Role and important of entrepreneur in economic growth

The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering economic
growth and development. Entrepreneurship is one of the most important inputs in the economic
development of a country. The entrepreneur acts as a trigger head to give spark to economic activities by
his entrepreneurial decisions. He plays a pivotal role not only in the development of industrial sector of a
country but also in the development of farm and service sector. The major roles played by an entrepreneur
in the economic development of an economy are discussed in a systematic and orderly manner as follows.
(1) Promotes Capital Formation:
Entrepreneurs promote capital formation by mobilizing the idle savings of public. They employ their own
as well as borrowed resources for setting up their enterprises. Such type of entrepreneurial activities leads
to value addition and creation of wealth, which is very essential for the industrial and economic
development of the country.
(2) Creates Large-Scale Employment Opportunities:
Entrepreneurs provide immediate large-scale employment to the unemployed which is a chronic problem
of underdeveloped nations. With the setting up of more and more units by entrepreneurs, both on small
and large-scale numerous job opportunities are created for others. As time passes, these enterprises grow,
providing direct and indirect employment opportunities to many more. In this way, entrepreneurs play an
effective role in reducing the problem of unemployment in the country which in turn clears the path
towards economic development of the nation.
(3) Promotes Balanced Regional Development:
Entrepreneurs help to remove regional disparities through setting up of industries in less developed and
backward areas. The growth of industries and business in these areas lead to a large number of public
benefits like road transport, health, education, entertainment, etc. Setting up of more industries leads to
more development of backward regions and thereby promotes balanced regional development.
(4) Reduces Concentration of Economic Power:
Economic power is the natural outcome of industrial and business activity. Industrial development
normally leads to concentration of economic power in the hands of a few individuals which results in the
growth of monopolies. In order to redress this problem a large number of entrepreneurs need to be
developed, which will help reduce the concentration of economic power amongst the population.
(5) Wealth Creation and Distribution:
It stimulates equitable redistribution of wealth and income in the interest of the country to more people
and geographic areas, thus giving benefit to larger sections of the society. Entrepreneurial activities also
generate more activities and give a multiplier effect in the economy.
(6) Increasing Gross National Product and Per Capita Income:
Entrepreneurs are always on the lookout for opportunities. They explore and exploit opportunities,,
encourage effective resource mobilization of capital and skill, bring in new products and services and
develops markets for growth of the economy. In this way, they help increasing gross national product as
well as per capita income of the people in a country. Increase in gross national product and per capita
income of the people in a country, is a sign of economic growth.
(6) Improvement in the Standard of Living:
Increase in the standard of living of the people is a characteristic feature of economic development of the
country. Entrepreneurs play a key role in increasing the standard of living of the people by adopting latest
innovations in the production of wide variety of goods and services in large scale that too at a lower cost.
This enables the people to avail better quality goods at lower prices which results in the improvement of
their standard of living.
(7) Promotes Country's Export Trade:
Entrepreneurs help in promoting a country's export-trade, which is an important ingredient of economic
development. They produce goods and services in large scale for the purpose earning huge amount of
foreign exchange from export in order to combat the import dues requirement. Hence import substitution
and export promotion ensure economic independence and development.
(8) Induces Backward and Forward Linkages:
Entrepreneurs like to work in an environment of change and try to maximise profits by innovation. When
an enterprise is established in accordance with the changing technology, it induces backward and forward
linkages which stimulate the process of economic development in the country.
(9) Facilitates Overall Development:
Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an enterprise is
established, the process of industrialization is set in motion. This unit will generate demand for various
types of units required by it and there will be so many other units which require the output of this unit.
This leads to overall development of an area due to increase in demand and setting up of more and more
units. In this way, the entrepreneurs multiply their entrepreneurial activities, thus creating an environment
of enthusiasm and conveying an impetus for overall development of the area.

