communication ability is the ability to communicate

effectively. Good communication also means that both the sender

and the receiver understand each other and are being understood.

An entrepreneur who can effectively communicate with customers,

employees, suppliers and creditors will be more likely to succeed

than the entrepreneur who does not.

2.5.7 Technical knowledge and willingness to change

An entrepreneur must have a reasonable level of

technical knowledge. Technical knowledge is the ability that most

people are able to acquire if they try enough. Technical change is

the prime mover in the process of economic growth. Inventions

and innovations have led the process of development in the world.

Technical knowledge implies the ability to devise and use new and

better ways of producing and marketing goods and services. A good

entrepreneur is one who is interested in changing the pattern of

production to suit the available resources, market conditions and

quality of output. He should be able to take initiative and to adapt

to changing conditions. An entrepreneur should have a keen desire

to initiate and accept changes. Willingness to accept change is a

major quality of successful entrepreneur.

 : 63

2.5.8 Capacity to assume risk

An entrepreneur assumes risk and, therefore he must

have self-confidence. He is both an investor and a financier and

should, therefore, be able to shift investments in search of larger

profits. He has to tie up capital and wait for good returns. He should

be willing to assure a relatively large degree of risk because he has

to guarantee wages to his employees, interest to his creditors and

rent to his landlord. A successful entrepreneur should have a keen

observation, ability of discrimination, tact and patience.

2.5.9 Ability to mobilise resources

A true entrepreneur is one who has the ability to

mobilise necessary resources in the best possible manner for

achieving the business objectives. He should be able to minimise

the cost of production without reducing the quality of the product

or service. He should have high ambitions, the will to conquer, the

impulse to fight and succeed and the tendency to prove himself

superior to others.

2.5.10 Desire for responsibility

Entrepreneurs feel a personal responsibility for the

outcome of venture in which they are associated. They prefer to be

in control of their resources and to use these resources to achieve

self-determined goals. This willingness to accept the responsibility

 : 64 :

for the outcome of the entrepreneurial venture is closely related to

the deep desire of entrepreneur to maintain an internal locus of
control.

2.5.11 Self-confidence

Successful entrepreneurs must have substantial

confidence in themselves. They firmly believe that what they
accomplish is within their own control. They tend to be optimistic.

2.5.12 Desire for immediate feedback

Successful entrepreneurs like to know how they are

doing and are constantly looking for reinforcement. They have
strong desire to use this knowledge to improve their performance.