STUDY MATERIAL FOR BA.

ECONOMICS
ENTREPRENEURIAL DEVELOPMENT – I
SEMESTER – III, ACADEMIC YEAR 2020-21

UNIT CONTENT PAGE Nr

I ENTRENEURSHIP 03

II ENTREPRENEURIAL GROWTH 19

III THEORIES OF ENTREPRENEURS 35

IV WOMEN ENTREPRENEURSHIP 44

V ENTREPRENEURIAL DEVELOPMENT 59

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 UNIT - I
ENTREPRENEURSHIP
Meaning
The meaning of entrepreneurship involves an entrepreneur who takes action to make a
change in the world. Whether startup entrepreneurs solve a problem that many struggle with
each day, bring people together in a way no one has before, or build something revolutionary
that advances society, they all have one thing in common: action.
It’s not some idea that’s stuck in your head. Entrepreneurs take the idea and execute it.
Entrepreneurship is about execution of ideas.
Entrepreneurship means staying committed to your goals beyond your feelings of excitement.
Stay the course and keep your “why” in mind.”

Evolution of the concept of entrepreneur

The majority of wealth in the hands of the ruling class, owning one’s own business was a
rare sight. The old-world entrepreneurs mostly consisted of merchants and craftsmen. Plenty of
merchants created their own business, but a lot of the time the business and connections were
handed down generation to generation. Skilled craftsmanship was another family affair, but
anyone with the right connections that was lucky enough to land an apprenticeship and
succeed at it we’re able to climb the economic ladder a little higher.
Merchants started to take over be more prominent as the world market grew because
of exploration and sailing and shipping became easier. It wasn’t until the industrial age when
the big business was back in a central location. Inventors were a large part of the
entrepreneurial field. Using new technology, manufacturing, transportation and ingenuity,
inventors dominated the industrial age.
The word “entrepreneur” is derived from the French verb “enterprendre”, which means
‘to undertake’. This refers to those who “undertake” the risk of new enterprises. An enterprise
is created by an entrepreneur. The process of creation is called “entrepreneurship”.
Entrepreneurship is a process of actions of an entrepreneur who is a person always in
search of something new and exploits such ideas into gainful opportunities by accepting the risk
and uncertainty with the enterprise.
Entrepreneurship has a main role in the economy of every country having as main
objectives of activity the creating and handling the enterprises in order to obtain profits and
introduce innovations on the market, or why not to create new products and even markets. The
entrepreneurial activity has a complex character, and because of that and of the difference
between the culture, traditions, politics and practical ways to develop business in various
countries or regions there are given a lot of different definitions for the term entrepreneurship
and entrepreneurs functions.
During the past centuries a lot of well-known economists like Cantillon (1700),
Schumpeter (1934), or Baumol (1993) have searched, developed and shared with their
followers a big number of different definitions for the term entrepreneurship. Landström
(2004) in his work “Pioneers in Entrepreneurship research” classified scholars that used to
study the entrepreneurship knowledge in four “swarms” of entrepreneurship research, as
follows:

1. First “swarm” (mid 19th) researched the administration more, and how through
different human actions the entrepreneur could achieve success.
2. Second “swarm” (late 19th) talk about uncertainty and gaining an equilibrium through
innovations or not.
3. Third “swarm” (1950

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 entrepreneurs.
4. Fourth “swarm” investigates the competition, large and small organizations and
principles of evaluating new concepts and areas.

Of course, definitions of entrepreneurship, that are used today in dictionaries, scientific

and other sources are more complete and use a lot of terms, gathering together the thoughts
that scholars from classical times till the modern ones used to clarify and find out which would
be the best explanation for this term. According to the Commission of the European
Communities, entrepreneurship is an individual’s creative capacity, independently or within an
organization, to identify an opportunity and to pursue it in order to produce new value or
economic success.
Nowadays, the Business Dictionary defines the Entrepreneurship like the “capacity and
willingness to undertake conception, organization and management of a productive venture,
with all attendant risks, while seeking profit as a reward… Entrepreneurial spirit is characterized
by innovation and risk-taking and an essential component of a nation’s ability to succeed in an
ever changing and more competitive global marketplace (Entrepreneurship…). Therefore the
entrepreneur has a major role, through the changes he introduces, being the driving force of all
economic transformations (McCaffrey, 2009). So, as we notice from the above, the various
definitions characterize the entrepreneurship as being a process, an attempt, a mindset or the
actions of the entrepreneur, through which he creates, innovates, implements, and deals with
uncertainty, while the productivity, creativity, risk-taking and anticipation of future results
describe him in his action.
To develop the entrepreneurship, and to follow all the steps, trying to succeed, an
important role comes to the personage that has to do and implement all that, to the
entrepreneur. There are not some limits of age, gender or social class that are required in order
to become an entrepreneur, but the studies show that there are still some characteristics that
describe the successful entrepreneurs, Martin, Osberg (2007) presents the entrepreneur to us,
in this way:
1. Entrepreneurs are inspired – comes from the willingness that they want to help
someone which they emphasize.
2. Entrepreneurs think creatively – they try to solve a problem, not through finding new
more sophisticated answers, but creating new explanations.
3. Entrepreneur takes direct action – they don’t wait for someone else to apply their idea
creating new products or services, but do it themselves.
4. Entrepreneur demonstrates courage – through the fact that assume to take big risks for
something that others think it is impossible to realize.
5. Entrepreneurs possess fortitude – they have force to go till the end, and even find
solutions to new confrontations and obstacle that face during the process.

Definitions of Entrepreneurship
An entrepreneur is an individual who starts and runs a business with limited resources
and planning, and is responsible for all the risks and rewards of his or her business venture. The
business idea usually encompasses a new product or service rather than an existing business
model.
Such entrepreneurial ventures target high returns with an equally high level of
uncertainty. The entrepreneur is willing to risk his or her financial security and career, spending
time as well as capital on an uncertain venture, arranging for the necessary capital, raw
materials, manufacturing locations and skilled employees. Marketing, sales and distribution are
other important aspects which are controlled by the entrepreneur.
Even if some of these functions are outsourced, the risk is still carried by the

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entrepreneur. This makes entrepreneurship different from inheriting and/or running an existing
business, working for a startup or entrepreneur for a salary, being a commissioned agent, or
selling already available goods or services as a franchisee or dealership.
Entrepreneurship refers to the process of creating a new enterprise and bearing any of
its risks, with the view of making the profit.
It is an act of seeking investment and production opportunity, developing and managing a
business venture, so as to undertake production function, arranging inputs like land, labour,
material and capital, introducing new techniques and products, identifying new sources for the
enterprise.

The person who creates a new enterprise and embraces every challenge for its
development and operation is known as an entrepreneur. And the undertaking or organisation,
typically a startup company, set up by the entrepreneur is called enterprise.
Economists have never had a consistent definition of "entrepreneur" or
"entrepreneurship" (the word "entrepreneur" comes from the French verb entreprendre,
meaning "to undertake"). Though the concept of an entrepreneur existed and was known for
centuries, the classical and neoclassical economists left entrepreneurs out of their formal
models: They assumed that perfect information would be known to fully rational actors, leaving
no room for risk-taking or discovery. It wasn't until the middle of the 20th century that
economists seriously attempted to incorporate entrepreneurship into their models.
Three thinkers were central to the inclusion of entrepreneurs: Joseph Schumpeter,
Frank Knight, and Israel Kirzner. Schumpeter suggested that entrepreneurs are not just
companies were responsible for the creation of new things in the search of profit. Knight
focused on entrepreneurs as the bearers of uncertainty and believed they were responsible for
risk premiums in financial markets. Kirzner thought of entrepreneurship as a process that led to
the discovery.

Definitions of Entrepreneur
Economists have never had a consistent definition of "entrepreneur" or
"entrepreneurship" (the word "entrepreneur" comes from the French verb entreprendre,
meaning "to undertake"). Though the concept of an entrepreneur existed and was known for
centuries, the classical and neoclassical economists left entrepreneurs out of their formal
models: They assumed that perfect information would be known to fully rational actors, leaving
no room for risk-taking or discovery. It wasn't until the middle of the 20th century that
economists seriously attempted to incorporate entrepreneurship into their models.

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 Three thinkers were central to the inclusion of entrepreneurs: Joseph Schumpeter,
Frank Knight, and Israel Kirzner. Schumpeter suggested that entrepreneurs—not just
companies—were responsible for the creation of new things in the search of profit. Knight
focused on entrepreneurs as the bearers of uncertainty and believed they were responsible for
risk premiums in financial markets.Kirzner thought of entrepreneurship as a process that led to
the discovery.
A person who can take an idea or an innovation and create a product or service that is in
demand by the general public, the government or even the military. Entrepreneurs have an
uncanny ability to evaluate business opportunities. They can imagine beyond what currently
exists and create a vision to make it happen.
The definition of an entrepreneur is not always someone who starts a business.
Entrepreneurship can also take place within large organizations by applying the concepts of
innovation to one’s own work. This entrepreneurship meaning is becoming more commonplace
as more organizations embrace fresh approaches to productivity.
For example, a human resources manager’s definition of entrepreneurship can mean engaging
in unique practices that improve their company’s staff productivity.

Different Types of Entrepreneurship with Examples

Entrepreneurship is very significant and also an innovative procedure that has a wide
range of activities offering new things to society as well as civilization. Due to all the different
activities, Entrepreneurship is divided into various types and we will discuss below. So here are
26 different types of entrepreneurship with examples that are discussed below. Let’s begin.

Administrative Entrepreneurship
Under this category, all the administrative techniques and functions of entrepreneurial
activity is included. It gives a very effective way to manage all the current as well as future
situations that avail the business with merits and a competitive edge.
There are few examples of Administrative Entrepreneurship that can give an idea such
as management of quality, redesigning of job, new techniques to do things and management by
consensus. All these tasks of this type of entrepreneurship maximize the efficiency of an
organization and nukes the achievements of the firm and sustain in the competitive
marketplace.
Examples: The government of Bangladesh consider old-age pension scheme as
administrative entrepreneurship.

Opportunistic Entrepreneurship
“Hit the iron when it is hot” this proverb describes this kind of entrepreneurship and is
the best exhibit of the features of Opportunistic Entrepreneurship. New opportunities are also
offered by the changes in the environment but not every business owner is able to identify the
opportunities and utilize the same in a timely manner. The opportunistic entrepreneurship
describes as identifying, exploiting and performs the upcoming opportunities in the first hand.
Examples: FedEx, Arthur Fry and Lan Hancock etc.

Acquisitive Entrepreneurship
This type of entrepreneurship learns from the collection of demonstrable features and
skills that allows as well as improves the efficiency of the business and other related
competencies is known as Acquisitive Entrepreneurship. It equips something that is of new
value, the competitive environment and accomplishes the capacities technically. It helps to
survive the business in this world of competition. The highlighted point is that some failures
never prevent them from learning and developing new skills but also encourages them to figure

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out such new things all the times.
Examples: Imagesbazaar.com is an example of Acquisitive entrepreneurship, the
founder Sandeep Maheshwari failed to produce the master piece in his first year of lauch, but
later on he discovered how he can make his a idea big success.

Incubative Entrepreneurship
The generation of new sort of ideas and ventures within the premises of the
organization is involved in this category of Entrepreneurship. It manages it in a productive way
and makes sure the material gain for the business firm.
To exemplify, some of the tech companies like Microsoft and Nokia always discover and
promote new technologies in a wide range of products and forms differentiation among all the
categories of the products in the marketplace.

Imitative Entrepreneurship
Under an agreement with a franchise, this entrepreneurship imitates or copying the
operative products and services. It is a model that assists to spread a new technology across the
globe so that people can utilize it. It involves the adoption of current technologies from across
the world and takes on existing technologies with some few modifications that suit the local
conditions.
Example: Walton BD. produced many products like refrigerators, motorbikes and other
electronic products without being the real creator of those products. Another example can be
China where mobile technologies is adapted and modified to take this to new level.

Private Entrepreneurship
Initiate entrepreneurship under the private sector is named as Private
Entrepreneurship. The government of every nation gives ample support services via public as
well as private concerns to motivate non-public initiative in taking the ventures of
Entrepreneurship. Moreover, it speeds up the economic development and maintains a balance
between a layer and mutual relationship.
Examples: Tesla, Disney, different food chains and hospitals all are examples of private
entrepreneurship.

Public Entrepreneurship
Public Entrepreneurship referred to as the entrepreneurship that comes under the
government through the various development agencies. All developed and underdeveloped
nations take initiative in venture ideas to meet the preliminary shortage of private
Entrepreneurs. These are different from private entrepreneurs because they work under
government to solve public and environment issues. Also they are not social entrepreneurs
because they are bound to governments rules and regulations.
For Examples: Hyman Rickover submarine and Nancy Hank, the chair person of national
endowment of arts are the examples of public entrepreneurs.

Individual Entrepreneurship
It is entrepreneurship that is managed and executed by an individual or a member of a
family with some personal motives as well as initiatives, thus it is called as individual
Entrepreneurship.
Examples: Steve Jobs, J.k Rolling and Mark Zukerberg etc.

Mass Entrepreneurship
The emergence of this category of entrepreneurship occurs when there is a presence of

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a lot of favourable climate of encouragement as well as a motivation among the common
masses and this describes the Mass Entrepreneurship. It leads to increase the small and large
enterprises in a nation.
Examples: Food caterers, beauty salon and local shops

Small Business Entrepreneurship

A greater number of businesses in society are small that employ more than 50% of total
non-government workers in the United States. The profit in these types of businesses is pretty
less as the main reason behind them among employers is creating a living for their
families.Some premier examples of Small Business Entrepreneurship are grocery stores,
plumbers, confectionary stores, electricians, house cleaners, consultants, and hair dressers,
among others. A small entrepreneur can be the person who operates a business by hiring local
people of family members. The majority of them funds their business through friends or family
or business loans.
Examples: Mint.com, core power, ozone coffee and Birchbox.
Also See: Important Qualities of a Good Entrepreneur

Large Company Entrepreneurship

There are finite life cycles found in large companies as the majority of them grow using
innovation. It let them create new variants apart from core products they manufacture. The
reasons for disruptive innovations are customization in the demand of customer, establishment
of new technologies and the emergence of new competitors among others.
It results in the creation of completely new products so that these challenges can tackle
successfully. The large companies do this either by creating disruptive products or by acquiring
innovative organizations. The disruptive innovation becomes pretty difficult to apply in large
organizations.
Some Examples of Large Company Entrepreneurship are LG, Tata, Microsoft, etc.

Scalable Startup Entrepreneurship

The majority of people believe that small business and Scalable Startup
Entrepreneurship is the same. However, they are pretty different in reality. In this version of
entrepreneurship, the company is started with a vision that changes the universe. The funding
in such businesses arises from the venture capitalists, and that’s why there are top employees
hired by them.
The main motive in this entrepreneurship is to seek a scalable and repeatable business
structure. After identifying them, they look for further funding so that business can grow. Only
a fees businesses is scalable startups due to the involvement of risks.
Examples: e-commerce websites, Facebook, etc.

Social Entrepreneurship
In this type of entrepreneurship, people in business are the innovators who target on
development of products and services, so that social requirements and problems can be solved.
Unlike scalable startup entrepreneurship, the main motive of entrepreneurs in this case is
improving the world.
One of the Premier Examples about Social Entrepreneurship is Safe Point Trust. It is
controlled by Marc Koska and involved in the world of redesigning medical tools. Additionally,
they introduce the low-cost non-reusable syringes for clinics that lack money globally. Since its
foundation, this firm has delivered more than 4 billion safe injections in more than 50 nations
around the globe.

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Intrapreneurship
This term was coined by Gifford Pinchot in the year 1973. It is based related to the
fostering the activities of entrepreneurs in a large organization by making improvements in the
products and branding them to increase the profitability. The valuable asset for an organization
considered as innovation and dedicated efforts by the intrapreneur.
The four elements of Intrapreneurship are the right structure, suitable manpower,
reward and collaboration for a bright future. This entrepreneurship is very significant in this
changing world of competitiveness in the marketplace.
For instance, some of the examples of this type of entrepreneurship are Google, Intel,
3M and so on.

Technopreneurship
It is a blend of two words, technology and Entrepreneurship. It a kind of
entrepreneurship in the intensive technology context and the process of amalgamating the
entrepreneurial skills and technology where the technology is used as an essential part. It is a
sort of new breed of entrepreneurship and needs an entrepreneur who is creative, techno-
savvy, passionate as well as the ability to calculate associated risk in advance.
The most Popular Examples of technopreneurship are Microsoft, Apple, Facebook,
Twitter, Instagram and so on. IT plays an important role and gives benefits such as generate
employment, the best utilization of resources, growth of technology and creates capital.

Cultural Entrepreneurship
These entrepreneurs’ change culturally who organize cultural, financial, social as well as
human capital to make a profit out of it. They produce products that are culturally good and
generating a lot of opportunities for economy, society and culture. These firms are coming from
micro, small to large enterprises.
Such entrepreneurship works in cultural professions such as artists, writers, musicians,
dancers, advertisers, bloggers, architects and so on. The motive of such firms is the betterment
of society by leverage the business. Sometimes, cultural entrepreneurs lie on media tools like
Twitter and Kickstarter to change the ideas, belief and behaviour of the people through
communication and influence.
Examples: Singers, Musicians, Artists and Writers.

International Entrepreneurship
It is the whole process of entrepreneurship conducts ad, performs the activities of the
business across the boundaries of the nation. It involves various activities such as opening new
branches of a business firm in new locations, exporting the products to other countries and get
a license to sell as well as promote the products across the nations. The highlighted purpose of
this entrepreneurship is to fulfill and satisfy the needs and wants of the target audiences.
This entrepreneurship gets the benefit when the demand for products increases
internationally but the need for the same product is domestically not required or decreasing. It
is very significant in different aspects such as lower the cost of manufacturing, increase in sales
and profit, Globalization, cheap labours, developing the habit of Customer relation
Management and utilizes the talent to a great extent along with the managerial competencies.
Examples: Google, Apple and Mcdonalds etc.

Ecopreneurship
It is also named as “Green entrepreneurship”. It involves the perspectives that signify
corporation with the environment by working on their goals as well as profitability. This term
gained popularity in the year 1990s and termed as “Environmental entrepreneurship”.