Difference between an entrepreneur and a manager

It’s never my intention to make this article controversial but I could help express my own view after
witnessing a heated debate between my friends and the subject of the argument was “entrepreneurs vs.
managers; which is more important to the process of building a business.” Though I am an entrepreneur
to the core, it is never my intention to place a kind of supremacy of one over the other; I just want to
highlight some fundamental differences between an entrepreneur and a manager and their relevance to
the entrepreneurial process.
“When entrepreneurs and investors come together to pool resources, they form a team. When employees
and self employed specialists come together to network, they form a union.” – Robert Kiyosaki
Sometimes, both of them are mistaken as being the same but they are not. However, both entrepreneurs
and managers are needed for the growth of any business. One cannot do without the other. So without
much ado, below are 12 differences between entrepreneurs and managers.
Entrepreneurs vs. Managers: What’s the big difference?
1. The Job of an Entrepreneur Begins Before Even the Business is Created
An entrepreneur will perceive an opportunity, assemble a team, locate resources for his new business
idea, raise the needed capital and start the business while the manager comes in only after the foundation
has been laid and the business established. What this mean in essence is that the job of a manager begins
only after the entrepreneur has done the ground work. Without entrepreneurs, the managers will have no
business to manage.
2. Entrepreneurs are more concerned with the launching and sustainability of a business in the face of
uncertainty while managers are more concerned with the effective and efficient operation of an on-going
business.
3. Managers are specialists; business management specialist to be precise. They are focused on managing
and growing a business. On the other hand, entrepreneurs are generalist. They need to know a little about
everything. An entrepreneur must know a little about product development and design, business law,
accounting, communication and public speaking, investing, leadership, business systems, finance and
insurance, marketing and sales, raising capital and so on. An entrepreneur’s cup must never be full.
“A cup that is full is useless.” – Chinese proverb
4. Entrepreneurs are street smarts; they learn  by trial and error, they learn from their own mistakes and
the business mistakes of others. An entrepreneur starts with whatever is on ground and learns the hard
way. That’s why most of the successful entrepreneurs of the world are school drop out billionaires. On the
other hand, managers are thoroughly trained in school in the area of business management. That’s why
they are refered to as MBAs. Entrepreneurs get their education from the streets.
“Business and financial intelligence are not picked up within the four walls of school. You pick them up
on the streets. In school, you are taught how to manage other people’s money. On the streets, you are
taught how to make money.” – Ajaero Tony Martins
5. Financial freedom is the utmost priority of entrepreneurs. Freedom to do what they want, freedom to
live the kind of life they love and freedom to make a choice. To managers, security is the utmost priority.
Security comes in the form of a steady paycheck, pension, gratuity, pay raises, job titles, promotions,
bonuses and entitlements.
6. An entrepreneur owns the business; a manager is simply an employee that works in the entrepreneur’s
business. In essence, a manager owns a job. A manager is paid to run the entrepreneur’s business.
7. The reward of entrepreneurs come in the form of capital gains, asset acquisition, cash flow, and
dividend while the managers reward come in form of salaries, pay offs, promotion, job title, bonus and
incentives.
8. Entrepreneurs thrive on risk and uncertainty. To entrepreneurs, risk and uncertainty are part of the
game of entrepreneurship; risk is what makes the game exciting. Managers on the other hand are
conservative and detest risk; they simply avoid it.
“Without the element of uncertainty, the bringing off of even, the greatest business triumph would be dull,
routine and eminently unsatisfying.” – J. Paul Getty
“You must take risks, both with your own money or with borrowed money. Risk taking is essential to
business growth.” – J. Paul Getty
9. Entrepreneurs see mistakes as an avenue to learn something; they learn more from their business
mistakes. Managers avoid mistakes because it will cost them their job. Besides; that is why they are being
paid; to avoid mistakes. That is where the word “professionalism” comes in.
10. When entrepreneurs come together to pool resources or network, they form a team but when
managers who are usually employees come together to work towards a common goal, they form a union.
11. Entrepreneurs are primarily motivated by the need to build a business that solves a problem or provide
a need, while providing them cash flow and freedom. Managers on the other hand are motivated by the
next paycheck, bonus, incentive, pay off, job title and promotion.
12. Entrepreneurs are committed to the business from its inception till they achieve their goal. Managers
on the other hand are committed till the next paycheck; delay or cut their paycheck and they are gone.
Basis Entrepreneur
Manager

