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What Young Entrepreneurs Think and Do: A

Study of Second-Generation Business
Entrepreneurs

Article  in  Journal of Entrepreneurship · March 1999

DOI: 10.1177/097135579900800104

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 What Young Entrepreneurs
Think and Do: A Study of
Second-Generation
Business Entrepreneurs

AZHAR KAZMI

Enquiries inspired by an urge to know and comprehend more about the entrepre-
neurial qualities and manifestations of different types of individuals form the bulk
of research in the area of entrepreneurship. This paper too falls in this tradition of
research as it presents a demographic and psychographic profile of and the type
of business strategies formulated and implemented by the young second-genera-
tion entrepreneurs in India. It goes a step further by comparing these with their
first generation counterparts to draw more generalisable conclusions. The find-
ings reinforce the point that entrepreneurs in general possess certain special char-
acteristics that sustain their need for high achievement.

Azhar Kazmi is Chairman and Dean of the Department of Business Adminis-

tration, Faculty of Management Studies and Research, Aligarh Muslim
University, Aligarh.

There are numerous theoretical and empirical studies that consider

attributes such as risk-taking, innovativeness, need for achievement, and
managerial competence as important enabling qualities for entrepreneur-
ship. A closer look into such studies reveals that the issue of age and
family background has received scant attention, especially as explana-
tory variables of the phenomenon of entrepreneurship.
It may be mentioned that in the Indian context, family background ana
entrepreneurship find mention in few studies. For instance, Gadgil’ and
Singers found that the joint family provides undivided family property to
invest in and expand the family fiwm. Sharma and Singh’ observe that
capital formation and the confidence to administer business are essential
for the development of industrial entrepreneurship and these are easily
available with people who have a business or industrial background. Family
occupation and inter-generational occupational mobility are lddi cssed in
a study by Khanka&dquo; which shows that there is a high propensity for the

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 68

members of the next generation to choose an occupation related to busi-

ness industry, if the first generation belonged to the same occupation.
and
By superimposing age and family background one could locate a seg-
ment of entrepreneurs who have inherited a business legacy through
familial links in terms of tangible and intangible assets, as well as the
appropriate environment and expertise at a young age. These are persons
who could be called the young second-generation entrepreneurs. The first-
generation entrepreneur, in contrast, does not possess a business family
background and ventures into business optionally and autonomously. This
paper presents the fmdings of a study on the second-generation business
entrepreneurs in India.

Objectives

The objectives of the study are as follows:

o to prepare a demographic and psychographic profile of young second-
generation entrepreneurs;
. to trace the
types of business strategies being formulated and imple-
mented by this group of entrepreneurs; and
. to analyse the similarities and dissimilarities among the first and
second-generation entrepreneurs;
. with regard to the first two
objectives.
Methodology
The popular Indian business daily The Financial Express had been pub-
lishing a Sunday feature on young entrepreneurs titled ‘Brat Barons’ based
on personal interviews. Each feature covered one young entrepreneur
and provided a variety of information on various aspects such as personal
and professional background, information about the company, its strate-
gies, policies, products, customers, markets, technology used, etc. These
features formed a ready source of secondary information for our study.
Fifty-two such features published in the year 1996 were considered ini-
tially. Four of these were dropped as they did not conform to the param-
eters set for this study. Of the remaining forty-eight, thirty-six were about
second-generation entrepreneurs and twelve were related to first-generation
entrepreneurs.
A checklist was prepared in order to draw a demographic and a psycho-
graphic profile of the young second-generation entrepreneurs. Adequate

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 / 69

information was available about the guiding philosophies, facilitating

factors that enabled the person to enter business, personal traits, engagement
in non-work activities and entrepreneurial competencies. These aspects
of the entrepreneur were considered sufficient to portray a psychographic
profile.
Next, the contents of the features were studied to find out how the
young second-generation entrepreneur formulated business strategies and
how these strategies were implemented. The format of the feature per-
mitted the coverage of only strategies in the functional areas of finance,
marketing, human resources, and operations. The data collected also ena-
bled a comparison of the second and the first-generation entrepreneurs
based on the above two aspects.
An obvious limitation of the methodology was that it was entirely based
on a secondary source of information. The features were written for pur-

poses other than research. Yet these proved to be an excellent source of

information as all these features conformed to a uniform pattern. Once
this pattern was discerned, it was easy to formulate the issues on which
data could be gleaned from the text.