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 Last but not least, this entrepreneurship is concerned with the problems of the
environment while focusing on the operations of the business firm and its profit margin. It has
three main concepts such as Eco-innovation, Eco-opportunity and Eco-commitment.
Examples: Body Shop and Ben and Jerry’s, Patagoina, Clif Bars and Grow Green
Happiness etc.

Agripreneurship
A formidable role has been played by agriculture in the growth of the economy and its
development too. When a business owner started to make developments in the field of
agriculture, then it is known as Agripreneurship. It is like a simple business and includes all the
operations of a business firm such as manufacturing, production and distribution of farm
supplies.
In addition to this, it also includes floriculture, horticulture, sericulture, animal
husbandry, biotechnology and so on. Basically, it is a type of farming business includes the
profitability, use of digital technologies to improve farming, farm management, and innovative
solutions and reduce the wastage of crops.
Examples: Spin Farming, Rantachook, Herbal Processing Units, Plant Clinics are also the
examples of agripreneurship.

Transpreneurship
When the people from various groups of gender such as transgender and Hijra, come up
with some small scale businesses to fulfil their day to day needs, then it is widely known as
Transpreneruship. It is associated with the third class of gender where people are not only
beggars or sex workers, but they get their bread and butter from doing any small scale
business.
For example: A fair was organized by “Anam Prem” in Mumbai where thirty-five stalls were
there and most of the shopkeepers belong to transgender started their stalls of different
products such as food, artificial jewellery, artificial flowers and so on.

Commercial Entrepreneurship
This type of entrepreneurship associated with the profitability only and emphasized the
opportunities and not on the resources. It uses the available resources lies between the
hierarchies as well as handles the network on behalf of the entity. It is viewed as profit-based
entrepreneurship as all the operations held by taking profit as a major motive. This concept was
coined about 250 years ago and focuses on the economy.
Examples: Any organization that works for profit like tiktok, facebook, snapchat and not
for society issues.

E- Entrepreneurship
This is also known as E-Entrepreneurship or Cyberpreneurship. In this world full of
technology, the sea of opportunities is there where individual, organizations as well as social
and nations can use their mobile phone and computer again and again to access the online
services. The influence and outreach of the internet are already known by every business and
there is less presence of brick and mortar businesses.
Every business owner tries to shift to online business and get a reward from technology.
The term “Entrepreneurship” indicates analyzing and identifying the bunch of resources and
converts the same to online venture business. This sort of entrepreneur is also known as SENs
(Self Employed Entrepreneurs).
Examples: Amazon, Ebay and Etsy etc.

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Domestic Entrepreneurship
When a business owner produces goods and provides services within the boundaries of
a nation, then it is known as Domestic Entrepreneurship. They follow all the rules and
regulations related to the business established by the government of the country to grow their
business domestically. It complies with the policies of the government, highly convenient,
culturally sensitive, adapts the technologies, better understand the local system, more
opportunities for growth and risk as well as reward.
For Examples: House Cleaning, Dog Walking and Freelance writing etc.

Trading Entrepreneurship
These are a kind of mediator between the manufacturer of a product and its customers
or retailers or wholesalers. All the activities related to the trading of an organization are done
through such type of entrepreneurs. It serves as middlemen for dealers, wholesalers,
manufacturers and the customers.
Examples: Paul Tudon Jones, Nick Leeson and John Key etc.

State Entrepreneurship
When a business firm is managed and operated wholly by the state or the government
of the state, then it is defined as “State Entrepreneurship”. All the trading, as well as industrial
ventures, are fully undertaken by the state only and not a single entrepreneur is there.
Examples: Any Business that is based on state like Investpunjab in India.

Joint Entrepreneurship
It is a collaboration of private and public entrepreneurship. When a business enterprise
if partly owned, controlled and managed by a private entrepreneur and the government, then it
is named as Joint Entrepreneurship.
Examples: Smart Phone development by Nokia and Microsoft.

Functions of an Entrepreneur
The main functions of an entrepreneur are grouped in three categories:
1. Risk bearing functions,
2. Administrative and decision-making functions, and
3. Distributive functions (responsibility of the organizer)

1.Risk Bearing Functions:

It is the most important and specific function of an entrepreneur. Every business
involves some amount of risk. The production of goods and services is always related to future
demands. The future demand is uncertain and unpredictable, because it is influenced by the
changes in fashion or taste and liking of the consumers.
The price structure, value of money, climatic conditions and government policies are
some other important factors that affect the demand of a commodity. All these factors are
variable and as such an exact estimation of future demand is a difficult exercise to work out.
Since this unpredictable task is undertaken by the entrepreneur, he has to bear the
risk. If his estimations prove to be wrong, then in the entire business sphere, no other factor of
production shares the loss incurred by the entrepreneur.
It is the main reason why the entrepreneur becomes entitled for the surplus that is
remaining with him from the sale proceeds of the product, after distributing the shares to other
factors. This surplus is termed as profit of the business.

2.Administrative and Decision-Making Functions:

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Conceiving the Idea of Business:
The entrepreneur conceives the idea of a particular business which suits his nature, skill
and resources. He makes a thorough (intensive and extensive) study of the condition of market
and business prospects. After making a thorough study of economic viability, he decides the
business that he has to start.

Estimation of Details of Business and Implementation of the Same:

After arriving at a conclusion about the nature of business, the entrepreneur works out
the details of business, i.e., what, how and when to produce and from where the resources are
to be arranged. With all these estimations, he makes an all-out effort to give a practical shape
to his plans, organizes various factors of production and sets them to function in proper
harmony.

Supervision and Control of Business Activities:

The entrepreneur has to supervise and control the day-to-day business activities to
accomplish the business objectives. For this he properly coordinates between various factors of
production. As the risk (success or failure) of business operations directly affect his economy,
he keeps a vision and control on the business affairs and avoids unnecessary expenditures.
He is required to take numerous decisions and has to get these decisions properly
implemented.

Innovation:
Innovation is one of the most important functions of an entrepreneur. An entrepreneur
uses information, knowledge and intuition to come up with new products, new methods of
reducing costs of a product, improvement in design or function of a product, discovering new
markets or new ways of organization of industry. Through innovation, an entrepreneur converts
a material into a resource or combines existing resources into new and more productive
configurations.
It is the creativity of an entrepreneur that results in invention (creation of new
knowledge) and innovation (application of knowledge to create the new products, services or
processes).

Distributive Functions:
The entrepreneur organizes different factors of production and sets them to work. It,
therefore, becomes his responsibility to make proper allocation of funds for each factor of
production, i.e., each factor of production must be properly remunerated.
The remuneration here refers to an important decision as to what should be the share
of each factor of production in the sale proceeds of the entire product. The remuneration
should be just and equitable and the payment to each factor should be commensurate, so that
each factor is fully satisfied.
If the factors of production remain dissatisfied, they will not be able to deliver their best
to the entrepreneur. So, it is the entrepreneur, who has to ultimately suffer. Hence, it is very
essential for the entrepreneur to perform distributive functions with extreme care and caution.

Important Functions of an Entrepreneur

To Prepare Plan:
The first and foremost function of an entrepreneur is to prepare the plan or scheme of
production i. e. the scale of production, types of goods to be produced and its quantity.

Selection of the Site:

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 The entrepreneur makes the selection of the site for the factory to be installed. The
place should be near the market, railway station or bus stand. The selection of the place may be
near the source of raw materials also. The selection of the place has an important bearing on
the cost of production.

Provision of Capital:
Capital is required to install a factory or an industry. Capital is required at all the stages
of business. It is not necessary that the entrepreneur should invest his own capital. Therefore,
he has to trace out a capitalist, to make provision for capital for the investment. He tries to
obtain capital at the lowest possible rate of interest.

Provision of Land:
After making provision of capital and selection of site, he has to arrange for land. Land is
either purchased or hired.

Provision of Labour:
In modern times; different types of labour are required to produce one type of
commodity. The entrepreneur has to make provision for labour from different places.

Purchase of Machines and Tools:

It is the function of the entrepreneur to purchase machines and tools in order to start
and continue the production.

Provision of Raw Materials:

It is the entrepreneur who makes provision for raw materials. He purchases the best
quality of raw materials at the minimum cost. He also knows the sources of raw materials.

Co-Ordination of the Factors of Production:

One of the main functions of the entrepreneur is to coordinate different factors of
production in proper combinations, so that the cost of production is reduced to the minimum.

Division of Labour:
The splitting up of production into different parts and entrusting them to different
workers is also the function of an entrepreneur. Thus, the entrepreneur decides the level and
type of division of labour.

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Quality of Product:
Keeping in view the competition in the market, the entrepreneur has to determine the
quality of his product. He is to decide whether the goods produced should be of superior
quality only or both of superior and ordinary qualities.

Sale of Goods:
The responsibility of the entrepreneur is not only to produce goods but also to sell his
produce He employs a good number of salesmen to market the goods. He makes arrangement
for publicity to push up the sales. He adopts both informative and persuasive methods to
achieve his goal.

Advertisement:
It is the duty of an entrepreneur to do advertisement explaining the superiority and
quality of his goods through newspapers, magazines, radio, TV, etc. Advertisement is done to
create and increase the demand or sale of his goods.

Search for Markets:

The entrepreneur has to explore markets for his products. He produces goods in
accordance with the consumers’ tastes which can be known from market trends.

Supervision:
One of the main jobs of an entrepreneur is to supervise all the factors engaged
production process. He has to supervise every little detail so as to ensure maximum production
and economy.

Contact with the Government:

The entrepreneur has to make contacts with the government because the modern
production system is controlled by the government in several ways. A licence is taken before
the start of production. The entrepreneur has to abide by certain rules and regulations of
production and has to pay taxes regularly.

Payment to Factors of Production:

The rewards of the various factors of production have to be decided by the
entrepreneur. He makes payments to the landlord, labour and capitalist in the form of rent,
wages and interest. Since payments to these factors of production constitute cost, so no
entrepreneur wants to pay to a factor more than its productivity.

Quantity of Production:
The entrepreneur determines the quantity of production keeping in view the demand
for goods and the extent of market. How much goods are to be produced is the mam decision
taken by the entrepreneur.

Risk-Taking:
Risk-taking is the most important function of an entrepreneur. He has to pay to all the
other factors of production in advance. There are chances that he may be rewarded with a
handsome profit or he may suffer a heavy loss. Therefore, the risk-bearing is the final
responsibility of an entrepreneur.

Innovation:

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 Innovation plays an important role in modern business. The entrepreneur makes
arrangements for introducing innovations which help in increasing production on the one hand
and reducing costs on the other. Innovations may take the form of the introduction of new
methods in the process of production or introducing improvements in the existing methods.
It also includes discovery of new markets, raw materials and new techniques of
production.

Characteristics of Entrepreneur
An entrepreneur is a person who is action-oriented and highly motivated to take a risk
and to achieve such a goal brings about a change in the process of generating goods or services
or re-initiates progress in the advent of creating new organizations.
Therefore, experts have nine characteristics for the entrepreneur from different
conceptual viewpoints.

Characteristics of an entrepreneur are;

1. Entrepreneur is an agent.
2. Entrepreneur is a risk-taker.
3. Entrepreneur is a profit maker.
4. Entrepreneur is an achievement motivator.
5. Entrepreneur is a capital provider.
6. Entrepreneur is the determinant of the nature of the business.
7. Entrepreneur is an innovator.
8. Entrepreneur is a reward receiver.
9. Entrepreneur is a challenge taker.
The characteristics that encompass the concept of the entrepreneur are discussed
below:

1.Entrepreneur is an agent
An entrepreneur is perceived as an economic agent who assembles materials for
producing goods at a cost that ensures profits and re-accumulation of capital.
He is also understood as a change agent who brings about changes in the structure and
formation of the organization, market and the arena of goods and services.

2.Entrepreneur is a risk-taker
Many experts – old and new, have emphasized this characteristic. Back I955, Redlich
pointed out that an entrepreneur is a person who identifies the nature of risk and takes a
decision.
Later on, Burch, Meredith and other experts have agreed that an entrepreneur is a risk-taker
while undertaking a venture.

3.Entrepreneur is a profit maker

An entrepreneur is an individual who establishes and manages the business for the
principal purpose of profit and growth.

4.Entrepreneur is an achievement motivator

David C. McClelland has initiated this concept of the entrepreneur by calling him “as per
sun with a strong desire for achievement.”
Later on, Meredith and others have expressed the same concept while they termed
“entrepreneurs are action-oriented, highly’ motivated individuals.”
Therefore, entrepreneurs have to have a deep-rooted need for achieving their goals.

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5.Entrepreneur is a capital provider
Entrepreneur a person who operates a business by investing his or her capital. Abbett
first pointed out this characteristic in 1967.
It supported by Nadkami (l97S) and Sharma (1981). They perceived entrepreneur as the
founder of an enterprise who assembles necessary resources for the operation of the
enterprise.

6.Entrepreneur is the determinant of the nature of the business

This characteristic /concept of the entrepreneur was promoted by Evans in 1957 It says
that an entrepreneur is the person or group of persons who perform the task of determining
the kind of business to the operated.
Therefore, entrepreneurs promote diversified and distinct types of business in society.

7.Entrepreneur is an innovator
Joseph A. Schumpeter {1934) characterized entrepreneur as an innovator of a new
combination in the field of production Later on Robinson (1962) and Hagen (1962) have
described entrepreneurs as a person who lakes a small venture to the edge of success by his
efforts, innovation and motivation.
Innovation is perceived by Schumpeter as an action that introduces a product, a new
quality, a new method of production, a new market and a new organization.
Therefore, an entrepreneur innovates something that brings about disequilibria in the industry.

8.Entrepreneur is a reward receiver

An entrepreneur is a person who creates something new of value by devoting time and
efforts and in tum receives monetary and personal rewards. Max Weber, Hartman, Hisrich and
Peters have recognized this distinct phenomenon of entrepreneurs.

9.Entrepreneur is a challenge taker

It perceives an entrepreneur as a person who accepts challenges for developing and
exercising vigilance about success and failure to take a risk and to generate products.The
above-mentioned characteris an entrepreneur show’ that an entrepreneur is a dynamic person
who promotes society and civilization by taking ventures that give an enormous variety of
goods and organizations to bring about changes in the arena of industrial activity.

Other Characteristics
Creative
Entrepreneurship starts with an idea. To be successful, you need to be always thinking
of new ideas and better ways of doing things.
In an interview in Martyn Lewis's book "Reflections on Success," Virgin Airlines
founder Richard Branson said, "I've gone into business, not to make money, but because I think
I can do it better than it's been done elsewhere. And, quite often, just out of personal
frustration about the way it's been done by other people."
Entrepreneurs are not satisfied with the status quo. They think outside the box and look
for opportunities to come up with new solutions.

Passionate
Perhaps the most important characteristic for entrepreneurs, passion is essential to any
business owner or working professional's success. Without passion, there is no reason for your
work and no drive to do it.

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Entrepreneurs love what they do and are extremely dedicated to the businesses they create. To
be successful, you must be confident in yourself and your business, and you must be proactive
with what you do and how you do it.

Motivated
In an interview with The Computer world Smithsonian Awards Program, the late Apple
founder Steve Jobs said, "I'm convinced that about half of what separates the successful
entrepreneurs from the non-successful ones is pure perseverance."
Because of their passion for their ideas, entrepreneurs are willing to put in the long
hours and hard work required to launch and run a successful new business. Are you self-
motivated? Entrepreneurs are their own boss, which means there's no one telling them to do
things. You must be in charge of your own time and how you spend it.

Optimistic
Do you see the glass half empty or half full? For entrepreneurs, it's always half full.
Entrepreneurs always look on the bright side and are constant dreamers. They look at how they
can do things better and make the world a better place. They never dwell on the past or the
negative. Instead, they focus on moving forward and moving up. When they're confronted with
challenges, entrepreneurs don't see them as problems; they see them as opportunities.
Challenges fuel entrepreneurs and make them reach higher and do more.

Future-oriented
Because entrepreneurs are focused on moving forward, they are always looking toward
the future. Entrepreneurs are very goal-oriented and know exactly what they want. They set
their goals and everything they do is aimed at achieving those goals. Having a strong vision
helps propel you toward accomplishment. Consider setting a goal for yourself - a north star that
can guide you on your path to success.

Persuasive
To be successful in business, you have to know business. If you're a person and know
how to get people to listen to you, you could be a successful entrepreneur.Especially when first
starting out, entrepreneurs need to gain buy-in from those around them on their big idea. If it's
an out-of-the-box idea, which it usually is, many people will be skeptical before giving their
support or investing any money. That's why entrepreneurs need to use their persuasiveness to
sell themselves and their ideas.

Flexible
According to professional development coach Ruchira Agrawal in an article for Monster,
"As an entrepreneur, you'll typically start out as a 'solopreneur,' meaning you will be on your
own for a while. You may not have the luxury of hiring a support staff initially. Therefore, you
will end up wearing several different hats, including secretary, bookkeeper and so on."
Entrepreneurs know how to adapt to unfamiliar situations. If their business requires
that they learn how to build a website or send an invoice, they'll do it. Whatever it takes,
entrepreneurs are ready and willing. They always approach things with an open mind and are
willing to change course if they need to.
Resourceful
In business, problems aren't a matter of if, but when, Entrepreneurs do not shy away
from challenges or conflicts. Instead, they face them head on and come up with a solution.
They know how to solve problems effectively.

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 Entrepreneurs also know how to make the most of what they have. Time, money and
effort are never used haphazardly. Everything has a plan and a purpose.

Adventurous
In an interview with Y Combinator president Sam Altman, Facebook founder Mark
Zuckerberg said, "In a world that's changing so quickly, the biggest risk you can take is not
taking any risk."Entrepreneurs know that to be successful, they must be willing to take risks.
While they don't mind walking on the wild side, they don't take risks lightly. They know how to
plan for the unknown and make a calculated decision that is best for them and their business.

Decisive
There is no room for procrastination in business. Entrepreneurs know what needs to be
done and don't hesitate to make the decisions that will lead them to success. They don't let
opportunities pass them by; instead, they seize the day and get the job done.