1. Motive & Reward Independence & Achievement, Leadership & power; corporate
uncertain monetary awards rewards

2. Venture Creates new venture; focus on future Works in the existing organization;
vision; perceives opportunity Focus on present reality

3. Status Owner of the enterprise; not Servant in the enterprise; concerned

concerned about status about status

4. Risks Bears all risks Does not bear risks

5. Innovative Change Innovates to meet changing customer Translates ideas into practice;
demands; Change agent maintains status quo

Basis Entrepreneur Manager

6. Commitment of Multi-stage commitment Single-stage commitment

Resources

7. Emphasis Emphasis on external environment Emphasis on internal environment

 8. Authority Direct involvement; centralized Delegates and supervises;
Hierarchical

9. Qualifications Creativity, farsightedness, technical Knowledge of management theory

knowledge and experience and practical experience

Entrepreneurship & Innovation

Innovation is doing new things. It is the process by which entrepreneurs convert opportunities into
marketable ideas. Creativity discovers new ways of looking at problems and opportunities. Innovation
applies creative solution to those problems and opportunities to enrich people's lives. It transforms the
new idea into product or process of business venture. It is action oriented costumer-based. Invention is the
mother of innovation. Invention is the source of change. It results in new knowledge into the new product
or processes. It is the applied aspect of invention. It is the result of extended thinking, research,
experience and work. It is the implementation of new idea. It involves more work than genius. It is
directed toward a specific, clear and carefully designated application.

Types of innovation

a. Invention:

 Creation of totally new product or process;

 Novel, untried and unique;

 Costly risky and time consuming,

 Only 10% of new products are really invention i.e. telephone by Graham Bell

b. Extension:

 New use of an existing idea

 Modification or improvement

 i-pod to i-phone

c. Duplication

 Replication of already existing product or process

 Represents copy or imitation

 Creative touch to bear competition

  E.g. Godrej to Podrej

d. Synthesis

 Combination o existing concepts and factors into new formulation

 Fusion

 E.g. lighter with a torch-light

Sources of innovation
Peter Drucker, one of the greatest management thinkers from the last century, defined in his book
“Innovation and Entrepreneurship” (1986) 7 classes of “OPPORTUNITIES”. He named these the
"SOURCES OF INNOVATION", namely:

1. THE UNEXPECTED: An example of the unexpected is the development of Nutrasweet. A

chemist developed a new chemical. Accidentally he got some of it in his mouth. To his surprise it
tasted very sweet. This was the start of a development trajectory, which took many years before
Nutrasweet was introduced by Searle into the market.
2. INCONGRUITIES: Incongruities or conflicts between opposing functions, requirements or
values may be the start of an innovation. For example the request for a small car with still
enough space on the inside seems to be incongruent. This however was solved in a new design as
the Smart.
3. PROCESS NEEDS: An old proverb says that “necessity is the mother of invention”. In the old
days of the US many unskilled immigrants from Europe arrived. They were peasants that lacked
in skills for the manufacturing of sophisticated artifacts such as guns. In those days one made
every component of these guns by hand. To let them fit to each other and work properly required
high skills in manufacturing. By making machines more precise and introducing standardization
of the artifacts one could produce thousands of components individually. The machine or gun
could be assembled using arbitrarily with ever component from the stores. The individual tasks
could easily be learned by the immigrants, without years of training to become an overall master.
In this way they could profit maximally from the existing economies of scale and learning curve.
4. INDUSTRY AND MARKET STRUCTURE: Industry markets and market structure may offer
opportunities for new types of services. Outsourcing of activities such as maintenance of the IT
infrastructure is an example. Other examples are the merging of industry’s such as for example
the merging of the computer industry with consumer electronics or IT with business consulting
services. The X box of Microsoft is just one example from many.
5. DEMOGRAPHICS: Demographics have long been a major source of innovation creating
opportunities for new types of products and services. Life style drugs such as Viagra are just
examples where the growing group of elderly people who feel themselves still very healthy and
who would like to enjoy life longer can conquer the effects of biological aging.
6. CHANGES IN PERCEPTION: An example of changes in perception as source of innovation is
the following. In older days health was seen as related to body mass, meaning fatter people were
perceived as more healthy. In the last century this perception changed as a result of medical
study’s that revealed that overweight was a risk factor. Since that time many light products have
come to the market. Many substitutes of sugar have been developed such as Nutrasweet. Also
substitutes of fat have been developed although these have not been successfully introduced into
the market yet.
7. NEW KNOWLEDGE: Last but not least new knowledge has produced many opportunities for
new products. The emergence of micro-electronics and new programming methods and tools,
 biotechnology, nano-technology etc have been the main motors of innovation and progress over
the last decades. This will probably continue for the coming decades”.

