Professor Manisha Rajadhyaksha

Entrepreneurship Introduction
The term 'entrepreneurship' is often used synonymously with 'entrepreneur'. Though
they are the two sides of the same coin, conceptually they are different. The
entrepreneur is essentially a business leader and entrepreneurship is the function
performed by him.

Robert Hisrich states 'Entrepreneurship is the process of creating something new and
assuming the risks and rewards'

Arthur Cole states "Entrepreneurship is the purposeful activity of an individual or a

group of associated individuals, undertaken to initiate, maintain and aggrandize profit
by production and distribution of economic goods and services."

B. Higgins: "Entrepreneurship means the functions of seeking investment and production

opportunity, organising an enterprise to undertake a new production process, raising capital,
hiring labour, arranging the supply of raw materials, finding site, introducing a new technique
and commodities, discovering new sources of raw materials and selecting top managers of
day to day operations of the enterprise."

B.C Tandon: "Entrepreneurship is the ability to create something new, organizing and
coordinating and undertaking risk and handling economic uncertainty."

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The word 'entrepreneur' is derived from the French word 'entreprende'. It means to 'to
undertake'.

In 18th century, Richard Cantilon an Irishman, living in France firstly used the term
entrepreneur

Webster's Dictionary defines the term entrepreneur as " a person who organizes and
manages a business undertaking, assuming the risk for the sake of profit."

Peter F. Drucker states that an entrepreneur is the one who always searches for changes,
responds to it and exploits it as an opportunity. He further states that innovation is the
specific tool of entrepreneur, the means by which he exploits change as an opportunity for a
different business or services.

The New Encyclopaedia Britannica describes an entrepreneur as an individual who bears

the risk of operating a business in the face of uncertainty about future conditions.

Joseph A. Schumpeter states that entrepreneur is a person who introduces innovative

changes in an enterprise.

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Characteristics of entrepreneurs:
Some entrepreneurs may have some special characteristics according to their capabilities.
These are the common characteristics:
▪ Achievable goals: The entrepreneurs have very positive desires to achieve high goals.
Such high self-motivation keeps them strong and confident to face various obstacles and
misfortunes. Hence, they are successful in setting a prosperous organisation.
▪ Future foresight: The entrepreneurs have good foresight to know about the future
market development and the external business environment. He can take proper decision
according to the market situations and market changes. This also helps them to take timely
actions.
▪ Intellectual Capabilities: Mental ability consists of intelligence and creative
thinking. To be an entrepreneur, a person must be intelligent and have the ability of creative
thinking. This ability will help him to take proper decision.
▪ Technical Knowledge: An entrepreneur should have sufficient technical knowledge
about the products and his plan to produce. Timely change of technology should always be
updated to be in pace with the market.
▪ Hard Work: A successful entrepreneur will always be ready to work hard. Hard
work will always distinguish a successful entrepreneur from unsuccessful one. At the start of
any venture, the entrepreneur has to work tediously, for long hours and independently handle
the main areas.
▪ Highly Optimistic: An entrepreneur always thinks positive in all the activities. He is
always optimistic with the market situations even in failure times. Such positive attitude helps
the enterprise to run successfully.
▪ Communication Skills: This refers to communicate effectively. It is very important
that the sender and receiver of the message are being understood perfectly. An entrepreneur
has to communicate to various parties i.e. customers, suppliers, creditors, employees, etc.
▪ Creativity: Creativity is the ability to bring something new into existence. Innovation
is the process of doing new things, and creativity is a prerequisite to innovation. An
entrepreneur should be creative, because ideas usually evolve through creative process
whereby imaginative people bring them into existence, grow them and develop them
positively.

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Important functions performed by an entrepreneur are:

1 Risk-bearing function:

The functions of an entrepreneur as risk bearer is specific in nature. The entrepreneur

assumes all possible risks of business which emerges due to the possibility of changes in the
tastes of consumers, modern techniques of production and new inventions. Such risks are not
insurable and incalculable. In simple terms such risks are known as uncertainty concerning a
loss.