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 UNIT - II
ENTREPRENEURIAL GROWTH

Meaning
The term entrepreneurial growth means organization plans to achieve its objective to
grow and expand a business by its quality, quantity, and turnover. Entrepreneurial growth can
be in terms of innovators, business developers, radicals, expanders, customers etc. An
entrepreneur who undertakes the risks, and effort to grow the business will certainly
have entrepreneurial growth whereas the person who is not willing fails to achieve objectives.
Entrepreneurship development is concerned with the study of entrepreneurial behavior,
the dynamics of business set-up, development and expansion of the enterprise.
Entrepreneurship development (ED) refers to “the process of enhancing entrepreneurial
skills and knowledge through structured training and institution-building programmes”.
It basically aims to enlarge the base of entrepreneurs in order to hasten the pace at
which new ventures are created. This accelerates employment generation and economic
development.
Entrepreneurship development focuses on the individual who wishes to start or expand
a business. Small and medium enterprise (SME) development, on the other hand, it also focuses
on developing the enterprise, whether or not it employs or is led by individuals who can be
considered entrepreneurial.

The three phases of entrepreneurial development are:

I. Initial Phase.
II. Development Phase.
III. Support Phase.

i.Initial Phase:
Based on the survey and research an awareness is created on entrepreneurial
opportunities. This awareness program once created motivate the prospective entrepreneurs
to come forward to take up some or the other venture.

ii.Development Phase:
Here, the entrepreneurs are thoroughly trained in their chosen field and in various
management skills, so that they can manage their business or enterprise profitably and
successfully.

iii.Support Phase:
Along with awareness and motivation, necessary support is provided to the
entrepreneurs so that they can start their enterprises without any obstacles. Support is
provided to various entrepreneurs in the form of financial assistance, infrastructural facilities,
counselling etc.

Factors affecting Entrepreneurial growth

Entrepreneurship is influenced by four distinct factors: economic development, culture,
technological development and education. In areas where these factors are present, you can
expect to see strong and consistent entrepreneurial growth.
These conditions may have both positive and negative influences on the emergence of
entrepreneurship. Positive influences constitute facilitative and conducive conditions for the
emergence of entrepreneurship, whereas negative influences create inhibiting milieu to the
emergence of entrepreneurship.

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Economic Factors
Economic environment exercises the most direct and immediate influence on
entrepreneurship. This is likely because people become entrepreneurs due to necessity when
there are no other jobs or because of opportunity.
The economic factors that affect the growth of entrepreneurship are the following:

Capital
Capital is one of the most important factors of production for the establishment of an
enterprise. Increase in capital investment in viable projects results in increase in profits which
help in accelerating the process of capital formation. Entrepreneurship activity too gets a boost
with the easy availability of funds for investment.
Availability of capital facilitates for the entrepreneur to bring together the land of one,
machine of another and raw material of yet another to combine them to produce goods.
Capital is therefore, regarded as lubricant to the process of production.
France and Russia exemplify how the lack of capital for industrial pursuits impeded the
process of entrepreneurship and an adequate supply of capital promoted it.

Labor
Easy availability of right type of workers also effect entrepreneurship. The quality rather
than quantity of labor influences the emergence and growth of entrepreneurship. The problem
of labor immobility can be solved by providing infrastructural facilities including efficient
transportation.
The quality rather quantity of labor is another factor which influences the emergence of
entrepreneurship. Most less developed countries are labor rich nations owing to a dense and
even increasing population. But entrepreneurship is encouraged if there is a mobile and flexible
labor force. And, the potential advantages of low-cost labor are regulated by the deleterious
effects of labor immobility. The considerations of economic and emotional security inhibit labor
mobility. Entrepreneurs, therefore, often find difficulty to secure sufficient labor.

Raw Materials
The necessity of raw materials hardly needs any emphasis for establishing any industrial
activity and its influence in the emergence of entrepreneurship. In the absence of raw
materials, neither any enterprise can be established nor can an entrepreneur be emerged
It is one of the basic ingredients required for production. Shortage of raw material can
adversely affect entrepreneurial environment. Without adequate supply of raw materials no
industry can function properly and emergence of entrepreneurship to is adversely affected.
In fact, the supply of raw materials is not influenced by themselves but becomes
influential depending upon other opportunity conditions. The more favorable these conditions
are, the more likely is the raw material to have its influence of entrepreneurial emergence.

Market
The role and importance of market and marketing is very important for the growth of
entrepreneurship. In modern competitive world no entrepreneur can think of surviving in the
absence of latest knowledge about market and various marketing techniques.
The fact remains that the potential of the market constitutes the major determinant of
probable rewards from entrepreneurial function. Frankly speaking, if the proof of pudding lies
in eating, the proof of all production lies in consumption, i.e., marketing.
The size and composition of market both influence entrepreneurship in their own ways.
Practically, monopoly in a particular product in a market becomes more influential for

Page 19 of 71
entrepreneurship than a competitive market. However, the disadvantage of a competitive
market can be cancelled to some extent by improvement in transportation system facilitating
the movement of raw material and finished goods, and increasing the demand for producer
goods.

Infrastructure
Expansion of entrepreneurship presupposes properly developed communication and
transportation facilities. It not only helps to enlarge the market, but expand the horizons of
business too. Take for instance, the establishment of post and telegraph system and
construction of roads and highways in India. It helped considerable entrepreneurial activities
which took place in the 1850s.
Apart from the above factors, institutions like trade/ business associations, business
schools, libraries, etc. also make valuable contribution towards promoting and sustaining
entrepreneurship’ in the economy. You can gather all the information you want from these
bodies. They also act as a forum for communication and joint action.

Social Factors
Social factors can go a long way in encouraging entrepreneurship. In fact it was the
highly helpful society that made the industrial revolution a glorious success in Europe. Strongly
affect the entrepreneurial behavior, which contribute to entrepreneurial growth. The social
setting in which the people grow, shapes their basic beliefs, values and norms.
The main components of social environment are as follows:

Caste Factor
There are certain cultural practices and values in every society which influence the’
actions of individuals. These practices and value have evolved over hundred of years. For
instance, consider the caste system (the varna system) among the Hindus in India. It has divided
the population on the basis of caste into four division. The Brahmana (priest), the Kshatriya
(warrior), the Vaishya (trade) and the Shudra (artisan): It has also defined limits to the social
mobility of individuals.
By social mobility’ we mean the freedom to move from one caste to another. The caste
system does not permit an individual who is born a Shridra to move to a higher caste. Thus,
commercial activities were the monopoly of the Vaishyas. Members of the three other Hindu
Varnas did not become interested in trade and commence, even when India had extensive
commercial inter-relations with many foreign countries. Dominance of certain ethnical groups
in entrepreneurship is a global phenomenon

Family Background
This factor includes size of family, type of family and economic status of family. In a
study by Hadimani, it has been revealed that Zamindar family helped to gain access to political
power and exhibit higher level of entrepreneurship.

Background of a family in manufacturing provided a source of industrial

entrepreneurship. Occupational and social status of the family influenced mobility. There are
certain circumstances where very few people would have to be venturesome. For example in a
society where the joint family system is in vogue, those members of joint family who gain
wealth by their hard work denied the opportunity to enjoy the fruits of their labor because they
have to share their wealth with the other members of the family.

Education

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 Education enables one to understand the outside world and equips him with the basic
knowledge and skills to deal with day-to-day problems. In any society, the system of education
has a significant role to play in inculcating entrepreneurial values.
In India, the system of education prior to the 20th century was based on religion. In this rigid
system, critical and questioning attitudes towards society were discouraged. The caste system
and the resultant occupational structure were reinforced by such education. It promoted the
idea that business is not a respectable occupation. Later, when the British came to our country,
they introduced an education system, just to produce clerks and accountants for the East India
Company, The base of such a system, as you can well see, is very anti-entrepreneurial.
Our educational methods have not changed much even today. The emphasis is till on
preparing students for standard jobs, rather than marking them capable enough to stand on
their feet.

Attitude of the Society

A related aspect to these is the attitude of the society towards entrepreneurship.
Certain societies encourage innovations and novelties, and thus approve entrepreneurs’ actions
and rewards like profits. Certain others do not tolerate changes and in such circumstances,
entrepreneurship cannot take root and grow. Similarly, some societies have an inherent dislike
for any money-making activity. It is said, that in Russia, in the nineteenth century, the upper
classes did not like entrepreneurs. For them, cultivating the land meant a good life. They
believed that rand belongs to God and the produce of the land was nothing but god’s blessing.
Russian folk-tales, proverbs and songs during this period carried the message that making
wealth through business was not right.

Cultural Value
Motives impel men to action. Entrepreneurial growth requires proper motives like
profit-making, acquisition of prestige and attainment of social status. Ambitious and talented
men would take risks and innovate if these motives are strong. The strength of these motives
depends upon the culture of the society. If the culture is economically or monetarily oriented,
entrepreneurship would be applauded and praised; wealth accumulation as a way of life would
be appreciated. In the less developed countries, people are not economically motivated.
Monetary incentives have relatively less attraction. People have ample opportunities of
attaining social distinction by non-economic pursuits. Men with organizational abilities are,
therefore, not dragged into business. They use their talents for non-economic end.

Psychological Factors
Many entrepreneurial theorists have propounded theories of entrepreneurship that
concentrate especially upon psychological factors. These are as follows :

Need Achievement
The most important psychological theories of entrepreneurship was put forward in the
early) 960s by David McClelland. According to McClelland ‘need achievement’ is social motive
to excel that tends to characterise successful entrepreneurs, especially when reinforced by
cultural factors. He found that certain kinds of people, especially those who became
entrepreneurs, had this characteristic. Moreover, some societies tend to reproduce a larger
percentage of people with high ‘need achievement’ than other societies. McClelland attributed
this to sociological factors. Differences among societies and individuals accounted for ‘need
achievement’ being greater in some societies and less in certain others.
The theory states that people with high need-achievement are distinctive in several
ways. They like to take risks and these risks stimulate them to greater effort. The theory

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identifies the factors that produce such people. Initially McClelland attributed the role of
parents, specially the mother, in mustering her son or daughter to be masterful and self-reliant.
Later he put less emphasis on the parent-child relationship and gave more importance to social
and cultural factors. He concluded that the ‘need achievement’ is conditioned more by social
and cultural reinforcement rather than by parental influence and such related factors.

Withdrawal of Status Respect

There are several other researchers who have tried to understand the psychological
roots of entrepreneurship. One such individual is Everett Hagen who stresses the-psychological
consequences of social change. Hagen says, at some point many social groups experience a
radical loss of status. Hagen attributed the withdrawal of status respect of a group to the
genesis of entrepreneurship.
Hage believes that the initial condition leading to eventual entrepreneurial behavior is
the loss of status by a group. He postulates that four types of events can produce status
withdrawal:
1. The group may be displaced by force;
2. It may have its valued symbols denigrated;
3. It may drift into a situation of status inconsistency; and
4. It may not be accepted the expected status on migration in a new society.

Motives
Other psychological theories of entrepreneurship stress the motives or goals of the
entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek power, prestige,
security and service to society. Stepanek points particularly to non-monetary aspects such as
independence, persons’ self-esteem, power and regard of the society.On the same subject,
Evans distinguishes motive by three kinds of entrepreneurs
1. Managing entrepreneurs whose chief motive is security.
2. Innovating entrepreneurs, who are interested only in excitement.
3. Controlling entrepreneurs, who above all otter motives, want power and authority.
Finally, Rostow has examined inter gradational changes in the families of entrepreneurs.
He believes that the first generation seeks wealth, the second prestige and the third art and
beauty.

Others
Thomas Begley and David P. Boyd studied in detail the psychological roots of
entrepreneurship in the mid-1980s. They came to the conclusion that entrepreneurial attitudes
based on psychological considerations have five dimensions:
1. First came ‘need-achievement’ as described by McClelland. In all studies of successful
entrepreneurs a high achievement orientation is invariably present.
2. The second dimension that Begley and Boyd call ‘locus of control’ This means that the
entrepreneur follows the idea that he can control his own life and is not influenced by
factors like luck, fate and so on.
3. Need-achievement logically implies that people can control their own lives and are not
influenced by external forces.
4. The third dimension is the willingness to take risks. These two researchers have come to
the conclusion that entrepreneurs who take moderate risks earn higher returns on their
assets than those who take no risks at all or who take extravagant risks.
5. Tolerance is the next dimension of this study. Very few decisions are made with
complete information. So all business executives must, have a certain amount of
tolerance for ambiguity.

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 6. Finally, here is what psychologists call ‘Type A’ behavior. This is nothing but “a chronic,
incessant struggle to achieve more and more in less and less of time” Entrepreneurs are
characterize by the presence of ‘Type A’ behavior in all their endeavors.

Factors Affecting Entrepreneurial Growth

In the under developed countries there are certain factors that affect the growth of
entrepreneurship.

Few of the major factors include

1. Economic Factors.
2. Social Factors.
3. Personality Factors.
4. Psychological and Sociological Factors.
5. Cultural Factors.

Economic Factors:
The economic factors effecting the growth of entrepreneurs in under developed
countries are as follows:
i. Non-availability of capital
ii. Non-availability of quality raw materials and finished goods.
iii. Lack of adequate basic facilities.
iv. Greater risk involved in the business.
v. Non-availability of skilled labours.

i.Non - Availability of Capital:

To expand the business and grow in future research and development has to be
conducted. To conduct a research either equipments have to be purchased or get exported
from other developed countries, for this huge capital is required. Thus the non-availability of
huge capital effects the growth of entrepreneurship in the country.

ii.Non-Availability of Quality Raw Materials and Finished Goods:

Since there is less availability of raw materials throughout the year, they have to be
purchased in large quantity and stored during the period of its availability. To purchase heavy
quality raw materials, capital has to be borrowed which involves heavy rate of interest. This
effects the entrepreneurial growth.

iii.Lack of Adequate Basic Facilities:

Certain basic facilities such as power facilities, irrigational facilities, latest technology,
transport and communication etc., are required for undertaking innovative activities which help
in providing increased output and reduce the cost of production. But in an under developed
country like ours there is in-adequate availability of these basic facilities. The entrepreneur
have to get these facilities by themselves where heavy costs have to be beared. Thus again
these factors causes hindrance in the growth of entrepreneurs.
iv.Greater risk involved in the business:
a. Due to seasonal fluctuations of demand there is instability in the market.
b. Instability in domestic and foreign economic policies.
c. An entrepreneur cannot make correct estimates for his proposed venture as there is
lack of correct information, overhead facilities, market demand etc.,
Since lot of risks are involved the growth of entrepreneurship is affected.

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v.Non-Availability of Skilled Labours:
As there are non-availability of skilled labours and no proper training facilities available,
the entrepreneurs find it difficult to progress with these unskilled labours.

Social Factors:
Some of the social factors include-
i. Social system.
ii. Customs and traditions.
iii. Social set up
iv. Rationality of the society.

i.Social System:
The social system existing in the locality effect the growth of entrepreneurship in the
country. If there is a joint family then one member of the family will not share his wealth with
the other member of the family. Thus entrepreneurship cannot be developed.

ii.Customs and Traditions:

In few cases customs and traditions play a dominant role in the production decisions
rather than critically assessing the facts.

iii.Social Set-Up:
In some societies very less importance is provided towards education, training, research
etc., and more importance is given towards caste considerations. Thus no entrepreneurs can
emerge from such societies who have great aptitude and skills.

iv.Rationality of the Society:

In under developed countries most of the societies are non-rational societies which is
not suitable for the entrepreneurial growth.

Personality Factors:
In under developed countries, the entrepreneurs are looked up as profit makers and
exploiters of the resources and people. Thus causing a problem for the growth of
entrepreneurs.

Psychological and Sociological Factors:

According to Mc Clelland, “need achievement motive induces entrepreneurship”.
According to Paul Wilken, “entrepreneurship becomes the link between need achievement and
economic growth”.
Cole states that, “besides wealth, prestige, entrepreneurs seek power, security and
serve the society”.
Rostow had conducted research on inter-generation changes in the entrepreneurial
families and found that, the first generation believes in seeking wealth, the second generation
in prestige and third generation in art and beauty.

On the basis of motives, Evens has distinguished three kinds of entrepreneurs:

i. Chief motive of managing entrepreneurs is security.
ii. Chief motive of innovating entrepreneurs is excitement,
iii. Chief motive of controlling entrepreneurs are power and authority.
Thus many psychological and sociological factors affect the growth of entrepreneurs.

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Cultural Factors:
If the cultural factors prevailing in the country does not attach great value to business
talents, industrial leadership etc., then entrepreneurs, may not prefer to start up a new
venture. Thus entrepreneurship is not developed.
Factors Affecting Entrepreneurial Growth
1. Economic Factors
2. Non-Economic Factors

1.Economic Factors
Capital
Capital is one of the most important factors of production for the establishment of an
enterprise. Increase in capital investment in viable projects results in increase in profits which
help in accelerating the process of capital formation. Entrepreneurship activity too gets a boost
with the easy availability of funds for investment.
Availability of capital facilitates for the entrepreneur to bring together the land of one, machine
of another and raw material of yet another to combine them to produce goods. Capital is
therefore, regarded as lubricant to the process of production. France and Russia exemplify how
the lack of capital for industrial pursuits impeded the process of entrepreneurship and an
adequate supply of capital promoted it.

Labor
Easy availability of the right type of workers also effect entrepreneurship. The quality
rather than quantity of labor influences the emergence and growth of entrepreneurship. The
problem of labor immobility can be solved by providing infrastructural facilities including
efficient transportation.
The quality rather quantity of labor is another factor which influences the emergence of
entrepreneurship. Most less developed countries are labor rich nations owing to a dense and
even increasing population. But entrepreneurship is encouraged if there is a mobile and flexible
labor force. And, the potential advantages of low-cost labor are regulated by the deleterious
effects of labor immobility. The considerations of economic and emotional security inhibit labor
mobility. Entrepreneurs, therefore, often find difficulty to secure sufficient labor.

Raw Materials
The necessity of raw materials hardly needs any emphasis for establishing any industrial
activity and its influence in the emergence of entrepreneurship. In the absence of raw
materials, neither any enterprise can be established nor can an entrepreneur be emerged.
It is one of the basic ingredients required for production. Shortage of raw material can
adversely affect entrepreneurial environment. Without adequate supply of raw materials no
industry can function properly and emergence of entrepreneurship to is adversely affected.
In fact, the supply of raw materials is not influenced by themselves but becomes
influential depending upon other opportunity conditions. The more favorable these conditions
are, the more likely is the raw material to have its influence of entrepreneurial emergence.

