Chapter 1

ENTREPRENEURSHIP

ENTREPRENEURSHIP
Entrepreneurship is the activity of setting up a business or businesses, taking on financial
risks in the hope of profit

• Capacity and Willingness

• Develop
• Organize
• Manage
• Risk and Profit

ENTREPRENEUR
 A person who starts, Organizes and Manages any Enterprise with Considerable Risk.
 An entrepreneur runs a small business and assumes all the risk and reward of a given
business venture, idea, or good or service offered for sale.
 Who organizes and manages a business undertaking, assuming the risk for the sake
of profit.
 Any person (any age) who starts and operates a business is an entrepreneur.
 To an economist, an entrepreneur is one who brings resources, into combinations
that make their value greater than before & also who introduces changes
innovations & a new order.

NATURE OF ENTREPRENEUR

 Creation Process
 Devotion of necessary time & effort
 Assuming the necessary risks
 Reward
AGRO-ENTREPRENEURS

• Lawn Maintenance Service

• Raise and Sell Fishing
• Custom Crop Harvesting
• Pet Sitting Service
• Fishing Guide
• Operating a Roadside Marketing Selling Produce
• Making and Selling Christmas Wreathes
• Operating a Small Engine Repair Service

Three Aspects of Entrepreneurship

• The identification/recognition of market opportunity and the generation of a

business idea (product or service) to address the opportunity.
• The marshalling and commitment of resources in the face of risk to pursue the
opportunity
• The creation of an operating business organization to implement the opportunity-
motivated business idea

Advantages

• You are your own boss

• Enjoy the profits from you efforts
• Sense of pride in your business
• Flexibility in your work schedule

Disadvantages

• Need to put in long hours

• Need money to start
• Have to keep up with government rules and regulations
• May have to mark hard decisions (hiring, firing, etc.)
• May lose money

THEORIES OF ENTREPRENEURSHIP & ENTREPRENEURIAL MOTIVATION

• Economic,
• Sociological
• Psychological
 • Entrepreneurship Innovation theory
• Theory of Achievement Motivation / Motivation theory by McClelland (Acquired
Needs theory)
• The Kakinada Experiment
• Motivating factors for entrepreneur- Internal and external

Economic Theory:

• Entrepreneurship and economic growth take place when the economic conditions
are favourable.
• Economic incentives are the main motivators for entrepreneurial activities.
• Economic Incentives Include
• Taxation policy,
• Industrial policy,
• Sources of finance and
• Raw material,
• Infrastructure availability,
• Investment and marketing opportunities,
• Access to information about market conditions,
• Technology etc.

Sociological Theory

• Entrepreneurship is likely to get a boost in a particular social culture

• Society’s values, religious beliefs, customs, taboos influence the behaviour of
individuals in a society
• The entrepreneur is a role performer according to the role expectations by the
society.
Psychological Theory

• Entrepreneurship gets a boost when society has sufficient supply of individuals with
necessary psychological characteristics
• The psychological characteristics include need for high achievement, a vision or
foresight, ability to face opposition.

Entrepreneurship Innovation Theory

• Joseph Schumpeter who believes that entrepreneur helps the process of

development in an economy
• He says that an entrepreneur is the one who is innovative, creative and has a
foresight.
• According to him, innovation occurs when the entrepreneur
• Introduces a new product
• Introduces a new production method
 • Opens up a new market
• Finds out a new source of raw material supply
• Introduces new organisation in any industry
• The theory emphasises on innovation, ignoring the risk taking and organising abilities
of an entrepreneur
• Schumpeter’s entrepreneur is a large scale business man, who is rarely found in
developing countries, where entrepreneurs are small scale businessmen who need
to imitate rather than innovate.
•
THEORY OF HIGH ACHIEVEMENT/THEORY OF ACHIEVEMENT MOTIVATION

• McClelland identified 2 characteristics of Entrepreneurship

–Doing things in a new and better way
–Decision making under uncertainty
• He stressed that people with high achievement orientation (need to succeed) were
more likely to become entrepreneurs
• Such people are not influenced by money or external incentives
• They consider profit to be a measure of success and competency
• According to McClelland, a person has three types of needs at any given time, which
are:
• Need for achievement (get success with one’s own efforts)
• Need for power (to dominate, influence others)
• Need for affiliation (maintain friendly relations with others)

THE KAKINADA EXPERIMENT

• Conducted by McClelland in America, Mexico and Mumbai

• Under this experiment, young adults were selected and put through a three month
training programme
• The training aimed at inducing the achievement motivation
• The course contents were–Trainees were asked to control their thinking and talk to
themselves, positively–
• They imagined themselves in need of challenges and success for which they had to
set planned and achievable goals
• They strived to get concrete and frequent feedback
• They tried to imitate their role models/those who performed well
• Conclusions of the experiment:
• –Traditional beliefs do not inhibit an entrepreneur
• –Suitable training can provide necessary motivation to an entrepreneur
• –The achievement motivation had a positive impact on the performance of
the participants
 • It was the Kakinada experiment that made people realise the importance of EDP
(Entrepreneurial Development Programme) to induce motivation and competence in
young, prospective entrepreneurs