The entrepreneur, according to Knight, "is the economic functionary who undertakes such
responsibility of uncertainty which by its very nature cannot be insured nor capitalised nor
salaried too."

Richard Cantillon conceived of an entrepreneur as a bearer of non-insurable risk because he

described an entrepreneur as a person who buys things at a certain price and sells them at an
uncertain price.

Thus, risk bearing or uncertainty bearing still remains the most important function of an
entrepreneur which he tries to minimise by his initiative, skill and good judgement. J.B. Say
and other have stressed risk taking as the specific function of the entrepreneur.

2. Organisational Function:

Entrepreneur as an organiser and his organising function is described by J.B. Say as a

function whereby the entrepreneur brings together various factors of production, ensures
continuing management and renders risk-bearing functions as well. His definition associates
entrepreneur with the functions of coordination, organisation and supervision. According to
him, an entrepreneur is one who combines the land of one, the labour of another and the
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 labourers and what remains is his/her
profit. In this way, he describes an entrepreneur as an organiser who alone determines the
lines of business to expand and capital to employ more judiciously. He is the ultimate judge
in the conduct of the business.

Marshall also advocated the significance of organisation among the services of special class
of business undertakers.

3. Innovative Function:

The basic function an entrepreneur performs is to innovate new products, services, ideas and
information for the enterprise. As an innovator, the entrepreneur foresees the potentially
profitable opportunity and tries to exploit it. He is always involved in the process of doing
new things. According to Peter Drucker, "Innovation is the means by which the entrepreneur
either creates new wealth producing resources or endows existing resources with enhanced
potential for creating wealth". Whenever a new idea occurs entrepreneurial efforts are
essential to convert the idea into practical application.

J.A. Schumpeter considered economic development as a discrete dynamic change brought by

entrepreneurs by instituting new combinations of production, i.e. innovation. According to
him innovation may occur in any one of the following five forms.
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The introduction of a new product in the market with which the customers are not get familiar
with.

Introduction of a new method of production technology which is not yet tested by experience
in the branch of manufacture concerned.

The opening of a new market into which the specific product has not previously entered.

The discovery of a new source of supply of raw material, irrespective of whether this source
already exists or has first to be created.

The carrying out of the new form of organization of any industry by creating of a monopoly
position or the breaking up of it.

4. Managerial Function:

Entrepreneur also performs a variety of managerial function like determination of business

objectives, formulation of production plans, product analysis and market research,
organisation of sales procuring machine and material, recruitment of men and undertaking, of
business operations. He also undertakes the basic managerial functions of planning,
organising, co-ordinating, staffing, directing, motivating and controlling in the enterprise. He
provides a logical and scientific basis to the above functions for the smooth operation of the
enterprise thereby avoids chaos in the field of production, marketing, purchasing, recruiting
and selection, etc. In large establishments, these managerial functions of the entrepreneur are
delegated to the paid managers for more effective and efficient execution.

5. Decision Making Function:

The most vital function an entrepreneur discharges refers to decision making in various fields
of the business enterprise. He is the decision maker of all activities of the enterprise. A. H.
Cole described an entrepreneur as a decision maker and attributed the following functions to
him.

He determines the business objectives suitable for the enterprise.

He develops an organization and creates an atmosphere for maintaining a cordial relationship

with subordinates and all employees of the organization.

He decides in securing adequate financial resources for the organisation and maintains good
relations with the existing and potential investors and financiers.

He decides in introducing advanced modern technology in the enterprise to cope up with

changing scenario of manufacturing process.

He decides the development of a market for his product, develops new product or modify the
existing product in accordance with the changing consumer's fashion, taste and preference.

He also decides to maintain good relations with the public authorities as well as with the
society at large for improving the firm’s image before others.