Findings and Discussion

This section presents and discusses the findings of the study. An attempt
is made to highlight the demographic and psychographic profiles of the
young second-generation entrepreneur and his/her entrepreneurial com-
petencies. A discussion of the non-work activities engaged in by the entre-
preneur is intended to provide a realistic view of the person rather than
make him/her look like a super human being. The second part of the
fmdings relates to the adoption and implementation of business strategies
by the entrepreneur in the areas of fmancial, human resource, marketing,
and operations management.

Profile of Entrepreneurs and Companies

As in 1996, the year of reporting, the age group of the entrepreneurs was
twenty-three to thirty-nine years, the average age being twenty-five years.
They joined the business between the ages of eighteen and twenty-nine,
the average age being twenty-one years. Except one, all the sample entre-
preneurs were male. Two-thirds of the entrepreneurs, i.e., twenty-four,
were married and had the support-direct or indirect-of their spouses
in their work. Almost all the entrepreneurs were post-graduates. Twenty

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70 /

of them had professional qualifications in management, accountancy or

engineering. A majority of them-twenty-eight out of thirty-six-had
previous exposure to business before joining their family business or start-
ing on their own.
The companies owned by the young second-generation entrepreneurs
were widely dispersed geographically throughout India with a relatively

higher representation of the central and western regions. The companies

of the sample entrepreneurs belonged to both manufacturing and service
sectors. The turnover for the year 1995-96 ranged between Rs one crore
and Rs 200 crore.

Psychographic Profile of Entrepreneurs

The study probed the guiding philosophies, personal traits, competen-
cies, facilitating factors and the non-work activities to get a comprehensive
view of the psychographic profile of the entrepreneurs.

Guiding Philosophies Interestingly, several statements expressing

similar sentiments were made by the entrepreneurs, which indicated that
there is a commonality in thinking and the philosophies that guide their
working life. Some examples of the statements are given below:

. ’Don’t cut comers if you want long-term gains.’

. ’If you have confidence in yourself, others will too.’
. ’In the world of dreams, everything is possible.’
.
’Challenges are stepping stones to success.’

There were some statements (for instance, ’looking within before looking
beyond’ and ’life has to be viewed from different angles’) which demon-
strated that some young entrepreneurs think differently from the majority
of their counterparts.

Personal Trails It is well-established that certain specific personal

traits and characteristics (like perseverance, creativity, risk-taking ability
etc.) make an entrepreneur what he or she is. Obviously, not all these
traits and characteristics are uniformly present in all the entrepreneurs. A
generalised list of traits observed in the sample entrepreneurs is given
below:

Intelligence: The mental capacity of the entrepreneur to handle situations

is the embodied trait of intelligence. Information revealed that the typical

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 71

entrepreneur is alert, rational, well-informed, and does not show care-

lessness and ignorance. All the entrepreneurs exhibited these traits in some
form or the other.

Diligence: The capacity for doing hard work is a sine qua non for becoming
an entrepreneur. A high priority is given to getting the job in hand done.
Almost all the entrepreneurs exhibited these traits.

Confidence: Entrepreneurs should trust their own ability to achieve their

objectives. Almost all the sample entrepreneurs exhibited a sense of con-
fidence in their abilities.

Creativity: The capacity to innovate, think of new and useful ideas, and
to approach problems flexibly and imaginatively is the hallmark of an
entrepreneur. A significant majority, thirty-three out of thirty-six entre-
preneurs in the study exhibit these traits in some form or other.
Perseverance: This refers to a characteristic tenacity in pursuing objec-
tives till they are achieved. The trait that keeps the entrepreneurs going is
the ability to keep on striving till one reaches the desired end. As compared
to a manager, an entrepreneur faces more problems and adversities. These
are overcome through perseverance, a trait that is exhibited by thirty-two
out of thirty-six entrepreneurs.