Meaning of small enterprises

Small business is an organization. It is engaged in production and marketing. The various types of
activities can be: manufacturing, services, construction, transport and trade. It is everywhere.

The small business owner establishes and manages the business to attain personal objectives. The
business is an extension of the owner's needs, objectives and personality. The business growth is not a
primary objective. The main aim is to continue operations over a long period of time.

Sometimes called a small business, a small-scale enterprise is a business that employs a small number of
workers and does not have a high volume of sales. Such enterprises are generally privately owned and
operated sole proprietorships, corporations or partnerships. The legal definition of a small-scale enterprise
varies by industry and country.
The U.S. Small Business Administration states that small-scale enterprises generally have fewer than 500
employees within a 12-month period in non-manufacturing industries. A company must consider any
individual on its payroll as an employee. In Australia, however, a small-scale enterprise is one that has
fewer than 15 employees on payroll, as defined by the Fair Work Act. The Small Business Act for Europe
states that small enterprises are those that have 250 employees or less. Small-scale enterprises in Asian
countries generally have 100 or fewer employees, while small-scale African enterprises hire 50 or fewer
workers.
In some countries, the definition of a small-scale enterprise is bound by financial measures such as net
profits, balance sheet totals, the value of assets and annual sales. In the United States, for example, a non-
manufacturing small-scale enterprise is one that does not earn more than $7 million in a year. Financial
measures can vary by industry, as annual receipts may be higher for industries that have higher overhead
costs to operate. In general, small-scale enterprises are businesses that do not dominate their respective
industry.
The US definition is: (Small business Act 1953) "A small business is one that is independently
owned and operated and not dominant in its field of operation".

Nicholas Siropolis: "Typically, a small business is ….. mom –and-pop stores. Business…. May
be looked upon as big or small, depending on the yardstick and cut-off point used".

According to Timothy Hatten: "A small business is independently owned, operated and financed,
has fewer than 100 employees, and has relatively little impact on its industry".

According to Longenecter, Moore and Petty: "A small business has financing supplied by one
individual or a small group, has geographically localized operations except marketing, is small
compared to the biggest firms in industry and has employees usually fewer than 100".

Problem of small enterprises in nepal and global

1. Management: Most small business are owner managed. Decision making is centralized.
Delegation is lacking. They are adequately managed.

2. Employees: Most employees in small business are family members, relatives and friends.
Competent employees are lacking.
 3. Technology: Small business makes low use of improved technology. They are mostly indigenous
technology. Their efficiency is poor

4. Costly: Procurement of raw materials is costly and time-consuming.

5. Market: Small businesses in Nepal generally cater to local market. They face difficulties in
marketing their finished goods. Customer-orientation is lacking. Competition is intense. They
have to compete with large business and e-commerce.