6. Research

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An entrepreneur is a practical dreamer and does a lot of ground-work before taking a leap in
his ventures. In other words, an entrepreneur finalizes an idea only after considering a variety
of options, analyzing their strengths and weaknesses by applying analytical techniques,
testing their applicability, supplementing them with empirical findings, and then choosing the
best alternative. It is then that he applies his ideas in practice. The selection of an idea, thus,
involves the application of research methodology by an entrepreneur.

7. Development of Management Skills

The work of an entrepreneur involves the use of managerial skills, which he develops while
planning, organizing, staffing, directing, controlling and coordinating the activities of
business. His managerial skills get further strengthened when he engages himself in
establishing equilibrium between his organization and its environment. However, when the
size of business grows considerably, an entrepreneur can employ professional managers for
the effective management of business operations.

8. Overcoming Resistance to Change

New innovations are generally opposed by people because it makes them change their
existing behavior patterns. An entrepreneur always first tries new ideas at his level.

It is only after the successful implementation of these ideas that an entrepreneur makes these
ideas available to others for their benefit. In this manner, an entrepreneur paves the way for
the acceptance of his ideas by others. This is a reflection of his will power, enthusiasm and
energy, which helps him in overcoming the society’s resistance to change.

9. Catalyst of Economic Development

An entrepreneur plays an important role in accelerating the pace of economic development of

a country by discovering new uses of available resources and maximizing their utilization. To
better appreciate the concept of an entrepreneur, it is desirable to distinguish him from an
entrepreneur and promoter.

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Role and Significance:

Entrepreneurs play a significant role in economic development of a country. He promotes the

prosperity of a nation by his innovation and dynamic leadership Skills. He creates wealth,
opens up employment opportunities and fosters the other segments. According to Harbison,
entrepreneurs are prime movers of innovation, growth and as such, entrepreneurship is a
dynamic force. The role and significance of an entrepreneur are explained below:

1. Bringing Economic Growth and Prosperity: Entrepreneur bring economic growth and
prosperity in the country through generation of employment opportunities, capital and wealth
creation, increasing per capita income and GDP, improvement in quality of life by raising the
standard of living, growth of infrastructural facilities, forward and backward linkages in
society, development of backward regions, economic independence. George gilder observes,
“The ‘heroic creativity of entrepreneur came to seem essential to our economic well-being in
a global economy”. Baumbach and Mancuso write, “In underdeveloped nations,
entrepreneurs often hold the key to economic growth for a whole society. So, entrepreneur is
not a dirty word or a fast buck opportunist, but, rather the backbone of the capitalist system”.

2. Brining Social Stability and Balanced Regional Development: Entrepreneurs play a

crucial and unique role in bringing about social stability and balanced regional development
through absorption of workforce in industries, removal of poverty, improving health and
education facilities, creating fair competition, equitable distribution of income, creation of
social infrastructures, empowering women and weaker sections of the society and supply of
qualitative goods and services Although entrepreneurs are criticized as self-interested
exploiters, Adam Smith, while recognizing that they do some good for society, partly
reflected this view when he wrote in The Wealth of Nations: “In spite of their natural
selfishness and rapacity, though they mean only their convenience, though the sole end which
they propose from the labours of all the thousands they employ be the gratification of their
own vain and insatiable desires they are led by a hidden hand, and without intending it,
without knowing it, advance the interest of society”.

3. Innovator in Economic Growth: by bringing new ideas, combinations, products

techniques, organizations, new markets, making full use of technical knowledge, balanced
growth, systematic innovation, technological advancement, implementation of mechanical
skills, an entrepreneur play very crucial role in encouraging entrepreneurship and economic
development. Peter Drucker writes, “Just as management has become the specific organ of all
contemporary institutions and the integrating organ of our society of organizations, so
innovation and entrepreneurship have to become an integral life-sustaining activity in our
organizations, our economy, and our society”. He further says that the emergence of a truly
entrepreneurial economy is the most significant and hopeful event that have occurred in
recent economic and social history.

4. Creation of Employment Opportunities: Entrepreneurs play a significant role in

generation of employment opportunities by establishing new units in manufacturing, trading
and service sectors, laying emphasis on small scale industries, utilizing the surplus labour
force in varied industrial and/or service activities, upholding self-employment as a core
objective. Entrepreneur integrates resources and technologies into profitable business
ventures and creates job opportunities.