Market
The role and importance of market and marketing is very important for the growth of
entrepreneurship. In modern competitive world no entrepreneur can think of surviving in the
absence of latest knowledge about market and various marketing techniques.
The fact remains that the potential of the market constitutes the major determinant of
probable rewards from entrepreneurial function. Frankly speaking, if the proof of pudding lies
in eating, the proof of all production lies in consumption, i.e., marketing.

Page 25 of 71
 The size and composition of market both influence entrepreneurship in their own ways.
Practically, monopoly in a particular product in a market becomes more influential for
entrepreneurship than a competitive market. However, the disadvantage of a competitive
market can be cancelled to some extent by improvement in transportation system facilitating
the movement of raw material and finished goods, and increasing the demand for producer
goods.

Infrastructure
Expansion of entrepreneurship presupposes properly developed communication and
transportation facilities. It not only helps to enlarge the market, but expand the horizons of
business too. Take for instance, the establishment of post and telegraph system and
construction of roads and highways in India. It helped considerable entrepreneurial activities
which took place in the 1850s.
Apart from the above factors, institutions like trade/ business associations, business
schools, libraries, etc. also make valuable contribution towards promoting and sustaining
entrepreneurship’ in the economy. You can gather all the information you want from these
bodies. They also act as a forum for communication and joint action.

2.Non-Economic Factors
Education
Education enables one to understand the outside world and equips him with the basic
knowledge and skills to deal with day-to-day problems. In any society, the system of education
has a significant role to play in inculcating entrepreneurial values.
In India, the system of education prior to the 20th century was based on religion. In this rigid
system, critical and questioning attitudes towards society were discouraged. The caste system
and the resultant occupational structure were reinforced by such education. It promoted the
idea that business is not a respectable occupation. Later, when the British came to our country,
they introduced an education system, just to produce clerks and accountants for the East India
Company, The base of such a system, as you can well see, is very anti-entrepreneurial.
Our educational methods have not changed much even today. The emphasis is till on
preparing students for standard jobs, rather than marking them capable enough to stand on
their feet.

Attitude of the Society

A related aspect to these is the attitude of the society towards entrepreneurship.
Certain societies encourage innovations and novelties, and thus approve entrepreneurs’ actions
and rewards like profits. Certain others do not tolerate changes and in such circumstances,
entrepreneurship cannot take root and grow. Similarly, some societies have an inherent dislike
for any money-making activity. It is said, that in Russia, in the nineteenth century, the upper
classes did not like entrepreneurs. For them, cultivating the land meant a good life. They
believed that and belongs to God and the produce of the land was nothing but god’s blessing.
Russian folk-tales, proverbs and songs during this period carried the message that making
wealth through business was not right.

Cultural Value
Motives impel men to action. Entrepreneurial growth requires proper motives like
profit-making, acquisition of prestige and attainment of social status. Ambitious and talented
men would take risks and innovate if these motives are strong. The strength of these motives
depends upon the culture of the society. If the culture is economically or monetarily oriented,
entrepreneurship would be applauded and praised; wealth accumulation as a way of life would

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be appreciated. In the less developed countries, people are not economically motivated.
Monetary incentives have relatively less attraction. People have ample opportunities of
attaining social distinction by non-economic pursuits. Men with organizational abilities are,
therefore, not dragged into business.

Barriers to Entrepreneurship
Finances
We are all bustling with ideas that are unique and can make for an amazing business
start-up. But no matter how good your idea is, you will always need stable finances and funding
from the investors to begin the process and take the first step towards your journey of
entrepreneurship.
And getting a sound financial investment or funding can be one of the biggest Barriers
to Entrepreneurship as many of banks, private investors, angel investors, and organizations find
it quite difficult to believe in the start-up ideas owing to the risk of failure and losing their
money.

Fear of not to be a success

We all go through the fear of failure. And if the fear is associated with the risks and
stakes taken in the stream of business and entrepreneurship, the level of fear elevates.
There is a fear if we are on the right track, is the idea worthwhile, will there be profit,
will I find investors, and various such fears and tensions act as the Barriers to Entrepreneurship.

No strategic plan in place

Lack of proper planning and strategy in place is one of the most common Barriers to
Entrepreneurship. Many of us think to build a business out of a hobby without having any sort
of long term and short term vision and plan in mind.
Running a fully-fledged business or being an entrepreneur requires a huge amount of skill set,
passion for excelling, strategic vision, the mission to accomplish the goals, market research, and
a lot more.
Right from the target market, finances, human resources, to a proper strategic plan is
required to build a successful business or a brand in the market.

Human resource issues

Entrepreneurs cannot handle and run a business alone by themselves. We require the
support of human resource to carve a niche in the market.
Employees with the required knowledge, expertise, and experience are needed for the
efficiency of the business processes and high levels of productivity.
First of all, it is quite difficult to find the employees that share the same vision and wavelength
of the business. Plus paying a hefty annual or even a monthly retainer income is a problem of
the start up’s as the finances at hand are always limited, and the overheads and expenses are
also to be taken care of.
And secondly, it is also difficult to manage human resources as each of us work with a
different mindset and perspective. Hence, human resources and employees can be as one of
the Barriers to Entrepreneurship.

Stringent rules and regulations of the market

It is not very easy for entrepreneurs to enter the new market as there are quite many
rules and regulations imposed by the government authorities.
Plus there are various laws and compliances to be adhered to such as taxation, environmental
regulations, licenses, property rights, and much more than act as the Barriers to

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Entrepreneurship.
Some of the countries have many corrupt officials that act as a hindrance for the new
entrepreneurs and start-up brands to start or expand their business in the new market. And if
the brand is planning to expand its business operations in any of the foreign countries, it gets
even more difficult.

Fewer opportunities
Even though there is a lot of talent pool in the market with the aspiring entrepreneurs
buzzing with the ideas, but the opportunities presented to them are quite less and fewer.
Reasons such as nepotism and corruption act as the Barriers to Entrepreneurship with
not many vital and lucrative opportunities.

Lack of capacity
Even if there are opportunities presented to the aspiring entrepreneurs, there is a lack
of capacity in some them to embrace the opportunities with open arms. The reasons can vary
from lack of knowledge, lack of education, lack of willingness, lack of strategic knowledge, and
cultural hindrances amongst others; but the factor of motivation and zeal gets missing.
To start a new business venture amidst all the risks and market-related issues, it
requires a lot of hard work, passion, and high capacity to handle all of it.

Less market experience

The experts always mention that one should never rush in setting up a business. It is
quite necessary to gain a relative amount of work experience by working in the industry domain
or sector of choice and as per the education levels. It also helps to sharpen the required
expertise and find the ground in the career graph.
Once the person is ready to take risks and have a relative amount of market exposure,
he is ready to take the entrepreneurial plunge.

Lack of risk-taking capacity

It is always said that entrepreneurs never sail in safe waters and are never confined to
their comfort zones. Lack of risk-taking capacity is the psychological mindset and perspective
towards the business and acts as one of the major Barriers to Entrepreneurship.
The budding entrepreneur has to have a structured and organized approach towards
the various business elements and should risks rather than averting them.

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Corrupt business situations
As mentioned earlier, if the business situations and the environment are not very
supportive and corrupt for the young and aspiring entrepreneurs, it acts as one of the top
Barriers to Entrepreneurship.
Bribing, rampant corruption, unfriendly ties of government with other nations, inconsistent
laws, stringent compliances, and enforcing regulations that are unhealthy and negative in their
approach hamper the growth of businesses in the country.
Russia is one of the examples of having an unhealthy and unsupportive business
environment.

Inadequate training
With no proper education, development, training, entrepreneurial skills, and technical
know-how acts as the Barriers to Entrepreneurship.

Lack of practical knowledge

Having a strong educational background is just not enough to pursue business as it
requires practical knowledge as well to stay relevant amidst the various market cycles. And
many entrepreneurs lack practical knowledge.

Environmental Factors affecting Entrepreneurship

Factors of the environment affecting entrepreneurship are;
1. Venture capital Availability.
2. Presence of experienced entrepreneurs.
3. Technically skilled labor force.
4. Accessibility of suppliers.
5. Accessibility of customers or new markets.
6. Favorable governmental policies.
7. The proximity of universities and research institutions.
8. Availability of infrastructural facilities.
9. Accessibility of transportation.
10. Receptive population.
11. Availability of supporting services.
12. Attractive living conditions.
These are explained below;

1.Venture Capital Availability

Venture funding of some form is usually essential if a new venture is to be started.In an
environment where entrepreneurial activity is well established, one source of venture capital is
the already successful entrepreneurs in the area.
They will often be sympathetic to other new ventures as managerial and financial
outlets. Many people who provide venture capital developed their capital base as
entrepreneurs.
According to Cooper (1970), an important source of initial capital for many firms is stock
held by the founders in the firms for which, they previously worked.
In the U.S. electronics industry, stock options that were intended for the executives to
firms sometimes make it financially feasible for them to leave the firm and become
entrepreneurs.
In Austin, an atypical situation meant that venture capital was not a critical
environmental factor. Most companies were formed with internal sources of capital because

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most were not highly capital-intensive. The initial capital needed was only in the tens of
thousands of dollars.
As Hoffman (1972) observes, if local banks or other local sources will not provide loan
money because they lack experience in financing technical companies, then entrepreneurs will
go elsewhere.
This lack of experience arises from regional ‘economic history and strongly affects loan
policies and practices. Cooper (1970) points out that most new firms were financed locally
because:
1. The founders did not know potential investors in other areas.
2. Investors in the local area were more likely to understand and be sympathetic to
technologically-oriented businesses.
3. Potential local investors could easily check into the background of the aspiring
entrepreneur. Often, they knew the individual personally.
4. Investors could keep in close touch with the new firm.
5. Presentations and proposals to local investors did not need to be elaborate.

2.Presence of Experienced Entrepreneurs

The notion that entrepreneurial activity precipitates more activity is the thesis of several
authors. Cooper (1970) argues that “technical entrepreneurship in a particular area appears to
be related closely to the incubator organizations (established firms) already there.
Unless such incubator organizations exist in a region, it is unlikely that there will be any
new, technologically-based firms born there”. If the first technology companies are successful,
they begin to change the environment and attract other entrepreneurs.
Naumes (1978) states that “the mere fact that there are other entrepreneurs in the
vicinity who have succeeded at new venture initiation draws entrepreneurs to the area and.
encourages potential entrepreneurs already in the area”.
Particularly, successful entrepreneurs can draw upon the experience and knowledge
derived from previous successes and failures. If they study their predecessors, they can
understand the formula for success.
Spin-off companies can draw on an existing talent pool. That talent is more likely to leave
secure positions m the area if the risks associated with the new enterprise are controlled and
easily assessed.
A source of debate is whether small companies or larger companies are better
incubators for new start-ups. On the one hand, it can be argued that employment in a small
company exposes the potential entrepreneur to the full range of problems and decisions the
entrepreneur can expect to encounter m his start-up.
On the other hand, it can be argued that the experience of working for some large
companies seems to precipitate entrepreneurial yearnings in the employee.
The incubator organization is important to the potential entrepreneur, can acquire managerial
insights to supplement his technical expertise, and he can gain familiarity with customers and
suppliers while on someone else’s payroll.
The networks he develops are bound to the environment of the incubator organization so that
when he starts up a venture it tends to be in the same area.

3.Technically Skilled Labor Force

A technically skilled labor force is another important environmental factor conducive to
entrepreneurial activity.
In the Twin Cities of USA, the hearing aid industry provided a technical base; many
technicians and engineers were employed in the area (Draheim 1972). Labor skilled in a
particular area of the new venture facilitates the formation of new companies.

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 A Stanford Research Institute (SRI) (1962) study of small businesses in the electronics
industry concluded that the “availability of the type of labor required in the industry is one of
the most important considerations in determining the location of electronics companies”.Since
a new firm is viewed as a high-risk place of employment, skilled labor is not willing to relocate.
The new firm must locate where the labor pool already exists.

4.Accessibility of Suppliers
Although several authors (Cooper 1970, Shapero 1972, Schollhammer and Kunloff 1979)
have noted the importance of supplier access to entrepreneurship, no published research has
been found to support this proposition.
In some situations, good access to suppliers has likely had a positive impact on the
decision to start a company. One suspects, however, that this is the exception rather than the
norm, and that accessibility’ to suppliers is seldom a deciding factor.
The consideration is likely to be highly specific to particular industries, depending upon
the bulkiness of raw materials and the degree of personal service desired from suppliers.Again,
little published research is available.
In general, this factor appears to be more significant when the entrepreneurial activity
has local rather than national or international scope, or when customers are geographically
concentrated. It should also depend on the amount and frequency of personal interaction
required by customers.

5.Accessibility of Customers or New Markets

This factor is particularly important when the entrepreneurial activity has local rather
than national or international in scope or when customers are geographically concentrated.
It should also depend on the amount and frequency of personal interaction required by
customers.
The new entrepreneur found it difficult to enter into a new market or inaccessible
market due to its incapacity in respect of lower means and efficiency.
Socio-political as well as cultural barriers also deter entry into a new market. A market
structure may be a strong barrier for entrepreneurs to have access to the market.Therefore,
environmental support for having entered into the new market or customers is primacy for the
entrepreneurship in any country.

6.Favorable Government Policies

Taxation rates, licensing policies, and other government activities can have a positive or
negative’ impact on entrepreneurship. Several researchers address the governmental influence
factor to observe that state and local legislation on taxation and licensing can make one
location more attractive than another.Cooper (1973) maintains that this legislation affects the
ability to collect “seed” capital with which to start new ventures. Mahar and Coddington (1965)
observe that taxes on business must bear some relationship to the services provided, but assert
that if lax costs were the only consideration.
Certain parts of the USA, like Boston. Palo Alto and Los Angeles would never have
developed as centers of entrepreneurial activity since California and Massachusetts have high
taxes.
Vesper and Albaum (1979) point to the area’s unfavorable business tax structures as
deterrents to new start-ups. Galvin (1978) notes that taxation laws often defer rather than
forwarding the decision to start a new business.

7.Proximity of Universities
It is a popular Relief that universities are the source of technical spin-off companies, but

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this is the exception, not the’ rule. If it does occur, it is due to the positive encouragement by
the administration or its passive acceptance of entrepreneurial activity on the part of the
faculty, and the presence of contract research, contract research centers, or laboratories
(Shapeno 1972).
Cooper maintains that universities have undoubtedly played a role in attracting able
young men and women to particular regions, and sometimes in giving the firms located there
competitive advantages in recruiting and retaining these people.
They also provide sources of consulting assistance and opportunities for continuing education
for professional employees.
However, the degree to which universities play a central or essential role in technical
entrepreneurship appears to vary widely (1973). Mapes observes that “many professors and
laboratory researchers at big universities throughout the country are going into business for
themselves. Mostly they take theories that they develop while doing university research work
and put them to practical use in highly specialized new products”.
There is also some evidence that the university spin-off is more likely to succeed than
the average new business venture. One advantage is their connection with university research
labs and the government agencies that finance them. Mapes quotes F. Turman of. Stanford
University, the USA as saying “more universities now believe a spin-off is in their enlightened
self-interest.
It builds the community as a more attractive place for faculty and students, and it keeps
scientists in touch with the engineering problems that exist in the practical world”(1907).
Allison (1965) concedes that schools with strong engineering and science capabilities and
policies that encourage entrepreneurship to stimulate new enterprises. The presence of
academic institutions, however, may be merely a facilitating factor and not a necessary one.
For example, Dallas did not have a “natural attractiveness” in terms of climate or
academic institutions but was able to develop an industrial community by creating a connection
between its research centers and the rest of the community. Hennings’ (1979) empirical
investigation of organizational births found the presence of a university to be insignificant.

8.Availability of Land or Facilities

Mahar and Coddington (1965) emphasize the importance of low-cost facilities for newly-
formed companies since they have little capital with which to operate. They recommend the
construction of shell-type buildings with easily movable partitions if incubator space is not
available in older buildings.
They maintain that high-quality industrial space is also essential since firms usually do
not want to worry about the ‘availability of water, power, sewage, roads, or zoning”.Recent
researches in various countries of the world suggest the negative impact that land availability
and related factors can have.
Quirt (1978) points out that California-based high-technology companies are not
building their new plants in California because of rising labor costs, environmental regulations,
high’ business taxes, and generous unemployment compensation rates.
The uncertainty over energy supplies, the absence of industrial revenue bonds, and soaring
housing costs also influence decisions to locate plants elsewhere.

9.Accessibility of Transportation
Accessibility to transportation and transportation costs are cited as important
environmental factors by several authors. It affects the establishment and progress of the
business and industry.
Mahar and Coddington (1965) emphasize the importance of airline transportation while
Schary (1979) says that industry type, competition, general and specific location, firm size,

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product, markets, energy, and regulation affect the importance of transportation to businesses
in the certain areas of the world.
It exhibits that transportation along with other variables is a significant contributive
factor that influences business decisions. But it is highly affected by the nature of industry or
business.
Cooper (1973) observes that transportation costs may not be very important with many
high-technology products but the ability to work closely with customers is sometimes essential.

10.Receptive Population
Cooper (1970) notes that public reception of new issues of stock can “substantially
affect the availability of venture capital, an important factor for success. Societal attitudes
toward business and entrepreneurship.
Undoubtedly influence individual decisions. Manhar and Coddington (1965) conclude
that it is difficult for a firm lo to operate successfully in an unsupportive environment.They
define an encouraging environment as “an attitude which recognizes that small firms are
making important contributions to the economic development of the area (1965). A supportive
population would promote the law, labor and materials supply, financing, distribution and
selling of goods or services and promotion of the firm and the product.

11.Availability of Supporting Service

Support services are auxiliary activities that are vital for the operation and survival of
new ventures. Thus, this factor usually affects a firm after the initial formation stage. These
services are provided by accountants, tax experts, lawyers, and consultants specializing in new
ventures and small businesses. Naumes (1978) mentions that these advisors understand the
typical problems present in starting a new enterprise.
He further opines that they help entrepreneurs overcome many of the initial stumbling
blocks to successful new venture initiation. The existence of supporting services further assures
that new ventures will be more successful in the future.

12.Attractive Living Conditions

The cultural, climatologically and recreational amenities are the greatest important
factors for the growth and development of entrepreneurial ventures. A community must
become an exciting and attractive place if it is to attract and retain the technical professional
workforce that is the chief productive factor in high technology industries.
The highly-trained body of workers is relatively young, highly mobile, in great demand
and has a choice of places to work and live, it will not stay in a community that does not have
within it a selection of amenities that are available elsewhere (Shapero, 1972).
Mahar and Coddington (1965) mention that primary and secondary schools are very
important because qualified people want good educational facilities for their children.