CHARACTERISTICS OF SUCCESSFUL ENTREPRENEURSHIP

• Hard work
• Desire for high achievement
• Highly optimistic
• Independence
• Foresight
• Good organizer
• Innovative
• Perseverance
• Team Sprit

Growth of Entrepreneurship in India

• Entrepreneurship during pre-independence

• Entrepreneurship during post-independence
Entrepreneurship During Pre-Independence

• The history of entrepreneurship in India starts in the era of Indus Valley Civilization.
• During the Early Harappa period (about 3200–2600 BCE)
• This age is also called as copper age, the Indus Valley Civilization area showed
ceramic similarities with southern Turkmenistan and northern Iran which suggested
considerable mobility and trade.
• Apart from agriculture and hunting, the Indus people supported themselves by
trading goods like exchange of Potteries, ornaments, exchanges of animals etc.
•
Growth of Entrepreneurship

• Indus valley civilization: organized enterprise at a time when the world just belonged
to cloth itself.
• The early years (1000 B.C-500 B.C): Indian trader introduced re-exporting bought silk
from Chinese and sold to central Asia.
• Bought horses from west Asians and sold to the Chinese.
• The Maurya Era: In modern times the Maurya Empire is remembered as one of the
golden ages of Indian history, a time when the country was united and independent.
• Vast territory, better trade. Widespread use of metallic money, Missions to Sri Lanka
and Southeast Asia increase trade.
• The people were divided into seven endogamous groups--philosophers, peasants,
herdsmen, traders, soldiers, government officials, and councillors.
• The Gupta Era: (400 A.D – 600 A.D) - Traders form associations to protect interests
Codification of transnational business.
• The Middle ages-(700 A.D-1300 A.D): Paper, Printing invented. Dams, roads ease
trade, south –East Asia & Indonesia.
• The Mughal age (1500 A.D-1600 A.D): Dominated world commerce, large quantities
of gold and silver flow into the country.
• The Mughal Era II (1600 A.D-1700 A.D): British arrive in this era. The person named
Surat merchant Virji Vora among first entrepreneurs.
• The colonial era I (1700 A.D-1850 A.D): Europe was then the hotbed of technological
innovation. The traders brought with them plenty of new ways of doing business.
Seizing the opportunities that emerged, many Indians became entrepreneurs.
• Dwarkanath Tagore, who formed India‘s first Joint Venture with a foreigner, Carr
Tagore Nanabhai Davar, who put up the country first textile mill in 1854. But could
not able to run that.
• The colonial ERA II (1850 A.D-1900A.D):
• Railways set up (1853). cowasjee Nanabhai Davar first cotton mill in Bombay.
• The colonial era III (1900 A.D-1947A.D): New crop arises in this Period. Change
makers like JRD Tata, MS Oberai, jamnalal Bajaj lead the way for Indian
entrepreneurs.
Entrepreneurship During Post-Independence
• After Independence: scale industrialization entrepreneurs like Dirubai Ambani
emerge.
• Globalisation arrives, and with it the Premjis, the Narayana Murthys, the Rajesh Jains
etc.,
• Over the last 68 years, India has seen the entrepreneur evolves in different role.
• The modern entrepreneurs are wealth creators, communicators, change agents,
entertainers etc.
•
Role of Entrepreneur in Economic Development
• Capital formation by mobilizing the idle savings
• Large Scale Employment
• Promotes Regional Development
• Reduce the Concentration of Economic Power
• Stimulates Equitable Redistribution of Wealth, Income and Even Political Power
• Encourages Effective Resource mobilization of capital and Skill
• Induces backward and Forward linkages – Economic Development
• Export Trade

Entrepreneurship Development Programs

• Small Industries Development Organisation – SISC
• Entrepreneurship Development Institute of India Ahamadabad-1983
• National Institute of Entrepreneurship and Small Business Development (NIESBUD)
• Rural Entrepreneurship Development Institute Ranchi – 1983
• Rural Management and Management Centers (RM&MC) Maharstra Universities
• Entrepreneurial Motivation Training Centre in North Eastern Region
• Xavier Institute of Social Services Ranchi.

Industrial Consultancy Organizations of Various States:

• Centre for Entrepreneurship Development Ahmadabad
• State Financial Corporations
• Centre for Entrepreneurship Development Hubli
• Small Industries Extension Training Institute, Hyderabad
• National Science and Technology Entrepreneurship Development Board