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5. Increase Productivity with Modern Production System: Play an important role in

raising productivity. John Keudrick writes, “Higher productivity is chiefly a matter of
improving production techniques, and this task is the entrepreneurial function par
excellence”. Two keys to higher productivity are research and development and investment in
new plant and machinery. But there is a close link between R & D and investment
programmes, with a higher entrepreneurial input into both”. George Gilder in The Spirit of
Enterprise said that: “Entrepreneurs are innovators who evoke demand’. They are makers of
markets, creators of capital, and developers of opportunity and producers of new technology.
They seek the unique product, the marketing breakthrough, the startling new, feature or the
novel design. They change technical frontiers and reshape public desires. They create wealth
and employment. They take exception to the received view that companies should be market
led. They lead the market”.

6. Export Promotion and Import Substitution: Liberalization, privatization and

globalization [LPG] has opened the arena of export promotion and import substitution to
entrepreneurs by establishing industries producing import substitution goods, establish new
industries, especially for export, products, exploration of new global markets, earning foreign
exchange reserves, utilizing the available productive resources, achieving self-reliance in
production of as many goods as possible, entrepreneur, are playing a pivot role in export
promotion and import substitution.

7. Entrepreneur Plays a Role of Catalytic Agent: As Joseph Schumpeter says,

entrepreneur’s task is “creative destruction”. He destroys to create new things. He changes
and transmutes values. He searches change and responds to it. He is a change creator. Ralph
Hurwitz writes in his book Realities of Profitability’, “The entrepreneur makes a happening,
wants piece of action, is the growth man. Without him there is no happening, no action, and
no growth”.

8. Augmenting and Meeting Local Demands: Entrepreneurs also play a significant role in
augmenting local demands and meeting them satisfactorily. Towards this, entrepreneurs focus
their attention to manufacture service through indigenous technology, skill, resources and
experiences.

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9. Reinventing Entrepreneurial Venture: An entrepreneur work to reinvent his

entrepreneurial venture. He knows that change and innovation is good for his organization.
Paul Wilken observes, “Entrepreneurship is a discontinuous phenomenon, appearing to
initiate changes in the production process and then disappearing until it reappears to initiate
another change”. Zoltan Acs writes, “Entrepreneurs stir up the waters of competition in the
market place. They are ‘agents of change in a market economy”.

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 Professor Manisha Rajadhyaksha

Nature and characteristics of entrepreneurship are:

1. Process: Entrepreneurship is a distinct process of creating something new, i.e., new

products, processes, techniques and so on. The entrepreneurship process requires a good
amount of managerial activities such as - planning, organizing, directing and controlling.

According to Joseph Schumpeter entrepreneurship is concerned with:

▪ Development of new technology
▪ Introduction of new product.
▪ Creation of new form of organisation structure.
▪ Development of new source of raw materials.
▪ Entry in new market.

2. Purposeful Activity: Entrepreneurship is purposeful activity. Emphasis is placed on

results rather than mere activities. The results may be in the form of:
▪ Reduction in wastages.
▪ Optimum use of resources.
▪ Motivated and dedicated workforce.
▪ Increase in efficiency.

The main purpose of entrepreneurship activity is to aggrandize (increase) profits. Therefore,

entrepreneurs place emphasis on cost-effective activities. The entrepreneurs undertake cost-
benefit analysis of each and every activity. The analysis is made not only from short-term
point of view, but also from long-term point of view' depending upon the nature of activity.

3. Individual or Group Activity: The entrepreneurship activity can be undertaken by an

individual or by a group of individual.
▪ In case of small size projects, and where there is limited risk, the activity can be
undertaken by an individual.
▪ In case of complex and large size projects, and where there are greater risks, the
activity may be undertaken by a group.