6. Finance: Small businesses suffer from inadequate financing. They face difficulties getting credit
from financial institutions. They have low creditworthiness.

7. Information: Small businesses lack up-to-date information. They lack environmental adaption.

8. Strategic Alliances: Small businesses lack strategic alliances to gain competitive advantages.

9. Government Policies: Small businesses face burdensome government policies and procedures.
They require lots of paperwork. They change frequently. Institutional support is poor. Laws are
conflicting.

10. Sickness: Most small businesses in Nepal suffer from sickness. More than 60% of small
manufacturing units remain sick, inactive or closed. They have low sustainability.

Women entrepreneurship

Women entrepreneurship is the process of creating new venture by women through risk-taking,
innovating and managing for rewards. It refers to women in independent business.

The process of entrepreneurship is common to both man and woman. It is only the gender that
distinguishes the women entrepreneurs from men entrepreneurs. However, women stand as a
special focus group for entrepreneurship development. They differ in terms of motivation,
business skills and occupational background.

According to Joseph Schumpeter: "Women entrepreneurs are women who innovate, imitate or
adapt a business activity."

Women entrepreneurs may be defined as a “woman or a group of women who initiate, organize and run a
business enterprise”. Government of India has defined women entrepreneurs based on women
participation in equity and employment of a business enterprise. Accordingly, a woman run a enterprise is
defined as “an enterprise owned and controlled by a women having a minimum financial interest of 51%
of the capital and giving at least 51%of the employment generated in the enterprise to women”. Women
entrepreneurs constitute 10%of the number of entrepreneurs in our country. This has been a significant
growth in self-employment of women with women now starting new ventures at three times the rate of
men. They constitute 50% of the population of our country with a lower literacy rate than men. This
statistical fact, indicates that for the economic growth of the nation, women should not be encouraged to
make their share of economic contribution towards the country.one way of achieving is by making
women come out and become entrepreneurs. In the traditional society, they were confined to the four
walls, playing household roles, but in the modern society, they are coming out to participate in all sorts of
activities. Normally, women entrepreneurship is found in the extension of their kitchen activities, mainly
in preparing commercially the 3’P’s namely, Pickles, Papads and Powder. Few of them venture into
services industry relating to hospitality, catering, educational services, consultation or public relations,
beauty clinics, etc. Women enter entrepreneurship due to economic factors which pushed them to be on
their own and urge them to do something independently. Women prefer to work from their own work
residence, difficulty in getting suitable jobs and desire for social recognition motivate them towards self-
employment. We see a lot of women professionals in engineering, medicine, law etc. They are also
setting up hospitals, training centres, etc.

Important of women entrepreneurship

A good share of the population: More than 50% in Nepal

Traditionally outside the domain of economic activities: Unused workforce confined to four walls
of kitchen/house

They must be made part of the economic development : because it will ensure the economic &
social development of the women along with providing more human resources to strengthen the
economy of the country.

Development Indicator: The economic status of women is now accepted as an indicator of a

society’s stage of development.

Explore the prospects: starting new enterprise.

Innovation: introduction of new innovations or invitation of successful ones in existence.

Risk Taking: Undertaking of risks and the handling of economic and non-economic uncertainties.

Efficiency: Co-ordination, administration and control.

Supervision: supervision and providing leadership in all aspects of the business.

Women entrepreneur are generally seen to undertake three types of industrial enterprises:-

1. Manufacture of consumer products which are directly sold in the market.

2. Manufacturer items that are usually used by large scale units.

3. Operate purely as a sub-contractor on raw materials provided by the customer.

The women entrepreneurs seem to prefer the production of those goods which have a direct sale
in the market.