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 UNIT - III
THEORIES OF ENTREPRENEURS
Kao’s Conceptual model of Entrepreneurs
John Kao thinks you need to play on the job. "When people use the word play in a
business context, it sounds kind of frivolous, but being playful is very much the source of new
ideas," says Kao, author of Innovation Nation and chairman of the global Institute for Large
Scale Innovation.

John Kao has developed a conceptual model of entrepreneurship in his article:

Entrepreneurship,creativity and organisation in 1989. This model has four main aspects:

Entrepreneurial Personality:
The overall success of a new venture largely depends upon the skill, qualities, traits and
determination of the entrepreneur.

Entrepreneurial Task:
It is a role played by entrepreneur in an enterprise. The major task of the entrepreneur
is to recognize and exploit opportunities.

Entrepreneurial Environment:
It involves the availability of resources, infrastructure, competitive pressures, social
values, rules and regulations, stage of technology etc.

Organizational Context:
It is the immediate setting in which creative and entrepreneurial work takes place. It
involves the structure, rules, policies, culture, human resource system, communication system.
According to Kao, the most successful entrepreneur is one who adapts himself to the
changing needs of the environment and makes it hospitable for the growth of his business
enterprise. This ECO (Entrepreneurship, creativity ad organization) analysis frame work
developed and conceptualized by John J. Kao contributes a great deal to the emergence as well
as sustenance of entrepreneurship and entrepreneurial talent
in the prevailing business environment.

David Meclelland’s Achievement Motivation Theory

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 David McClelland was a psychological theorist. I’m going to briefly describe his work on
Achievement Motivation Theory. Similar to the boost that knowing how to read body language
gives you, simply being aware of this theory (which has been indirectly validated by a thousand
subsequent pieces of research) gives you a useful framework for interpreting the behaviour and
motivations of co-workers, clients and even yourself.
Every individual is driven to varying extents by one of three motivators:
1)Achievement
2)Power
3) Affiliation
These motivators ALL exist to varying extents in each individual, and are socially
acquired or learned. How people act is to a significant extent driven by the combination of
these attributes, both based on individual and relative strengths. It’s interesting to note that
most people aren’t consciously aware of what drives them, and yet the combination of these
motivators that you hold significantly impacts how you work with others and the types of roles
you’re likely to succeed in.

ACHIEVEMENT:
Achievement oriented people are driven to master complex challenges, to find
solutions, overcome goals, and they love getting feedback on the level of success. Standards of
excellence, precise goals and clear roles are what motivates these people. This results in a non-
conscious concern for achieving excellence through individual effort. They usually set
challenging goals for themselves, assume personal responsibility for accomplishment and take
calculated risks for achieving these goals. They are very effective in leading task oriented groups
and do well in entrepreneurial roles. Simply put, they love to achieve, and to measure that
achievement.

POWER:
Power oriented people want to control and influence, they have a need to win
arguments, and love to persuade and prevail. This motivator is typically and not surprisingly
strong in executives. In fact, when the power motivator exceeds that of achievement (which
can be an individual focused trait), it is predictive of leadership effectiveness. The desire to
influence results in a sustained focus on leadership. However, this motivator needs to be
constrained to a level where self-promotion doesn’t have negative consequences for the
organization. This motive is activated when the individual is allowed to have an impact, impress
those in power or beat competitors.

AFFILIATION:
Affiliation oriented people have a strong desire to belong. They have a deep concern for
relationships, they strive to reduce uncertainty, and they love teamwork. They tend to be less
assertive, submissive, and tend to be more dependent on others. In management positions, too
great of a need for affiliation can surface in behaviors such as: avoidance for disciplining
subordinates, favoritism, submissiveness, and reluctance to hold others accountable. These
leaders are motivated by what they can accomplish with people they know and trust.

McClelland's Experiment
McClelland's particular fascination was for achievement motivation, and this laboratory
experiment illustrates one aspect of his theory about the affect of achievement on people's
motivation. McClelland asserted via this experiment that while most people do not possess a
strong achievement-based motivation, those who do, display a consistent behavior in setting
goals:

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 Volunteers were asked to throw rings over pegs rather like the fairground game; no
distance was stipulated, and most people seemed to throw from arbitrary, random distances,
sometimes close, sometimes farther away. However a small group of volunteers, whom
McClelland suggested were strongly achievement-motivated, took some care to measure and
test distances to produce an ideal challenge - not too easy, and not impossible. Interestingly a
parallel exists in biology, known as the 'overload principle', which is commonly applied to
fitness and exercising, ie., in order to develop fitness and/or strength the exercise must be
sufficiently demanding to increase existing levels, but not so demanding as to cause damage or
strain. McClelland identified the same need for a 'balanced challenge' in the approach of
achievement-motivated people.
McClelland contrasted achievement-motivated people with gamblers, and dispelled a
common pre-conception that n-ach 'achievement-motivated' people are big risk takers. On the
contrary - typically, these individuals set goals which they can influence with their effort and
ability, and as such the goal is considered to be achievable. This determined results-driven
approach is almost invariably present in the character make-up of all successful business people
and entrepreneurs.
McClelland suggested other characteristics and attitudes of achievement-motivated people:
1. Achievement is more important than material or financial reward.
2. Achieving the aim or task gives greater personal satisfaction than receiving praise or
recognition.
3. Financial reward is regarded as a measurement of success, not an end in itself.
4. Security is not a prime motivator, nor is status.
5. Feedback is essential, because it enables measurement of success, not for reasons of
praise or recognition (the implication here is that feedback must be reliable,
quantifiable and factual).
6. They constantly seek improvements and ways of doing things better.
7. They will logically favour jobs and responsibilities that naturally satisfy their needs, ie
offer flexibility and opportunity to set and achieve goals, eg., sales and business
management, and entrepreneurial roles.

Role of Entrepreneur in Indian Economy With reference to Self employment development:

Economic development essentially means a process of upward change whereby the real
per capita income of a country increases over a period of time. Entrepreneur plays a vital role in
economic development. Entrepreneurs serve as the catalysts in the process of industrialization
and economic growth. Technical progress alone cannot lead to economic development, unless
technological breakthroughs are put to economic use by entrepreneurs.
It is the entrepreneur who organizes and puts to use capital, labour and technology.
Accordingly, “development does not occur spontaneously as a natural consequence when
economic conditions in some sense are right. A catalyst is needed and this requires
entrepreneurial activity to a considerable extent, the diversity of activities that characterizes
rich countries can be attributed to the supply of entrepreneurs.”
The entrepreneur is the key to the creation of new enterprises that energize the
economy and rejuvenate the established enterprises that make up the economic structure.

Entrepreneurs initiate and sustain the process of economic development in the following
ways:
Capital Formation:
Entrepreneurs mobilize the idle savings of the public through the issues of industrial
securities. Investment of public savings in industry results in productive utilization of national
resources. Rate of capital formation increases which is essential for rapid economic growth.

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Thus, an entrepreneur is the creator of wealth.

Improvement in Per Capita Income:

Entrepreneurs locate and exploit opportunities. They convert the latent and idle
resources like land, labour and capital into national income and wealth in the form of goods
and services. They help to increase net national product and per capita income in the country,
which are important yardsticks for measuring economic growth.

Generation of Employment:
Entrepreneurs generate employment both directly and indirectly. Directly, self-
employment as an entrepreneur offers the best way for independent and honorable life.
Indirectly, by setting up large and small scale business units they offer jobs to millions. Thus,
entrepreneurship helps to reduce the unemployment problem in the country.

Balanced Regional Development:

Entrepreneurs in the public and private sectors help to remove regional disparities in
economic development. They set up industries in backward areas to avail various concessions
and subsidies offered by the central and state governments.
Public sector steel plants and private sector industries by Modis, Tatas, Birlas and others have
put the hitherto unknown places on the international map.

Improvement in Living Standards:

Entrepreneurs set up industries which remove scarcity of essential commodities and
introduce new products. Production of goods on mass scale and manufacture of handicrafts,
etc., in the small scale sector help to improve the standards of life of a common man. These
offer goods at lower costs and increase variety in consumption.

Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to
manufacture indigenous substitutes of hitherto imported products thereby reducing
dependence on foreign countries. Businessmen also export goods and services on a large scale
and thereby earn the scarce foreign exchange for the country.
Such import substitution and export promotion help to ensure the economic
independence of the country without which political independence has little meaning.

Backward and Forward Linkages:

An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise
has several backward and forward linkages. For example- the establishment of a steel plant
generates several ancillary units and expands the demand for iron ore, coal, etc.
These are backward linkages. By increasing the supply of steel, the plant facilitates the
growth of machine building, tube making, utensil manufacturing and such other units.
Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose. They give
an organization its momentum. Entrepreneurial behavior is critical to the long term vitality of
every economy. The practice of entrepreneurship is as important to established firms as it is to
new ones.
Now people have begun to realise that for achieving the goal of economic development,
it is necessary to increase entrepreneurship both qualitatively and quantitatively in the country.
It is only active and enthusiastic entrepreneurs who fully explore the potentialities of the
country’s available resources land, tech., capital, material etc.
The role of entrepreneurship in economic development varies from economy to

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economy depending upon its material resources, industrial climate and the responsiveness of
the political system to the entrepreneurial function. The entrepreneurs contribute more in
favourable opportunity conditions.
1. In underdeveloped/developing regions, due to lack of funds and skilled labour, the
atmosphere is less conducive for innovative entrepreneurs.
2. Under the conditions of paucity of funds and the problem of imperfect market, the
entrepreneurs are bound to launch their enterprises on a small scale. Also initiator
entrepreneurs are preferred in such regions.
3. Generation of employment
4. Balanced regional development
5. Improvement in standard of living
6. Backward and forward linkages
7. Creator of wealth (securities, issues etc.).
Thus, small scale entrepreneurship in such industrial structure plays an important role
to achieve balanced regional development, generation /creator of wealth etc.

Important role that entrepreneurship plays in the economic development of our economy
(India) are:
Improvement in Per Capita Income:
Entrepreneurs locate and exploit opportunities. They convert the latent and idle
resources like land, labour and capital into national income and wealth in the form of goods
and services. They help increase Net National Product and Per Capita Income in the country.

Generation of Employment:
Entrepreneur generate employment both directly and indirectly. By starting their
business they present an opportunity to others for work by offering jobs.

Balanced Regional Development:

Entrepreneurs help to remove the regional disparities in the economic development of
areas. They set up industries in backward areas to avail various substitutes and bring up the
development of that region.

Improvement in Living Standards:

Entrepreneur set up industry which introduce new products on a mass scale. They are at
lower costs and this helps to improve the standard of life of a common man.

Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to
manufacture substitutes of imported products thereby reducing dependence on foreign
countries. These businessmen also export products thereby earning foreign exchange for the
country.
Entrepreneurship does not emerge and grow spontaneously. There are various factors
having both positive and negative influence on the growth of entrepreneurship. (Positive
influence imply facilitating and conducive conditions whereas negative influences refer to
factors inhibiting the emergence of entrepreneurship).
Facilitating Factors:
1. Technical knowledge
2. Entrepreneurial training
3. Market contacts
4. Family business

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 5. Availability of capital
6. Successful role models
7. Local manpower
8. Government and institutional support

Barriers:
1. Lack of technical skills
2. Lack of market knowledge
3. Lack of business knowledge
4. Time pressure and distractions
5. Legal and bureaucratical constraints
6. Patent inhibitions
7. Political instability
8. Non-cooperate attitude of banks and other institutes

Economic Conditions:
Economic environment exercises the most direct and immediate influence on
entrepreneurship. Capital, labour, raw materials and markets are the main economic factors.
(a) Capital:
It is one of the most important prerequisites to establish an enterprise. Availability of
capital facilitates the entrepreneur to bring together the land of one, machine of another and
raw material of yet another to combine them to produce goods. With an increase in capital
investment, capital-output ratio also increases.
This results in increase in profit which ultimately goes to capital formation. This suggests
that as capital supply increases, entrepreneurship also increases (e.g., Russia – how lack of
capital for industrial pursuits impeded entrepreneurship).

(b) Labour:
The quality rather than quantity of labour is another factor which influence the
emergence of enterprise. Adam Smith considered division of labour as an important element in
economic development. According to him, division of labour, which itself depends upon the
sizes of the market leads to improvement in the productive capacities of labour due to an
increase in the dexterity of labour.

(c) Raw Materials:

The accessibility of raw material for establishing any industrial activity, is indisputable. In
the absence of raw materials, no enterprise can be established. Of course in some cases
technological innovation can compensate for raw material inadequacy e.g., Japan.

(d) Market:
The fact remains that the potential of the market constitutes the major determinant of
probable rewards for entrepreneurial function. The size and composition of market both
influence entrepreneurship in their own ways. Practically, monopoly in a particular product in
the market become more influential for entrepreneurship than a competitive market.
However, the disadvantages of competitive market can be cancelled to some extent, by
improvement in transportation system, facilitating the movement of raw materials and finished
goods and increasing the demand for goods. For example, Germany and Japan are prime e.g.,
where rapid improvement in market was followed by rapid entrepreneurial activities.

Social Factors:

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 Social environment in a country exercises a significant impact on the emergence of
entrepreneurship.

The various sub factors are:

(a) Legitimacy of Entrepreneurship:
The social factors give emphasis to the relevance of a system of norms and value, within
a sociocultural setting for the emergence of entrepreneurship. This system is referred to as
“legitimacy of entrepreneurship” in which the degree of approval or disapproval granted
entrepreneurial behavior influences its emergence and characteristics if it does not emerge.
Some scientists call it appropriate social climate for entrepreneurship and some call it cultural
sanctions.

(b) Social Mobility:

It involves the degree of mobility, both social and geographical and the nature of
mobility channels within a system. Some are of the view that a high degree of mobility is
conducive to entrepreneurship (e.g., openness of a system and need for flexibility in role
relations imply the need for the possibility of mobility within a system for entrepreneurship
development).
In contrast, there is another group of scholars who express the view that a lack of
mobility possibilities promotes entrepreneurship. The third opinion is a combination of first
two, i.e., the need for both flexibility, the denial of social mobility. Thus a system should not be
too rigid nor too flexible. (If too flexible individual will move towards other roles, if too rigid,
entrepreneurship will be restricted along with other activities).

(c) Marginality:
A group of scholars hold a strong view that social marginality also promotes
entrepreneurship. They believe that individuals or groups on the perimeter of a given social
system or between two social systems provide the personnel to assume the entrepreneurial
role.
They may be drawn from religious, cultural, ethnic or migrant minority groups and their
marginal, social position is generally believed to have psychological effects which make
entrepreneurship particularly attractive for them.

Psychological Factors:
(a) Need Achievement:
E.g., David Mc Clelland’s theory of need achievement. According to him high need of
achievement is the major influencing factor for entrepreneurship development therefore if the
average level of need achievement in a society is relatively high, one would expect a relatively
high amount of entrepreneurship in that society.
Mc Clelland says that need achievement can be developed through the intensive
training programmes.

(b) Withdrawal of Status Respect:

Hagen attributed the withdrawal of status respect of a group to the genesis of
entrepreneurship e.g., Japan developed sooner than any non-western society except Russia due
to two historical differences.
First, Japan had been free from ‘colonial disruption’ and secondly, the repeated long
continued withdrawal of expected status from important groups (like Samurai) in her society
drove them to retraction which caused them to emerge alienated from traditional values with
increased creativity.

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 This very fact led them to the technological progress entrepreneurial roles. Hagen
believes that the initial condition leading to eventual entrepreneurial behaviour is the loss of
status by a group.

The importance of entrepreneurs in Indian economy arises on account of the following

reasons:
Entrepreneurs can help reduce unemployment:
Unemployment Rate in India averaged 7.32 percent from 1983 until 2013, reaching an
all-time high of 9.40 percent in 2009 and a record low of 4.90 percent in 2013. Entrepreneurs
are expected to provide employment opportunities to the unemployed. The rural
entrepreneurs and women entrepreneurs can play a very significant role.

Entrepreneurial initiatives can contribute to higher gross national product and per capita
income:
Gross National Product in India was Rs 56738.60 Billion in 2014. Entrepreneurial
initiatives and activities can enhance the level of gross national product as well as per capita
income of the people in a country leading to the economic development of the economy.

Entrepreneurs can contribute towards capital formation:

The gross capital formation in India for the year of 2009-10 was 36.5% of the GDP and
35.12% of GDP 2012-13. Indian entrepreneurs can promote capital formation in the economy.
Entrepreneurs can increase the avenues for fruitful investments.

Entrepreneurial activities can significantly influence the standard of living:

According to the Human Development Index of 2015, India is ranked at 130th position
among 188 countries. Entrepreneurs can play a vital role in enhancing the standard of living of
the people by adopting latest innovations in the production of wide variety of goods and
services. They can make available the best quality products and services in possible cheapest
cost.

Entrepreneurs endeavour to promote balanced regional development:

The growth of industries and business in backward areas would lead to a large number
of benefits for the public like road transport, health, education, etc. The entrepreneurs can
contribute to balanced regional development. The Corporate Social Responsibilities (CSR) of the
established entrepreneurs can improve the backward regions. The CSR activities have been
made mandatory for the companies that come under the categories recognized under
Companies Act of 2013.

Entrepreneurial activities would lead to wealth creation and distribution:

Entrepreneurial activities guided by national interest would lead to generation of
greater wealth as well as its distribution.

Entrepreneurial initiatives can help in skill development:

The Indian entrepreneurs can play a vital role in skill development and thereby
contribute to the process of job creation and development of the economy. The entrepreneurs
should take the initiative of improving the skill of the semiskilled or unskilled labour force.

Entrepreneurs can improve India’s global competitiveness:

In the Global Competitiveness report 2015-2016, published by World Economic Forum,
India is ranked at 55th position among the 140 countries enlisted in the report. The

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entrepreneurial class has to take up the challenge and contribute towards improving the
competiveness of Indian economy.

Entrepreneurs can increase the country’s share in global export trade:

India’s share in Global Merchandise exports is very low. The entrepreneurs have to track
the avenues for export and concentrate to improve the share of Indian economy in global
export trade.