Amiability: An entrepreneur could well be impatient with slow-starters.

There could be a certain level of rashness in dealing with people. Yet,
amiability-a trait that makes an entrepreneur agreeable, charming, good-
natured, and pleasant-is present in twenty-six out of thirty-six entrepre-
neurs, making them more acceptable and approachable by the people
who work for them.

Entrepreneurial Competencies Entrepreneurial competencies are

different from traits in sense that the latter contribute more directly to
achievement in the work situation. It is true that there is some unavoid-
able overlapping of personal traits and competencies.
The stories of entrepreneurs were scanned to identify a set of compe-
tencies that they possessed. We could locate and rank ten such competen-
cies. These are described below in the order of their ranks.

Need for achievement: All the sample entrepreneurs generally have the com-
petency of being highly achievement-oriented. They take responsibility for
their actions, persist in the face of obstacles and concentrate on achiev-
ing progressively higher goals. They derive pleasure out of overcoming
obstacles which spurs them to work for achieving still more difficult goals.

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72

Leadership: A significant majority of entrepreneurs, thirty-four out of

thirty-six, clearly demonstrated an ability to accept people with openness
and trust, and to provide an environment in which they are motivated to
work.

Human relations skills: Thirty-three out of the thirty-six entrepreneurs

tried to maintain a healthy interpersonal relationship with the employees,
suppliers, creditors, and other community members. They possessed the
quality of emotional stability.
Motivation: The inner urge to excel and be demanding on oneself to
deliver results is evident in thirty-one out of the thirty-six entrepreneurs.
Administrative skills: Entrepreneurial skills are sometimes viewed as an
antithesis to administrative skills in the sense that the latter require a differ-
ent set of qualities. Yet, thirty, out of thirty-six entrepreneurs exhibited
the ability to manage human resources effectively, take timely action,
and generally engage in activities designed to run the business smoothly
and efficiently.

Eagerness to lookfor new ideas: Entrepreneurship is generally viewed as

the ability to constantly look out for ideas that could be turned into prof-
itable ventures. Twenty-nine out of the thirty-six entrepreneurs demon-
strated enthusiasm towards any ideas that could be used to bring in novelty
in products, markets, production methods, sources of raw material, and
new forms of organisation and managing.

Risk-taking ability: In fact, risk-taking ability is the singular quality that

distinguishes entrepreneurs from other individuals. Twenty-eight out of
thirty-six entrepreneurs did not hesitate to take calculated risks in the
face of uncertainty.
Time management: Twenty-seven out of thirty-six entrepreneurs placed a
high value on time management.
Ability to look ahead: Vision is supposed to drive many of the entrepre-
neurs towards achievement. An orientation towards the future is demon-
strated by twenty-five out of thirty-six entrepreneurs.

Managerial skills: An entrepreneur is rarely a master of all managerial

skills, yet is directly responsible for all aspects of business. Twenty-four
out of thirty-six entrepreneurs have a deep understanding of one or a few
areas of management and a working knowledge of practically all the areas
of their activities.

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 73

Business Strategy Formulation and Implementation

The second part of the research study dealt with an analysis of informa-
tion available in entrepreneurial stories about the types of business strate-
gies employed and the implementation of such strategies. Since the
published stories did not contain much information regarding the finer
aspects of strategic management, the attempt here is to analyse functional
implementation aspects in the areas of finance, marketing, human resource
management, and operations management.
There are a number of strategic alternatives available to an entrepre-
neur in order to achieve their objectives. They range from complex and
difficult options such as diversification to relatively simple ones like tech-
nical tie-ups with foreign collaborators. In this section of the paper, a
brief description is provided about the types of strategies employed. The
sequence of strategies described are in order of ranking based on the
number of entrepreneurs, out of a total of thirty-six, opting for a particular
type of strategy.
Joint venture: The liberalised environment of the 1990s has obviously
motivated several young entrepreneurs to enter into joint ventures with
foreign collaborators. Fifteen out of thirty-six entrepreneurs opted for the
joint venture strategy, almost all of them doing so for the purpose of
gaining access to technical expertise and for technology transfer. This is
understandable as the relatively smaller size of the units managed by the
entrepreneurs required liberal doses of technological inputs. Besides this, ,
the entrepreneurs wished to share the high initial development costs, spread
out risk, and derive synergistic benefits. Seven out of these fifteen entre-
preneurs have stated the purpose of modernisation indicating their effort
to provide technological improvements. They aim at increasing produc-
tion, lowering cost, and improving the efficiency and productivity of their
companies.
Diversification and integration: Diversification turned out to be the stra-
tegic choice of fourteen of the thirty-six entrepreneurs. These strategies
required a change in business defmition in terms of either customer func-
tions provided, customer groups served, or alternative technologies used.
The entrepreneurs generally used these strategies to move away from the
family business or to chart out an independent course of action.
Expansion: Ten out of thirty-six entrepreneurs adopted expansion strate-
gies for their business indicating their urge to substantially increase the
capacity of their units and scale of operations. More often, this option