Problem

Women entrepreneurs are key players in any developing country particularly in terms of their
contribution to economic development. In recent years, even among the developed countries like USA
and Canada, Women's role in terms of their share in small business has been increasing. The facts of a
study: Conducted by IIT, Delhi are :
(i) Women own one-third of small business in USA and Canada.
(ii) Britain has seen an increase of over three times of women in workforce than that of men even since
1980s.
(iii) Women make for 40 percent of total work force in Asian Countries.
(iv) In China, women outnumber men by at least two times when it to starting business there.
(iv) In Japan, the percentage of women entrepreneurs increased from 2.4 percent in 1980 to 5.2 percent in
1995.
Problems of Women Entrepreneurs :
There are umpteen problems faced by women at various stages beginning from their initial
commencement of enterprise, in running their enterprise. Their various problems are as follows:
1. Patriarchal Society: Entrepreneurship has been traditionally seen a male preserve and idea of women
taking up entrepreneurial activities considered as a distant dream. Any deviation from the norm is
frowned and if possible, immediately curbed. Women also have to face role conflict as soon as they
initiate any entrepreneurial activity. It is an uphill task for women to face such conflicts and cope with the
twin role.
2. Absence of Entrepreneurial Aptitude: Many women take the training by attending the
Entrepreneurship Development Programmes without entrepreneurial bent of mind. As per a study,
involvement of women in small scale sector as owners stands at mere 7 percent. Women who are
imparted training by various institutes must be verified on account of aptitude through the tests,
interviews etc.
3. Quality of EDPs: All women entrepreneurs are given the same training through EDPs. Second-
generation women entrepreneurs don't need such training as they already have the previous exposure to
business.
4. Marketing Problems: Women entrepreneurs continuously face the problems in marketing their
products. It is one of the core problems as this area is mainly dominated by males and even women with
adequate experience fail to make a dent.
For marketing the products women entrepreneurs have to be at the mercy of middlemen who pocket the
chunk of profit. Although the middlemen exploit the women entrepreneurs, the elimination of middlemen
is difficult, because it involves a lot of running about. Women entrepreneurs also find it difficult to
capture the market and make their products popular.
5. Financial Problems: Obtaining the support of bankers, managing the working capital, lack of credit
resources are the problems which still remain in the males domain. Women are yet to make significant
mark in quantitative terms. Marketing and financial problems are such obstacles where even training
doesn't significantly help the women. Some problems are structural in nature and beyond the control of
entrepreneurs.
6. Family Conflicts: Women also face the conflict of performing of home role as they are not available to
spend enough time with their families. They spend long hours in business and as a result, they find it
difficult to meet the demands of their family members and society as well. Their inability to attend to
domestic work, time for education of children, personal hobbies, and entertainment adds to their conflicts.
7. Credit Facilities: Though women constitute about 50 per cent of population, the percentage of small
scale enterprise where women own 51 percent of share capital is less than 5 percent. Women are often
denied credit by bankers on the ground of lack of collateral security. Therefore, women's access to risk
capital is limited.
The complicated procedure of bank loans, the inordinate delay in obtaining the loans and running about
involved do deter many women from venturing out. At the same time, a good deal of self- employment
programme has been promoted by the govt. and commercial banks.
8. Shortage of raw-materials: Women entrepreneurs encounter the problems of shortage of raw-
materials. The failure of many women co-operations in 1971 such as these engaged in basket making
were mainly because of the inadequate availability of forest-based raw materials.
9. Heavy Competition: Many of the women enterprises have imperfect organizational set up. But they
have to face severe competition from organized industries.
10. High cost of production: High cost of production undermines the efficiency and stands in the way of
development and expansion of women's enterprises, government assistance in the form of grant and
subsidies to some extent enables them to tide over the difficult situations. However, in the long run, it
would be necessary to increase efficiency and expand productive capacity and thereby reduce cost to
make their ultimate survival possible, other than these, women entrepreneurs so face the problems of
labour, human resources, infrastructure, legal formalities, overload of work, lack of family support,
mistrust etc.
Her being a woman

Responsibility towards family, society and work

Male dominated society

Tough Competition with large scale units

Lack of business training

Lack of education

Low risk bearing ability

Obtaining credit

Non-awareness of facilities provided by government

Questions by licensing authorities

Marketing