Entrepreneurs ensure overall development of an economy:

The activities of the entrepreneurs can influence all the sections of the economy. They
can reduce the negativity and pessimism of a society. Their activities generate enthusiasm
among the followers. A new level of development is dreamt by the entire economy and the
Indian entrepreneurial class can contribute a lot in ensuring overall development of the
country.

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 UNIT - IV
WOMEN ENTREPRENEURSHIP
Women Entrepreneurship
Women entrepreneur may be defined as a woman or group of women who initiate,
organize, and run a business enterprise. In terms of Schumpeterian concept of innovative
entrepreneurs, women who innovate, imitate or adopt a business activity are called “women
entrepreneurs”.
Kamal Singh who is a woman entrepreneur from Rajasthan, has defined woman
entrepreneur as “a confident, innovative and creative woman capable of achieving self-
economic independence individually or in collaboration, generates employment opportunities
for others through initiating, establishing and running the enterprise by keeping pace with her
personal, family and social life.”
The Government of India has defined women entrepreneurs based on women
participation in equity and employment of a business enterprise. Accordingly, the Government
of India (GOI2006) has defined women entrepreneur as “an enterprise owned and controlled by
a women having a minimum financial interest of 51 per cent of the capital and giving at least 51
per cent of the employment generated in the enterprise to women.” However, this definition is
subject to criticism mainly on the condition of employing more than 50 per cent women
workers in the enterprises owned and run by the women.

Woman Entrepreneurs in India – Importance

In modern days, women entrepreneurs are playing a very important role in business,
trade or industry. Their entry into business is of recent origin. Women have already shown their
vital role in other spheres like politics, administration, medical and engineering, technical and
technological, social and educational services. This is true in advanced countries and now in
recent years, they have been entering into these fields in our country. Their entry into business
is a recent phenomenon in India.
It is an extension of kitchen activities. In certain businesses, women entrepreneurs are
doing exceedingly well and even they have exceeded their male counterparts. Women are
successful not only in law, science, medical, aeronautics and space exploration and even in
police and military services, but now they are showing their might even in business and
industry. They have proved that they are no less them men in the efficiency, hardwork, or
intelligence, provided they are given proper scope.
The role or importance of women entrepreneurs may be ascertained from the study of
the functions they perform.
These functions are as under:
a) Exploring the prospects of starting new enterprises.
b) Undertaking risks and handling economic uncertainties.
c) Introducing innovations.
d) Co-ordinating administration and control.
e) Routine supervision.
It may be observed that these functions are not always of equal importance. For
example, risk-taking and innovation functions are of utmost importance for establishing,
diversifying and running the business successfully co-ordination and supervision functions
become important in improving the efficiency and attaining the goodwill for the business as
well as in assuring the smooth balanced operation of the enterprise.
In the case of women enterprises, usually the same lady performs all these functions
and some times, she may also take the assistance of other female staff members. In most of the
cases, a woman is the owner of the business enterprise.
Generally, the following three types of business are suitable to the women entrepreneurs:

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 a) Manufacturing a product for direct sale in the market.
b) Manufacturing a product or a part of the product to meet the short term or long-term
order of a large industrial company, and
c) Operating purely as a sub-contractor of raw materials supplied by the customers.
Generally, the last two types industry or business are known as ancillaries. The women
entrepreneurs prefer to deal in consumer goods which have always a demand in the market.
They prefer to deal in intermediate goods which are used in the production of other products
and mostly they are manufactured to the orders of large companies.

Factors Influencing Women Entrepreneurship

Family culture and traditions –
Family culture and traditions influence entrepreneurship. Women entrepreneur will
remain entrepreneur if its family tradition is so or if she belongs to a pioneer entrepreneur.

Geographical factors and social factors –

The society, the state and the area to which she belongs also influence the
entrepreneurship. If she is a Punjabi or Gujrati belonging to their respective state, will become
entrepreneurs

Caste system –
The caste system also influences as a women who is Sindhi may start a business at an
early stage as in their caste or communities it is a trend.
Government aids and policies – Government can never increase entrepreneurship, it
always helps an entrepreneur. A capable person only can become entrepreneur even if she gets
aids or adopts policies to start a venture.

Government can help poor class people with reservations.

Government help can be of significance if entrepreneur takes its help for logical
conclusions. But for this, caliber of an entrepreneur is also seen.

Inherent capabilities and efficiency –

Capabilities to withstand the competition with males require guts and dare to become
an entrepreneur. Females require same capabilities as that of males. They get benefit of being
females only when the service has to be rendered to women only like in hospitals etc.
Capabilities influence the entrepreneurship but efficiency is also required as if the person has
capability to become an entrepreneur but if she is not efficient to run the venture she cannot
become a better entrepreneurship.

Push Factors:
a. Death of bread winner
b. Permanent inadequacy in income of the family
c. Sudden fall in family income

Pull Factors:
a. Need and perception of Women’s Liberation, Equity etc.
b. To gain recognition, importance and social status.
c. To get economic independence
d. To utilize their free time or education
e. Women’s desire to evaluate their talent

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There are four motivating factors which influence a woman entrepreneur:
Recognition:
A woman entrepreneur is motivated by recognition in respect of admiration, regard,
esteem and celebrity. It is communication tools that reinforces and rewards the most important
outcomes entrepreneurs create for the business.

Influence:
It is the capacity or power of a person to be a compelling force on or produce effects on
the actions, behavior, opinions, etc., of others.

Internal:
It is the main factor which motivates businesswomen. It is the internal factors which are
very much important for the motivation. It includes creativity, respect, and happiness of other
people.

Profit:
It is not the true motivation which influences an entrepreneur. Welfare of the
employees, payment of tax to the government, is indirectly improving the living conditions of
the entrepreneur. Thus the real motivation for Apple to create and sell popular products like
ipod, iPhone and ipad is probably not money, but the interest.

Functions of Women Entrepreneurs

The women entrepreneur has to react to new ideas, demand and exploit the
opportunities and thereby contribute to technical progress.

A women entrepreneur is expected to perform the following functions:

Risks –
The women entrepreneur has to take risks in the form of changes in tastes of
consumers, techniques of production and new innovations. Such risks can be minimized if
women take earlier initiative, use skill and judgment.

Decision making –
The women entrepreneur has to decide the nature of type of products to be produced.
She enters a particular industry which offers her the best prospects and products and produces
those goods which she thinks will pay her the most and employees those methods of
production which seems to her the most profitable. She effects suitable changes in the size of
the business, its location, techniques of production and does everything that is needed for the
development of her business.

Innovation:
The women entrepreneur conceives the idea for the improvement in the quality of
product line. She considers the economic viability and technological feasibility in bringing about
improved quality.

Managerial function:
She formulates production plans, arranges finance, purchase raw materials, provides
production amenities, organizes the sales and also undertake the task of personnel
management. She undertakes a venture, assumes risk and earns profit. She is a woman who
has a strong motivation to achieve success.

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Role of Woman Entrepreneurs in Society:
According to Pandit Jawaharlal Nehru, “When women move forward, the family moves,
the village moves, and the nation moves.”
Women entrepreneurship has been recognized as an important, untapped source of
economic growth during the last decade. With the spread of education and awareness, Indian
women have shifted from the extended kitchen, handicrafts, and traditional cottage industries
to non-traditional, higher level of activities.
In the new industrial policy, the government has laid special emphasis on the need of
conducting special entrepreneurial training programs for women to enable them to start their
own ventures. Financial banks and institutions have also set up special cells to assist women
entrepreneurs. This has helped the women a lot in taking up the entrepreneurial activity in
India.
Estimates in Europe (both European Union countries and other), indicate that there
exist more than 10 million self-employed women and in the United States 6.4 million self-
employed women providing employment for 9.2 million people and creating significant sales.
Women entrepreneurs not only create new jobs for themselves, but also provide jobs to others.
However, the participation of women entrepreneurs is less than male entrepreneurs.

The role of women entrepreneurs is explained in the following points:

Employment Generation:
It implies that women entrepreneurs not only establish their enterprise, but provide job
to others. Women entrepreneurship is about women’s position in the society and their role as
entrepreneurs in the same society. It can be understood in two ways, namely, at the individual
level (number of self-employed) and at the firm level (number of firms owned by women and
their economic impact). In this way, woman entrepreneurs have an important impact on the
economy in terms of their ability to create jobs for themselves as well as for others.

Economic Development:
It signifies that women entrepreneurs contribute to the gross domestic product of the
country by establishing enterprises and producing goods and services. Due to their
entrepreneurial activity, women entrepreneurs bring dynamism in market. In this way, they
also help in increasing the national income of the country.

Better Utilization of Resources:

It implies that the involvement of women in industrial development ensure the effective
utilization of all available resources (labor, raw materials, capital). The issue of women in the
industrialization process has been emphasized only in the last decade when the ‘Declaration of
Mexico in July 1975’, the equality of womanhood and their contribution to individual
development became the center of attention.

Improved Quality of Life:

It implies that women entrepreneurs are now economically independent and take
decisions independently. They are now capable of upbringing their children according to their
wish. They are providing quality education to their children and a better living standard to their
family members. They not only improve their living standards, but also the living standards of
others by providing them the means of earning.
Factors Responsible for Increasing Female Entrepreneurship in India
In spite of the growing number of female entrepreneurs, the share of female
entrepreneurs is still significantly low when compared to their participation rate.
However, there are several factors responsible for increasing the level of female

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entrepreneurship in India:

Nature of Entrepreneurship:
Women enter into entrepreneurial activity because regular employment does not
provide them with the flexibility, control or challenge offered by business ownership.

Empowerment:
Indian women are becoming more empowered now-a-days. Legislations are being
progressively drafted to offer them more opportunities at various levels.

Social Conditions:
For women, in particular, the relatively high involvement in necessary entrepreneurship
indicates that self-employment is used as a way to circumvent institutional and cultural
constraints with respect to female employment, as well as a way to provide supplemental
family income.

Literacy and Education:

Increased levels of education have played a crucial role in initiating the process of
entrepreneurship. It is not only the illiterate that are starting the businesses but those with
education and skills are also exploiting profit opportunities.

Multitask Oriented:
Women are known for juggling many tasks at the same time and still producing
excellent results. A woman can talk on the phone, open and read her email and schedule what
else she needs to finish for the rest of the day all at the same time. Men have more trouble
with this multitasking thing; therefore sometimes they miss many opportunities.

Being Patient with the Process:

This is an extremely important attribute for entrepreneurs to have. Too often we hear of
visionary entrepreneurs who tried to start their businesses and after a few months gave up.
Very often we find these entrepreneurs gave up on their dreams too soon. They became
impatient with the process. Women know naturally that you must wait in order to receive
positive outcomes.

Branding and Marketing Themselves:

Women are natural marketers. They are so passionate and enthusiastic about what they
choose to do that they just do not stop talking about it. They don’t forget to emphasize the
benefits of their services to their potential customers. They understand how to emphasize the
positive.

Collaborator:
Women entrepreneurs are becoming more and more successful because they are
natural collaborators and love doing project together. When they find likeminded women
whom they like and think they can accomplish something with by combining their talents they
do it. A collaborative spirit and attitude reigns with women a competitive attitude is rarely seen
and considered unsavory when witnessed. Women do work they love to do and they feel great
when they can do it with other women.

Structural Shift:
One of the primary drivers is a structural shift. Women are now a greater part of the

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economic make-up of society; there are more women in the workforce. They are resourceful,
leaving the workforce to stay home and raise a family, re-entering when the kids are grown or
working a flex schedule when their kids go to school.

It’s the Blend:

One of the biggest reasons women entrepreneurs are now in the forefront is their
desire to blend career and life ambitions. Their personal goals are oftentimes meshed with
career goals. They put their passions into practice and it shines through in entrepreneurial
endeavors. For them it’s not just a job, it’s a significant part of who they are.

Relating to Customers’ Needs:

One of the biggest reasons women entrepreneurs are so successful is they are more
conscious of their customers’ needs. Men for the most part are not customers they’re
consumers. It is the big difference. As a woman they shop for price of course, but what is just as
important is the buying experience. If the service is poor or they can’t relate to the employees
then it doesn’t matter what it costs. It’s all about word of mouth and customer loyalty.

Integrity of Relationships:
Women’s ability to nurture the whole relationship is what makes them great as
entrepreneurs. They naturally listen to understand, so they can connect across
business boundaries to give solid integrity to relationships. Whether they are talking to a major
account, negotiating with a vendor or coaching an employee, it’s more than just about that one
issue. Their want of making a wide and deep relationship is one thing of many that makes them
great entrepreneurs.

Resourcefulness of Women:
There are a growing number of work-at-home moms starting a business from their
homes while taking care of their families. Most do it to augment the income of their families,
without leaving their homes. Others want to do something economically and financially
productive with their time if a corporate career is out of the question at this point. Still others
have stumbled upon an opportunity that can be done while staying at home to be with their
children.

Women are Social:

Entrepreneurs now have to be engaged in social media to be successful. By nature,
women are social. They can leverage social media in ways that can help jumpstart new
businesses quickly and cheaply. Whether it is engaging customers via Twitter, blog, forum or
Facebook, they are good at gathering people and starting conversations.

Barriers in the Path of Women Entrepreneurs

There are many barriers or constraints that restrict the expansion of women
entrepreneurship. The major barriers in the path of women entrepreneurs are as follows:

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Financial Problem:
It refers to the major problem of women entrepreneurs that arise due to the lack of
access to funds. It is really difficult for them to arrange the requisite fund as they may not
possess any tangible security and credit in the market. Generally, the family members of
women entrepreneurs do not have confidence in their capability of running the business
successfully.
Women entrepreneurs even face problems in financing day-to-day operations of
enterprises, including purchasing of raw materials and paying wages to labors. The lack of
access to funds makes the condition of women entrepreneurs extremely vulnerable. The
complexities and the complications in the process of obtaining bank loans usually deter women
from establishing enterprises.

Production Problem:
Production problem act as a main problem that discourages women to be
entrepreneurs. The data shows that the participation of women entrepreneurs in the
production is minimal due to complications involved in the production process. In a
manufacturing enterprise, production involves the coordination of a number of activities.
Improper coordination and delay in execution of any activity cause problems in production. This
may become difficult for women entrepreneurs to coordinate and control all the production
activities.

Marketing Problem:
Marketing problem refers to the problems of women entrepreneurs in marketing their
products or services. Lack of mobility and heavy competition in the market makes the women
entrepreneurs dependent on middlemen. Middlemen take a huge amount of money to market
the products. Women entrepreneurs lack information on changing market and find it difficult to
capture the market and make their products popular.

Socio-Cultural Barriers:
Socio-cultural barriers refer to the constraints and barriers imposed on women
entrepreneurs by the society. In conventional countries, such as India, the major role of a
woman is acknowledged towards her family. She has to perform primarily her family duties
irrespective of her career as a working woman or an entrepreneur. A woman entrepreneur has
to bear double responsibilities, she has to manage her family as well as her business.
In our society, more importance is given to educating a male child than a female child.
This results in lack of education and vocational training of women. Lack of education and
technical skills becomes the root cause of lack of awareness of opportunities available by
women entrepreneurs. Our society even gives more preference to male labor than to female
labor. A male labor is paid more wages than a female labor. It is ascertained that male labor
force are generally reluctant to work under a female boss.

Lack of Confidence:
It refers to the personal problem of women entrepreneurs. Women have been
dependent on their family members for a long time. They have been always protected and
guided by the male members of their family. Right from taking any decision to going anywhere
they are accompanied by male. This makes women feel less confident even about their own
capabilities.
Despite these barriers women entrepreneurs have proved themselves in all the walks of
industrial activities. They are successfully performing and managing their roles at work and
home. They have made a great level of adjustment and tuning between two rolesof a woman.

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They are confident, creative, and are very much capable of running an enterprise, regardless of
all the barriers in their path. They are equally talented as men and need a congenial
environment to grow themselves.
Entrepreneurship does not depend upon man or woman. It is an attitude of mind and
requires suitable motivation duly supported by cordial external conditions. Therefore, women
entrepreneurs need to be supported by congenial environment to develop the risk-taking and
decision-making qualities.

Operational Problems Faced by Women Entrepreneurs:

Women as entrepreneurs may face certain problems while working that could
demoralize them completely at the outset.
However, with little grit, perseverance, and devotion they could overcome most of challenges
and emerge stronger.

Product Choice:
First problem, albeit not unique to gender, is the choice of the product or service. Ability
to choose and decide to undertake a manufacturing or trading activity with an inclination to
take calculated, moderate risks have to be cultivated among women like any other
entrepreneur.

Identity:
Some aspiring women could face a mental block regarding their identity. In a deeply
patriarchal society they are often identified as wife, daughter, and mother, which eclipses their
individuality. Seldom are they confident of their abilities and skills. Once this block is overcome,
they can become successful entrepreneurs and create an independent identity for themselves
and their products or service.

Marketing:
A majority of women entrepreneurs face marketing problems. Since some play multiple
roles in their respective enterprises, they have to prioritize their duties which more often than
not results in giving less importance to marketing.

Accounts and Finance:

The general perception is that women are good at maintaining records and are very
calculative in their financial matters. But this alone does not help them significantly. Most
entrepreneurs do not have adequate knowledge about accounting, and are also ignorant about
banking terminologies and procedures. This may be because they might have given more
significance to production and sales. Although accountancy and financial management are
separate subjects altogether, women should familiarize themselves with elementary knowledge
of the same.

Motivation:
Not all women are fortunate to have cooperative and understanding family members in
the event of failures. Initiative, independence, self-confidence, positive thinking are among the
qualities that should be nurtured to make a positive impact on the business.

Problem-Solving:
Most women in spite of their abilities face stress and strain when problems arise. This
again may stem from the dual responsibility on the domestic and professional front, which are
most of the time in conflict.

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Life Style:
The life style of a woman entrepreneur distinctly differs from that of ‘9 a.m. to 5 p.m.’
executives and could entail keeping uncertain working hours.
All these aspects must be fully understood by those interested in promotion of women
entrepreneurship.
The Indian government has been making concerted efforts to channelize the skills and
talent of women towards economic and business generating activities. For instance, according
to the Indian government, was ‘an enterprise owned and controlled by a woman and having a
minimum financial interest of 51 per cent of the capital and giving at least 51 per cent of the
employment generated in the enterprise to women.’
The government further simplified the definition of women enterprise by eliminating
the stipulation regarding employment of majority of women workers and units in which women
entrepreneurs have a majority shareholding and managing control. This change clearly lays
emphasis on women entrepreneurship, a distinct shift from women employment generation as
the prime motive to promote.
The Small Industries Development Bank of India (SIDBI) has been supporting
entrepreneurship development programs for women to create and develop necessary
entrepreneurial qualities among them for establishing small scale and ancillary industries, not
only as self-employment but also to generate jobs for people around them.