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74,

was exercised where the existing enterprises were perceived as being

continually profitable.
Stability: The young second-generation entrepreneurs often had to enter
into family businesses that had been running comfortably for some time.
When they entered the scene their first reaction was to maintain the status
quo till the time they were able to size up the situation. Till such time,
these entrepreneurs relied on stability strategies that aimed at modest
growth levels without disturbing the current state of affairs. Only five out
of the thirty-six entrepreneurs have adopted the stability strategies.

Retrenchment: Five entrepreneurs had to adopt the extreme option of

retrenchment, i.e., getting out of the business they were in so that the
business could be saved. This was done to divert resources from the exist-
ing business to other prospective areas. One other reason that prompted
the entrepreneurs to retrench from existing business, even if it was moder-
ately successful, was to chart out an independent course of action free of
past commitments.
Turnaround: Some entrepreneurs fmd that the business handed over to
them is not so successful and requires a turnaround. Two entrepreneurs
adopted turnaround strategies to make their units viable and profitable.
Besides the above strategies, eight out of thirty-six entrepreneurs were
involved in exporting products and services to foreign countries. This is
also viewed as the first step to the adoption of joint venture strategy.

Functional Implementation of Strategies

The information provided in the features enabled an assessment of the

nature of functional implementation that the entrepreneurs exercised in
their companies. The analysis is presented below.
Financial management: As a basic requirement for project implementa-
tion, capital and fmancial assistance is required at every stage. The strat-
egies of expansion, modernisation etc., require a liberal infusion of fiinds.
Almost all the entrepreneurs have a sound fmancial background or under-
standing and managing finances is not envisaged as a problem. The sources
of funds in most cases came from the family kitty. This is understandable
as the entrepreneurs were essentially involved in managing their family
businesses. Seven out of thirty-six entrepreneurs went in for a public issue
to raise money for their business activities while four took loans from
fmancial institutions and banks.

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 75

Human resource management: Contrary to the expectations that entre-

preneurs are not good’man-managers’, substantial majority-thirty out
a

of thirty-six-lay great emphasis on teamwork. They value the contribu-

tion of their staff members and consider them as partners in their work.
Since the entrepreneurs work hard themselves they are perceived as hard
task masters and expect full commitment from their employees. Good
performers are rewarded adequately while laggards are not tolerated.
Marketing management: This is a problem area experienced by a majority
of the entrepreneurs, probably due to the small size of business they man-
age. Yet, they place a high value on maintaining a good relationship with
their customers, who, in most cases, are industrial buyers. There is a wide-
spread belief in the efficacy of marketing as a tool to achieve strategic
objectives. The techniques employed by the entrepreneurs frequently in-
volve providing personalised customer service, maintaining close public
relations, using good advertising and creative selling techniques, and a
competitive pricing policy.
Operations management: The use of technology, a constant effort to up-
grade it, and continuous search for potential sources of advanced tech-
nology characterise the approach of alrpost all the entrepreneurs to
operations management. The typical areas that attract attention are selec-
tion, installation, and maintenance of equipment, product design and en-
gineering, inventory and quality control and shop floor supervision. The
entrepreneurs are quality conscious and consequently, several of them
have the ISO 9000 certification for their products. Most entrepreneurs
maintain good office premises.