4. Future Oriented Activity: Entrepreneurship activity is future oriented. The entrepreneurs

need to plan and think ahead. The entrepreneurs need to undertake SWOT analysis.
Therefore, there is a need to analysis internal and external environment that would be
affecting the plans and strategies of the organisation.

5. Innovation and Creativity: Entrepreneurship activity involves innovation and creativity.

The most successful entrepreneurs are the innovators. The innovators are on the constant look
out for something different that would give them a competitive advantage. According to
Joseph Schumpeter, a person behaves as an entrepreneur only when carrying out innovative
activities.

The innovative activities may involve development of a new product in the market,
development of new and innovative schemes to promote the product, development of new
techniques for production and distribution, etc.

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6. Proactiveness: Entrepreneurship requires proactiveness. An entrepreneur is the one who

takes proactive decision. Unlike traditional mangers, who take reactive decisions, an
entrepreneur takes proactive decisions, and other follow the entrepreneur. Proactiveness gives
first mover advantage or competitive edge in the market.

7. Exploits Change into an Opportunity: An entrepreneur always looks for a change. If

there is a potential for a change, he responds to it. He exploits the change as an opportunity
for different business. Seeking change and converting into an opportunity is the hallmark of
entrepreneurship.

8. Risks and Rewards: Entrepreneurship activity is undertaken to assume risks and rewards.
Any innovative activity is always subject to risks and uncertainties. If the innovative activity
is successful, the entrepreneur will reap rewards, otherwise, the entrepreneur has to assume
risks of failure. Therefore, an entrepreneur needs guts to assume risks, and he gets glory when
there is success. It is to be noted that entrepreneurs take moderate risks, as compared to
gamblers who take extreme risks.

9. Organizing Abilities: An entrepreneur requires highest level of organizing abilities. The

entrepreneurship activity requires a proper blend of physical, capital and manpower
resources. Right amount of resources, both in terms of quality and quantity needs to be
organized so as to achieve higher level of returns.

10. Social and Economic Development: Entrepreneurship activity facilities social and
economic development. Due to entrepreneurship, the production of better-quality goods and
services take place, which in turn facilities economic growth of the nation. Also,
entrepreneurs play an important role in social development by supporting social development
activities like health, education, community development, etc.

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Significance of Entrepreneurship:

Entrepreneurship plays an important role in the economic and social development of a nation.
Due to economic and social development, entrepreneurs create economic and social wealth.
The importance and significance of entrepreneurship is explained as follows:

1. Economic Development: Entrepreneurship activity contributes to the economic

development of a nation. Due to entrepreneurship, new and innovative materials, products,
technologies, processes are developed. This increases production and distribution of goods
and services, resulting in growth and development of the nation.

Developed countries like Japan, USA, Germany, etc., owe their economic development to the
contribution of their entrepreneurs. Without the innovative role of entrepreneurs, economic
development of a nation would get hampered.

2. Social Development: Entrepreneurs play an important role in social development of a

nation. Professional and successful entrepreneurs recognize and respond to social
development needs of the society.

The entrepreneurs contribute funds towards social development activities like health,
education, and community development activities. They also generate new and innovative
ideas to enhance social development in the society.

3. Regional Development: The entrepreneurs set up industries not only in urban areas, but
also in backwards areas. Due to government incentives such as cash subsidy, tax holiday,
duty concessions, etc., entrepreneurs are induced to set up industries in backward areas. As a
result of such initiative on the part of entrepreneurs, the backward areas get developed not
only economically but also socially.

4. Development of managerial capabilities:

The biggest significance of entrepreneurship lies in the fact that it helps in identifying and
developing managerial capabilities of entrepreneurs. An entrepreneur studies a problem,
identifies its alternatives, compares the alternatives in terms of cost and benefits implications,
and finally chooses the best alternative.

This exercise helps in sharpening the decision-making skills of an entrepreneur. Besides,

these managerial capabilities are used by entrepreneurs in creating new technologies and
products in place of older technologies and products resulting in higher performance.