Problems of Women Entrepreneurs

Women entrepreneurs encounter two sets of problems, viz., general problems of
entrepreneurs and problems specific to women entrepreneurs. These are discussed as follows:

The problem of Finance:

Finance is regarded as “life-blood” for any enterprise, be it big car small. However,
women entrepreneurs suffer from a shortage of finance on two counts. Firstly, women do not
generally have property on their names to use them as collateral for obtaining funds from
external sources. Thus, their access to the external sources of funds is limited. Secondly, the
banks also consider women less credit-worthy and discourage women borrowers on the belief
that they can at any time leave their business. Given such a situation, women entrepreneurs
are bound to rely on their savings, if any, and loans from friends and relatives which are
expectedly meager and negligible. Thus, women enterprises fail due to the shortage of finance.

Scarcity of Raw Material:

Most of the women enterprises are plagued by the scarcity of raw material and
necessary inputs. Added to this is the high prices of raw material, on the one hand, and getting
raw material at the minimum of discount, on the other. The failure of many women co-
operatives in 1971 engaged in basket-making is an example of how the scarcity of raw material
sounds the death-knell of enterprises run by women.

Stiff Competition:
Women entrepreneurs do not have organizational set-up to pump in a lot of money for
canvassing and advertisement. Thus, they have to face stiff competition for marketing their
products with both the organized sector and their male counterparts. Such a competition
ultimately results in the liquidation of women enterprises.
Limited Mobility:
Unlike men, women’s mobility in India is highly limited due to various reasons. A single
woman asking for a room is still looked upon suspicion. The cumbersome exercise involved in

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starting an enterprise coupled with the officials’ humiliating attitude towards women compels
them to give up the idea of starting an enterprise.

Family Ties:
In India, a woman mainly must look after the children and other members of the family.
Man plays a secondary role only. In the case of married women, she has to strike a fine balance
between her business and family. Her total involvement in the family leaves little or no energy
and time to devote to the business. Support and approval of husbands seem a necessary
condition for women’s entry into the business. Accordingly, the educational level and family
background of husbands positively influence women’s entry into business activities.

Lack of Education:
In India, around three-fifths (60%) of women are still illiterate. Illiteracy is the root cause
of socio-economic problems. Due to the lack of education and that too qualitative education,
women are not aware of a business, technology, and market knowledge. Also, a lack of
education causes low achievement motivation among women. Thus, the lack of education
creates problems for women in the setting up and running of business enterprises.

Male-Dominated Society:
Male chauvinism is still the order of the day in India. The Constitution of India speaks of
equality between sexes. But, in practice, women are looked-upon, i.e. weak in all respects.
Women suffer from male reservations about a woman’s role, ability and capacity and are
treated accordingly. In nutshell, in the male-dominated Indian society, women are not treated
equally to men. This, in turn, serves as a barrier to women’s entry into the business.

Low Risk-Bearing Ability:

Women in India lead a protected life. They are less educated and economically not self-
dependent. All these reduce their ability to bear risk involved in running an enterprise. Risk-
bearing is an essential requisite of a successful entrepreneur.
In addition to the above problems, inadequate infrastructural facilities, shortage of power, high
C’wt of production, social attitude, low need for achievement and socio-economic constraints
also hold the women back from entering into business.

Conceptual model of Entrepreneurs

While women account for just under half of the world’s population, the level of
women’s participation in the workforce varies widely from nation to nation, from just 12% in
Qatar, to a high of 53% in Mozambique. Additionally, women are, on average, paid less than
men, with the gender gap in earnings estimated to be approximately 17% globally. Women are
also disproportionately represented in low paying jobs, and where they are in higher-paying
positions, the gender gap in earnings is even higher. Clearly then, there is significant scope for
economic growth and poverty reduction through the promotion gender equality in the
workforce. One promising avenue for empowering women entrepreneurs is through the rapidly
increasing use of information and communication technologies (ICTs), a concept known as
cyber feminism.
The relationships between social media, self-efficacy, and social capital are summarized
in the form of a conceptual framework comprised of five key propositions:
Proposition 1:
The use of information technology, particularly social media, instills self-efficacy in
newly-engaged women entrepreneurs in emerging economies.

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Proposition 2:
The use of information technology, particularly social media, increases the social capital
of the newly-engaged woman entrepreneur in emerging economies.

Proposition 3:
Improved self-efficacy in newly-engaged women entrepreneurs in emerging economies
will result in greater feelings of empowerment.

Proposition 4:
Increased social capital in newly-engaged women entrepreneurs in emerging
economies will result in greater feelings of empowerment.

Proposition 5:
There will be an increase in the number of women entrepreneurs in emerging
economies as feelings of empowerment are improved.
The authors conclude that it is critical we gain a better understanding of the
determinants that can increase the empowerment of women entrepreneurs in emerging
economies, and that the observed role of social media use in the outcomes of women
entrepreneurs creates a fruitful avenue of investigation. As a woman entrepreneur’s network
(bridging social capital) and feelings of ability to control resources (self-efficacy) grow through
the use of social media, the proffered propositions suggest that this will have a wider impact on
society, e.g. the increased status of women in the community, which may help with the
fostering of more public and private rights for women.

David Meclelland’s Achievement Motivation Theory

David McClelland was a psychological theorist. I’m going to briefly describe his work on
Achievement Motivation Theory. Similar to the boost that knowing how to read body language
gives you, simply being aware of this theory (which has been indirectly validated by a thousand
subsequent pieces of research) gives you a useful framework for interpreting the behaviour and
motivations of co-workers, clients and even yourself.

Every individual is driven to varying extents by one of the three motivators:

1. Achievement
2. Power
3. Affiliation
These motivators ALL exist to varying extents in each individual, and are socially
acquired or learned. How people act is to a significant extent driven by the combination of
these attributes, both based on individual and relative strengths. It’s interesting to note that
most people aren’t consciously aware of what drives them, and yet the combination of these
motivators that you hold significantly impacts how you work with others and the types of roles
you’re likely to succeed in.

1. ACHIEVEMENT:
Achievement oriented people are driven to master complex challenges, to find
solutions, overcome goals, and they love getting feedback on the level of success. Standards of
excellence, precise goals and clear roles are what motivates these people. This results in a non-
conscious concern for achieving excellence through individual effort. They usually set
challenging goals for themselves, assume personal responsibility for accomplishment and take
calculated risks for achieving these goals. They are very effective in leading task oriented groups

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and do well in entrepreneurial roles. Simply put, they love to achieve, and to measure that
achievement.

2. POWER:
Power oriented people want to control and influence, they have a need to win
arguments, and love to persuade and prevail. This motivator is typically and not surprisingly
strong in executives. In fact, when the power motivator exceeds that of achievement (which
can be an individual focused trait), it is predictive of leadership effectiveness. The desire to
influence results in a sustained focus on leadership. Howver, this motivator needs to be
constrained to a level where self-promotion doesn’t have negative consequences for the
organization. This motive is activated when the individual is allowed to have an impact, impress
those in power or beat competitors.

3. AFFILIATION:
Affiliation oriented people have a strong desire to belong. They have a deep concern for
relationships, they strive to reduce uncertainty, and they love teamwork. They
tend to be less assertive, submissive, and tend to be more dependent on others. In
management positions, too great of a need for affiliation can surface in behaviours
such as: avoidance for disciplining subordinates, favoritism, submissiveness, and reluctance to
hold others accountable. These leaders are motivated by what they can accomplish with people
they know and trust.

McClelland's Experiment
McClelland's particular fascination was for achievement motivation, and this laboratory
experiment illustrates one aspect of his theory about the affect of achievement on people's
motivation. McClelland asserted via this experiment that while most people do not possess a
strong achievement-based motivation, those who do, display a consistent behaviour in setting
goals:
Volunteers were asked to throw rings over pegs rather like the fairground game; no
distance was stipulated, and most people seemed to throw from arbitrary, random distances,
sometimes close, sometimes farther away. However a small group of volunteers, whom
McClelland suggested were strongly achievement-motivated, took some care to measure and
test distances to produce an ideal challenge - not too easy, and not impossible. Interestingly a
parallel exists in biology, known as the 'overload principle', which is commonly applied to
fitness and exercising, ie., in order to develop fitness and/or strength the exercise must be
sufficiently demanding to increase existing levels, but not so demanding as to cause damage or
strain. McClelland identified the same need for a 'balanced challenge' in the approach of
achievement-motivated people.
McClelland contrasted achievement-motivated people with gamblers, and dispelled a
common pre-conception that n-ach 'achievement-motivated' people are big risk takers. On the
contrary - typically, these individuals set goals which they can influence with their effort and
ability, and as such the goal is considered to be achievable. This determined results-driven
approach is almost invariably present in the character make-up of all successful business people
and entrepreneurs.

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McClelland suggested other characteristics and attitudes of achievement-motivated people:

1. Achievement is more important than material or financial reward.

2. Achieving the aim or task gives greater personal satisfaction than receiving praise or
recognition.
3. Financial reward is regarded as a measurement of success, not an end in itself.
4. Security is not a prime motivator, nor is status.
5. Feedback is essential, because it enables measurement of success, not for reasons of
praise or recognition (the implication here is that feedback must be reliable,
quantifiable and factual).
6. They constantly seek improvements and ways of doing things better.
7. They will logically favour jobs and responsibilities that naturally satisfy their needs, ie
offer flexibility and opportunity to set and achieve goals, eg., sales and business
management, and entrepreneurial roles.

Role of Entrepreneur in Indian Economy With reference to Self employment development

Economic development essentially means a process of upward change whereby the real
per capita income of a country increases over a period of time. Entrepreneur plays a vital role in
economic development. Entrepreneurs serve as the catalysts in the process of industrialization
and economic growth. Technical progress alone cannot lead to economic development, unless
technological breakthroughs are put to economic use by entrepreneurs.
It is the entrepreneur who organizes and puts to use capital, labour and technology.
Accordingly, “development does not occur spontaneously as a natural consequence when
economic conditions in some sense are right. A catalyst is needed and this requires
entrepreneurial activity to a considerable extent, the diversity of activities that characterizes
rich countries can be attributed to the supply of entrepreneurs.”
The entrepreneur is the key to the creation of new enterprises that energize the
economy and rejuvenate the established enterprises that make up the economic structure.

Entrepreneurs initiate and sustain the process of economic development in the following
ways:
Capital Formation:
Entrepreneurs mobilize the idle savings of the public through the issues of industrial
securities. Investment of public savings in industry results in productive utilization of national
resources. Rate of capital formation increases which is essential for rapid economic growth.
Thus, an entrepreneur is the creator of wealth.

Improvement in Per Capita Income:

Entrepreneurs locate and exploit opportunities. They convert the latent and idle
resources like land, labour and capital into national income and wealth in the form of goods
and services. They help to increase net national product and per capita income in the country,
which are important yardsticks for measuring economic growth.

Generation of Employment:
Entrepreneurs generate employment both directly and indirectly. Directly, self-
employment as an entrepreneur offers the best way for independent and honorable life.
Indirectly, by setting up large and small scale business units they offer jobs to millions. Thus,
entrepreneurship helps to reduce the unemployment problem in the country.

Balanced Regional Development:

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 Entrepreneurs in the public and private sectors help to remove regional disparities in
economic development. They set up industries in backward areas to avail various concessions
and subsidies offered by the central and state governments. Public sector steel plants and
private sector industries by Modis, Tatas, Birlas and others have put the hitherto unknown
places on the international map.

Improvement in Living Standards:

Entrepreneurs set up industries which remove scarcity of essential commodities and
introduce new products. Production of goods on mass scale and manufacture of handicrafts,
etc., in the small scale sector help to improve the standards of life of a common man. These
offer goods at lower costs and increase variety in consumption.

Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to
manufacture indigenous substitutes of hitherto imported products thereby reducing
dependence on foreign countries. Businessmen also export goods and services on a large scale
and thereby earn the scarce foreign exchange for the country. Such import substitution and
export promotion help to ensure the economic independence of the country without which
political independence has little meaning.

Backward and Forward Linkages:

An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise
has several backward and forward linkages. For example- the establishment of a steel plant
generates several ancillary units and expands the demand for iron ore, coal, etc.
These are backward linkages. By increasing the supply of steel, the plant facilitates the
growth of machine building, tube making, utensil manufacturing and such other units.
Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose.
They give an organization its momentum. Entrepreneurial behavior is critical to the long term
vitality of every economy. The practice of entrepreneurship is as important to established firms
as it is to new ones.Now people have begun to realise that for achieving the goal of economic
development, it is necessary to increase entrepreneurship both qualitatively and quantitatively
in the country. It is only active and enthusiastic entrepreneurs who fullyexplore the
potentialities of the country’s available resources land, tech., capital, material etc.
The role of entrepreneurship in economic development varies from economy to
economy depending upon its material resources, industrial climate and the responsiveness of
the political system to the entrepreneurial function. The entrepreneurs contribute more in
favourable opportunity conditions.
1. In underdeveloped/developing regions, due to lack of funds and skilled labour, the
atmosphere is less conducive for innovative entrepreneurs.
2. Under the conditions of paucity of funds and the problem of imperfect market, the
entrepreneurs are bound to launch their enterprises on a small scale. Also initiator
entrepreneurs are preferred in such regions. Thus, initiation of innovations introduced
in developed regions on a massive scale bring about rapid economic-development in
underdeveloped/developing regions.
3. Further India aims at decentralized industrial structure to reduce regional imbalances in
levels of economic development.
4. Generation of employment
5. Balanced regional development
6. Improvement in standard of living
7. Backward and forward linkages

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 8. Creator of wealth (securities, issues etc.)

Thus, small scale entrepreneurship in such industrial structure plays an important role
to achieve balanced regional development, generation /creator of wealth etc.

Important role that entrepreneurship plays in the economic development of our economy
are:
Improvement in Per Capita Income:
Entrepreneurs locate and exploit opportunities. They convert the latent and idle
resources like land, labour and capital into national income and wealth in the form of goods
and services. They help increase Net National Product and Per Capita Income in the country.

Generation of Employment:
Entrepreneur generate employment both directly and indirectly. By starting their
business they present an opportunity to others for work by offering jobs.

Balanced Regional Development:

Entrepreneurs help to remove the regional disparities in the economic development of
areas. They set up industries in backward areas to avail various substitutes and bring up the
development of that region.

Improvement in Living Standards:

Entrepreneur set up industry which introduce new products on a mass scale. They are at
lower costs and this helps to improve the standard of life of a common man.

Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to
manufacture substitutes of imported products thereby reducing dependence on foreign
countries. These businessmen also export products thereby earning foreign exchange for the
country.
Entrepreneurship does not emerge and grow spontaneously. There are various factors
having both positive and negative influence on the growth of entrepreneurship. (Positive
influence imply facilitating and conducive conditions whereas negative influences refer to
factors inhibiting the emergence of entrepreneurship).

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 UNIT - V
ENTREPRENEURIAL DEVELOPMENT
Qualities of a successful Entrepreneur
Successful business people have many traits in common with one another. They are
confident and optimistic. They are disciplined self starters. They are open to any new ideas
which cross their path,Here are ten traits of the successful entrepreneur.

Disciplined
These individuals are focused on making their businesses work, and eliminate any
hindrances or distractions to their goals. They have overarching strategies and outline the
tactics to accomplish them. Successful entrepreneurs are disciplined enough to take steps every
day toward the achievement of their objectives.

Confidence
The entrepreneur does not ask questions about whether they can succeed or whether
they are worthy of success. They are confident with the knowledge that they will make their
businesses succeed. They exude that confidence in everything they do.

Open Minded
Entrepreneurs realize that every event and situation is a business opportunity. Ideas are
constantly being generated about workflows and efficiency, people skills and potential new
businesses. They have the ability to look at everything around them and focus it toward their
goals.

Self Starter
Entrepreneurs know that if something needs to be done, they should start it
themselves. They set the parameters and make sure that projects follow that path. They are
proactive, not waiting for someone to give them permission.

Competitive
Many companies are formed because an entrepreneur knows that they can do a job
better than another. They need to win at the sports they play and need to win at the businesses
that they create. An entrepreneur will highlight their own company’s track record of success.

Creativity
One facet of creativity is being able to make connections between seemingly unrelated
events or situations. Entrepreneurs often come up with solutions which are the synthesis of
other items. They will repurpose products to market them to new industries.

Determination
Entrepreneurs are not thwarted by their defeats. They look at defeat as an opportunity
for success. They are determined to make all of their endeavors succeed, so will try and try
again until it does. Successful entrepreneurs do not believe that something cannot be done.

Strong people skills

The entrepreneur has strong communication skills to sell the product and motivate
employees. Most successful entrepreneurs know how to motivate their employees so the
business grows overall. They are very good at highlighting the benefits of any situation and
coaching others to their success.
Strong work ethic

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 The successful entrepreneur will often be the first person to arrive at the office and the
last one to leave. They will come in on their days off to make sure that an outcome meets their
expectations. Their mind is constantly on their work, whether they are in or out of the
workplace.

Passion
Passion is the most important trait of the successful entrepreneur. They genuinely love
their work. They are willing to put in those extra hours to make the business succeed because
there is a joy their business gives which goes beyond the money. The successful entrepreneur
will always be reading and researching ways to make the business better.
Successful entrepreneurs want to see what the view is like at the top of the business
mountain. Once they see it, they want to go further. They know how to talk to their employees,
and their businesses soar as a result.

Risk-taking ability
All entrepreneurs are risk-takers. They take their ventures in an uncertain environment
of the future. Every future course contents uncertainty.

Leadership behavior
Entrepreneur organizes resources and engages in uncertain ventures that he will
transfer into a certain enterprise. Therefore, he must have leadership qualities. It requires
leadership behavior, gets along well with others and responsive to suggestions and criticism.
Leadership behavior refers to both people and production-centered behavior. It is also
concerned with behavioral equity with the people in the organization.
Leadership behavior is indeed a continuum of autocratic to democratic to laissez-faire
behavior. It is a situation that determines the appropriateness of certain behavior.