First- and Second-Generation Entrepreneurs: A Comparison

The source of information provided thirty-six stories on second-generation

entrepreneurs and twelve stories on first-generation entrepreneurs. The
analysis for the twelve cases of first-generation entrepreneurs was done
on similar lines as those for the second-generation entrepreneurs. This

analysis yieldcd considerable similarities between the two categories and

some important points of differences.

Similarities

First-generation entrepreneurs, like their counterparts, are young, have a

good educational background and previous exposure to business before
setting up enterprises. They believe in scanning the environment around

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76

them for new ideas and adopt and follow certain mottos and philosophies
in their day-to-day working. They also exhibit a high level of intelli-
gence, diligence, confidence, creativity, pragmatism, and amiability though
with varying degree. They indulge in non-work activities such as reading
and travelling to invigorate themselves for the hard work they have to put in.
The entrepreneurial competencies are also similar for this group. They
are eager to look for and accept new ideas, arc able to look ahead and

take risks, possess a high intensity of need for achievement and demon-
strate managerial, administrative and human skills. Business strategies
formulation and implementation is also done largely in the same way as
the second-generation entrepreneurs.

Dissimilarities

There are certain characteristics that differentiate entrepreneurs who create

their own business from those who run an established business. Second-
generation entrepreneurs have the resources of the existing business on
which they have to build. They have the capital, access to credit, and
financial worthiness to stand in the market. They have high-talent man-
power organised around key entrepreneurial activities. These people are
trained to handle varied responsibilities. There are research and develop-
ment facilities which considerably reduce the expense and risk in devel-
oping new product lines. A second-generation entrepreneur, when entering
the business, is not so much concerned with running a business as with
fmding a niche where potential for advancement exists. They often enter
business as a call of duty to handle family responsibilities and then become
an integral part of that setting.

First-generation entrepreneurs have a different background, motiva-

tion, and character than second-generation entrepreneurs. They have to
start from scratch and enter the business with a yearning to fmd a place
for themselves and an overwhelming compulsion to be on their own.
Though they lack in terms of family, support systems, sources of funds,
etc., they try to make it up through sheer determination to succeed. Their
share of problems are decidedly greater than that of the second-generation
entrepreneur. The first-generation entrepreneur is found to be extra dili-
gent, more confident, having a greater propensity to persevere as com-
pared to the second-generation entrepreneur. Their motivation level is
higher and time management skills are also more refined. The need for
achievement is extremely strong as they realise that they have nothing to
fall back upon if they fail.

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Conclusion

As society is becoming increasingly industrialised, new areas open up to

which the innovative entrepreneur responds positively. Entrepreneurial
studies have gained significance in this context.
This study on the second-generation entrepreneurs offers interesting
and useful insights into entrepreneurial behaviour in a specific context.
From the psychographic profile it is evident that the second-generation
entrepreneur possesses many personal traits that are normally ascribed to
entrepreneurs in general. So is the case with entrepreneurial competen-
cies. Joint venture, diversification, and expansion are the preferred stra-
tegic alternatives of these entrepreneurs, while maintaining stability,
effecting retrenchment, and attempting turnaround are less preferred. The
context in which the entrepreneurs operate is understandably a prime
consideration in exercising a strategic choice. The functional implemen-
tation of strategy is done with a finesse that is expected of those who
have been exposed to business since long.
The first-generation entrepreneur, as compared to his counterpart, turns
out to be quite similar, except that he is a much more hardy individual
exhibiting greater determination and commitment to succeed.
Notes

(The author is grateful to Anika Raja for providing help in data collection and analysis.)
1. D.R. Gadgil, Origins of the Modern Indian Business Class: An Interim Report, (New
York: Institute of Pacific Relations, 1959).
2. Milton Singer, When a Great Tradition Modernises, (New York: Praeger Publishers,
1972).
3. K.L. Sharma and H. Singh, Entrepreneurial Growth and Development Programmes
in Northern India, (New Delhi: Abhinav Publications, 1980).
4. S.S. Khanka, Entrepreneurship in Small Scale Industries, (New Delhi: Himalaya Pub-
lishing House, 1990).

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