5. Creation of organisations:

Entrepreneurship results into creation of organisations when entrepreneurs assemble and

coordinate physical, human and financial resources and direct them towards achievement of
objectives through managerial skills.

6. Improving standards of living:

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By creating productive organisations, entrepreneurship helps in making a wide variety of

goods and services available to the society which results into higher standards of living for
the people.

Possession of luxury cars, computers, mobile phones, rapid growth of shopping malls, etc. are
pointers to the rising living standards of people, and all this is due to the efforts of
entrepreneurs.

7. Capital Formation: Entrepreneurs facilitate capital formation in the country. The

entrepreneurs provide employment to the people. The employees save a part of their income.
The entrepreneurs also save a part of their profits. These savings lead to investment.
Investment in turn facilitates capital formation, i.e., production of capital goods, which can be
used for further production of consumer goods and services.

8. Consumer Welfare: Entrepreneurship activity facilitates consumer welfare. Due to

innovative ideas, consumers can enjoy new and better types of goods and services. Also due
to employment, purchasing power of the people increases, resulting in more demand for new
and better type of goods. Therefore, the standard of living of the society improves.

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Tips for Becoming a Successful Entrepreneur:

Success is every entrepreneur’s dream. To get there, effort should be done on oneself and on
one’s people. There is no magical key, but experience has shown that the entrepreneur should
work both on the intellectual and organizational levels of the business. In fact, the two go
together. Successful entrepreneurs are those who overcome both objective and subjective
hurdles. Below, are twelve tips on how to conquer and succeed in a world that is changing so
rapidly:

1. Success is in the mind. It is an attitude. A disposition. If you set your mind on earning a
million dollars, you will most probably earn it. If once you earn it, you start being afraid of
losing it, you will most certainly lose it. Adopt a success-driven attitude even when you reach
your goals. Set up higher goals and challenge yourself.

2. Think big, act small. Small droplets will end up filling the bucket. There are no too small
battles or small gains for you to wage. All victories lead to your success. Win them with
pride.

3. Lead instead of playing the boss. Be a mentor, a model. You are the person with the
ideas, the vision. You know where you want to go. Your collaborators should trust you and
do their best to follow your trace, your footprints. Leadership is the most effective power.
Use it to motivate and achieve.

4. Inverse your organizational chart. Those on top help those on the line do their job. Don’t
be in the way, but be there when needed. If anything, recognizing what line managers do is a
real task for you at the top.

5. Bring out the best in everyone. There is good in all of those working for you. But each
one has something special about them. Tap into that to make them grow, stay motivated and
be creative.

6. There is no such thing as a perfect plan. There are only imperfect -but good- plans.
Waiting for perfection will cost you time and resources. Working with what is available,
albeit imperfect, is not only timely, but smart.

7. The global complete approach wherein everything will fall into its place is a utopia.
You don’t have time for that. Piece-meal progress, small wins are your way towards success.

8. Making mistakes is no problem. Not learning from them is the real problem. As you
make your wins, you will also improve on your past errors. The more you do, the more you
fall but the more you learn to avoid hurdles on the way.

9. Risk is a part of life. Be bold in your actions if you want to reach out where the others
don’t go. Uncharted territories are opportunities for you to be creative and succeed.

10. Build trust. The world is full of crooks. But it’s not a reason for you not to trust anyone.
You have to build trust; renew it; and reinforce mutual commitments.

11. Seek out allies. Enemies don’t stay that way forever; rivalries change, so do opportunities
for growth. Recruit some old “enemies” to be your allies, partners or clients. Don’t stay in the
small world of those who like you and whom you like.
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12. Look for the silver linings. Problems don’t exist. What we call problems are only
opportunities that are hidden behind obstacles and hurdles. Remove these to get to the
goldmine.

Success does not happen overnight. It is the outcome of a lifetime of hard work. What is
important is to think things through and adjust your attitudes and approaches in relation to the
changes that take place in your environment. Success is the culmination of a long journey
both internal and inside the business. To succeed is to change oneself, and when you change
you also change those surrounding you. Good luck.

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