Innovative
Innovativeness is the quality of adding or discovering new utility with the old product or
process or system. An entrepreneur is an innovator.

Creative
Creativeness is the work of an that is the skillful and imaginative use of something to
produce. It is the ability to invent or discover things of absolutely new phenomena.
Entrepreneur perceives the use of indigenous means and materials in a new phenomenal
direction. His creative faculty makes him uncommon in a lot of commoners.

Flexible
Flexibility is the quality of changing self with new conditions. Entrepreneurs have an
open mind and always ready to adopt new things with adaptability or use in the given situation
of an economy.
They are in the flux of change to extract the maximum benefits out of the existing
opportunities and threats in the environment.

Resourceful
Resourcefulness is the ability to create and use tools and techniques in a useful manner.
It is the quality of finding ways of doing things.
Entrepreneurs have the basic resource to find the most beneficial ways of doing things with the
tools and techniques appropriately designed and created by them for the purpose.

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Versatile
Versatility is a desired quality of the entrepreneurs. A person can turn easily; or readily
from one subject, skill or occupation to another.
The entrepreneurs are the jack-of-all-trades, as they have to handle all necessary functions of
the new venture.

Knowledge
Knowledge is the facts, information, understanding, and skills that a person has acquired
through experience or education.
The entrepreneurs should have the right education and experience in the area of
operation in which they try to develop their ventures.
Originality is the only distinguishing characteristic that differentiated entrepreneurs from
others in society.

Hard work
Hard work is the quality of industriousness that shows a strong physical capacity to
engage in work without any lethargy. Entrepreneurs are hard-working and energetic persons.
They are immensely involved in work.

Drive
The drive is the inner state of mind that energizes channels or directs a person toward
action and to the destination. Entrepreneurs have got a strong drive for action and the
accomplishment of their desired goal.

Energy
Energy refers to the mental and physical ability to put effort and enthusiasm into an
activity.
Entrepreneurs have enormous energy to take the toll of diversified and tedious works required
for making a new venture successful.

Determination
A determination is a quality of being firmly committed to doing something
Entrepreneurs never drop the target for any reason. They are determined to do that as it is set
with considerable efforts and justification.

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 Distinction between an Entrepreneurship and a Manager
Sr BASIS FOR ENTREPRENEURSHIP
COMPARISON
1. Rights to profits The entrepreneur is the owner
of the company and
company’s profit. He/she has
the choice to distribute the
profit with who and when.
2. Availability of Will gain his resources through
resources financial institutions or start-
up promotion organizations or
own resources.
3. Property rights Since the entrepreneur is the
one who started the firm or
business, she or he will have
the property rights.
4. Educational Entrepreneur may or may not
background have educational background
in the field of work. The firm
can be created by identifying
the need in the society.
5 Incentives and Entrepreneur may have the
opportunity costs highest opportunity costs if
the firm productivity is less
MANAGER
Based on human capital theory,
the productivity awarded to the
firm should compensate
employees based on their
productivity. Each firm is
different and they provide
salary or commission to
managers. This may not be
based on their productivity.
Manager has the ability to
distribute workforce and
financial resources to
appropriate projects in order to
achieve directive board goals.
Manager is an employee of the
firm and he or she is employed
as contract or permanent basis.
Manager does not have
property rights, unless in some
cases firms sign an agreement
with the managers to provide
shares.
Manager should have an
educational background or
experience related to the field
of work. He or she may be
educated or have experience in
finance, human resources,
marketing, and production
A person with high education or
experience and have an ability
to handle administrative part of
the business. Firms may
provide incentives for the
opportunity costs to managers
to keep them in the company.
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Nature of Promoter
The above given definitions bring out the following characteristics or Nature of a promoter:
a. A promoter conceives an idea for the setting-up a business.
b. He makes preliminary investigations and ensures about the future prospects of the
business.
c. He brings together various persons who agree to associate with him and share the
business responsibilities.
d. He prepares various documents and gets the company incorporated.
e. He raises the required finances and gets the company going

Types of Promoters
Professional Promoters:
These are the persons who specialize in promotion of companies. They hand over the
companies to shareholders when the business starts. In India, there is lack of professional
promoters. In many other countries, professional promoters have played an important role and
helped the business community to a great extent. In England, Issue Houses; In U.S.A.,
Investment Banks and in Germany, Joint Stock Banks have played the role of promoters very
appreciably.
There are firms which specialize in company promotion, including its flotation,
incorporation, and before handing it over to the shareholders or their representatives for the
company.

Occasional Promoters:
These promoters take interest in floating some companies. They are not in promotion
work on a regular basis but take up the promotion of some company and then go to their
earlier profession. For instance, engineers, lawyers, etc. may float some companies.
They are not engaged in promotion work on a regular basis. They take up the promotion
of some company and once it is over they go to their original profession. For instance,
engineers, lawyers etc. may float some companies. These promoters take interest in floating
some companies.

Financial Promoters:
Some financial institutions of financiers may take up the promotion of a company. They
generally take up this work when financial environment is favourable at the time.
Financial institutions, like industrial banks, or investment banks may take up the
promotion of a company with a view to finding opportunities for investment

Managing Agents as Promoters:

In India, Managing Agents played an important role in promoting new companies. These
persons used to float new companies and then got their Managing Agency rights. Managing
Agency system has since long been abolished in India.

Entrepreneur promoters
They conceive the idea of a new business unit, do the groundwork to establish it and
may subsequently become a part of the management. They are both promoters and
entrepreneurs.

Steps to start a small scale Industry

Small Scale Business provides more independence than the large scale business and
through this type of business one can fulfill their dream to become an entrepreneur. It

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eliminates much of the overhead expense and extensive planning required in larger business
ventures. One can set up small-scale industries by following the simple procedures, which are
as follows:
Decision Making: First of all, you need to prepare the description for the small scale
industry you want to set up. It is necessary to decide whether you wish to set up a corporation,
proprietorship or partnership. The potential entrepreneur has to analyze his strength, weakness
while deciding for entrepreneur career. This analysis helps in knowing what type and size of
business would be the most suitable.
Scanning Of Business Environment: Before setting up your industry, it is always essential
to study and understand the prevailing business environment in which they operate particularly
the industrial policy, economic policy, licensing policy, legal environment, and technological
environment. The environment impacts a lot in setting up a proper industry.

Product Selection:
You need to decide the product you wish to manufacture or the service you wish to
offer. While choosing the product or service you want to offer, you must conduct a good
market research and learn about the prevailing competition in the market.

Location:
You need to choose a location to set up your small scale industry. While choosing the
location such factors such as nearness to market, sources of material availability of raw
materials, labor, transportation services, modern infrastructural facilities and other things are
considered. Location determines the success or failure of the enterprise.

Technology:
To manufacture any item, technology is used. The entrepreneur should collect
information on all available technologies, and the most suitable one should be identified. This
will also be useful to determine the type of machinery and equipment to be installed.

Project:
Project appraisal means the assessment of a project. It is a technique for ex-ante
analysis of a scheme or project while preparing to set up an enterprise; the entrepreneur has to
appraise the project carefully from the standpoint of economic, financial, technical, market,
social and managerial aspects to arrive at the most socially-feasible enterprise.

Finance:
Finance is the lifeblood of the enterprise. So, the next big step is to arrange for finance.
No business can be created, with zero capital. If you don’t have enough finance and then the
best way is to borrow or take a loan.

Provisional Registration:
It is always worthwhile to get the unit registered with the government. The
entrepreneur has to obtain the prescribed application from DIC or Directorate of Industries.
After having duly filled in the application form, he has to submit the application with all
relevant documents in the local DIC or Directorate of Industries.

Production Management:
Production management is the next step, once you can start your small scale industry.
This includes allocating space for different operations and choosing your production methods.
You are required to purchase machinery and hire employees and workers for different

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departments.

Power And Water Connection:

The sites where the enterprise will be located should either have adequate power
connections, or it should be arranged. The entrepreneur can calculate the total power
requirement and determine the nearest pole from which power will be given to the enterprise,
as it can materially affect the installation cost.

Installation Of Machinery:
Once the above formalities have been completed; the next step is to procure machinery
and begin its installation as per the plant layout.

Insurance:
It is necessary to have adequate insurance for fixed assets at this stage and later on for
the current assets as well.

Recruitment Of Manpower:
Once machines are installed, the need for manpower arises to run them. So, the
quantum and type of manpower are to be decided. The sources of getting desired labor are also
important. This follows the recruitment, training, and placement.
If you want to learn more about Industrial and Labour laws, you can take up this course that is
created by iPleaders in association with National University of Juridical Sciences (NUJS), Kolkata
which is regularly ranked as one of India’s top three law schools.

Production:
The unit established should have an organizational set-up. To operate optimally, the
organization should employ its manpower, machinery, and methods effectively. There should
not be any wastage of manpower, machinery, and materials. If items are exported, then the
product and its packaging must be attractive.

Marketing:
Marketing is the most important activity as far as the entrepreneurial development is
concerned. Marketing and business advertising form the next big step of setting up a small
scale industry. Online business directories and various traditional forms of advertising can gain
exposure for your business. Prices for your products or services are decided to keep in mind the
profit margin.

Quality Assurance:
Before marketing, the product quality certification from BIS (Bureau of Indian
Standard)/ AGMARK/HALLMARK, etc., should be obtained depending upon the product. If there
are no quality standards specified for the products, the entrepreneur should evolve his quality
control parameters.

Permanent Registration:
After the small scale unit goes into production and marketing, it becomes eligible to get
permanent registration based on its provisional registration from the DIC or Directorate of
Industries.
Market Research:
Once the product or service is introduced in the market, there is strong need for
continuous market research to assess needs and areas for modification, up gradation and

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growth.

Monitoring:
Periodical monitoring and evaluation not only of markets but also production, quality,
and profitability help in knowing where the firm stands in comparison to performance
envisaged in the business plan. It also identifies the direction of future growth. Therefore,
planning is a useful aspect of setting up a small scale. According to business, at every stage, you
are required to improve your plan.

Step to Start A Small Scale Industry In India

The small scale industry sector has flourished in the Indian economy over the past five
decades. In India, the small scale industries accounts for about 95 percent of industrial units
adds 40 percent of value addition to the manufacturing sector, nearly 80 percent of
manufacturing employment and about 35 percent of exports.
Starting a small scale industry is a profitable business idea for it has certain merits for the
entrepreneur as well as the economy of the nation. Despite being a labor-intensive industry, it
requires less capital to start a small scale industry. Therefore, a lot of small entrepreneurs wish
to start a small scale industry of their own.
For all those entrepreneurs who are thinking about starting a small scale industry, here
are a few simple steps that could help them to begin with the business.

Selection of Products
By conducting a market research, one could decide the product that they want to
manufacture. A product that has good market potential and profitability should be the one.

Consider these factors while conducting market research:

Should have a little or no competition
1. Should be innovative
2. Easy availability of raw materials
3. Government Policies regarding the product type should be clear/all right
4. Should be easily accessible to the market
5. Should be within your budget

Location of Enterprise
While deciding on the location of the industry, availability of raw material,
transportation costs and availability of land at cheaper rates are the most crucial points to be
remembered (along with some more factors). In India, government also offers a relevant
industrial estate with pre-built factory sheds/developed plots in order to make a room for
integrated development of small scale industries.

Deciding the Organization Pattern

There are three main forms of ownership that small scale industry owners operate on:
Proprietary, Partnership, and Company.
Proprietary describes all the rights that are the owner of property can exercise and all items
manufactured and marketed under exclusive rights.
Partnership is an association of two or more businesspeople. Both partners invest their money
in a partnership and carry on the business as joint ventures where they share all their profits,
losses, risks and combine their capital and managerial skills for mutual benefit.
Company is a legal entity created by the state whose assets and liabilities are separate
from its owners.

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Project Appraisal
Project appraisal means the analysis of a scheme or project that has to be prepared
keeping in mind the economic, financial, technical, market and managerial aspects to arrive at
the most socially-feasible enterprise. It enables an entrepreneur to assess inputs required to
assimilate in the future activities of the firm.

Registration with the Authorities

After finalizing the above steps, it’s time to get the small scale industry registered with
authorities like State Directorate of India, DGS&D, RBI, RLA, etc to get your industry recognized
by the government.

Incentives and subsidies available.

Incentives Available For Encouraging Entrepreneurship Under Different Schemes Of Govt. Of
India
1. Agricultural and Processed Food Products Export Development Authority (APEDA) mission is
to develop agricultural commodities and processed food to promote exports. APEDA
provides financial support for packaging development, export promotion and market
development etc.
2. Ministry of Food Processing Industries (MoFPI) covers setting up technology upgradation,
modernization of food processing industries in fruits & vegetables, pulses etc. The scheme
provides 25% of the cost of plant & machinery and technical civil works subject to a
maximum of Rs.50 lakhs in general areas and 33% up to Rs.75 lakhs in difficult areas like
NER.
3. National Horticulture Board (NHB) provides financial support for land development,
cultivation expenses, poly house or shade nets, farm tools etc.
4. Ambedkar Hastshilp Vikas Yojana (AHVY) wherein the main thrust is on a projectised, need
based approach for integrated development of potential handicrafts clusters with
participation of the craft persons at all stages for implemenation of the scheme. AHVY
extends financial support for development & supply of improved modern tools, design &
technical development workshops, training, organising seminar & exhibitions etc.
5. Market Access Initiative (MAI) scheme is an Export Promotion Scheme formulated on focus
product- focus country approach to evolve specific strategy for specific market and specific
product through market studies/ survey. MAI provides financial support for opening
showroom & warehouses, display in international departmental stores, publicity campain
and branch promotion etc.
6. Tea Board extends support towards plantation, irrigation, transport vehicle, exhibitions,
advertisement etc.
7. Coffee Board extends support towards replantation, water augmentation, quality
upgradation etc.
8. Coconut Development Board provides financial support for production & distribution of
planting material, integrated farming for productivity improvement, market promotion,
coconut palm insurance scheme etc.
9. Coir Board provides financial support for skill upgradation, organising workshop & seminars,
exposure tour and quality improvement programme. Mahila Coir Yojana (MCY) is the first
woman oriented self employment scheme by giving subsidy of 75% of the cost of purchase
of ratts to the trained women artisans.

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10. Rubber Board provides financial support for production & distribution of planting material,
integrated farming for productivity improvement, market promotion etc.

Subsidies for an Indian Entrepreneur

To promote a vibrant business community and generate employment, the Government
of India provides a host of subsidies and incentives for business. For any entrepreneur
managing a startup or an established business, it is important to know about these subsidies
and incentives – so that these subsidies are availed while incurring capital expenditure to
reduce capital cost, lessen interest burden and achieve break-even faster. We now present a
list of 7 Must Know Subsidies for an Indian Entrepreneur.

Credit Linked Capital Subsidy Scheme (CLCSS)

Many of the Small Scale Industries (SSI) in India continue to manufacture goods and
products with outdated technology and plant & machinery due to the lack of awareness about
access to capital, quality standards and modern technology. However, the globalization and
liberalization of the market, has necessitated upgradation and modernization of equipment to
ensure survival and growth of the unit. Therefore in an effort to facilitate the technology
upgradation of SSI in India, the Ministry of Small Scale Industries is operating a scheme for
technology upgradation called the Credit Linked Capital Subsidy Scheme.
The CLCSS provides 15% capital subsidy to SSI units on institutional finance availed by
them for the induction of well established and improved technology in many of the sub-
sectors/products approved under the scheme for a loan of upto Rs.1 crore. Click here to
view Credit Linked Capital Subsidy Scheme Guidelines.

Subsidy for Establishing Cold Chain

A strong and dynamic food processing sector plays a vital role in the reduction in the
wastage of perishable agricultural produce, enhancing the shelf life of food products, enhancing
the income of farmers and creating surplus for the export of agro& processed foods. Therefore,
in an effort to develop a strong food processing industry, the Ministry of Food Processing
Industry provides a subsidy for establishing cold chain.
The objective of this scheme is to provide financial assistance for integrated cold chain
and preservation infrastructure facilities without any break from the farm gate to the
consumer. It covers pre-cooling facilities at production sites, reefer vans,mobile cooling units as
well as value addition centres which includes infrastructural facilities like processing/multi-line
processing/collection centres, etc. for horticulture, organic produce, marine, dairy, meat and
poultry etc.
Financial assistance (grant-in-aid) of 50% the total cost of plant and machinery and
technical civil works in general areas and 75% for NE region including Sikkim and difficult areas
(J&K, Himachal Pradesh and Uttarakhand), subject to a maximum of Rs.10 crore is provided as
financial ass under this scheme. Click here to know more about MOFPI Cold Chain
Subsidy Guidelines.

Technology Upgradation Fund Scheme (TUFS) – Textile Sector

The Textiles sector is the second largest provider of employment after agriculture. It
contributes about 14% to industrial production, 4% to the GDP, and 17% to the country’s export
earnings. It provides direct employment to over 35 million people, which includes a substantial
number of SC/ST, and women. Therefore, the Ministry of Textiles through its flagship scheme,
the Technology Upgradation Fund Scheme(TUFS) has helped the industry scale new heights and
improve technology to match global standards.
Under the TUFS Scheme, Interest Reimbursement of 5% is provided on interest charged

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by the financial institutions or banks for textile technology upgradation projects. In addition,
the scheme also provides for margin money and/or capital subsidy for investment in many
types of textiles manufacturing equipment like power looms, common effluent treatment
plants, garment machinery, machinery for technical textiles, handlooms, etc., Click here to
know more about TUFS Scheme Guidelines.

Subsidy for Acquiring Quality Management System

With a competitive global market, implementation of quality standard has become
mandatory for MSME units to successfully compete and improve profitability by optimizing
internal processes. Therefore, in an effort to increase the adoption of quality standards by
Indian MSME units, the Government of India provides a subsidy, wherein the cost of acquiring
ISO Certifications like ISO-9000 and ISO-14001 is subsidized.
The scheme provides for all units having an SSI Registration to have reimbursement of
charges of acquiring ISO-9000/ISO-14001 certifications to the extent of 75% of the expenditure
subject to a maximum of Rs.75,000/- in each case. Click here to know more about Subsidy
for Technology Quality Upgradation.

Interest Subsidy for MSME Units in Gujarat

The Gujarat State Government in an effort to boost industrial investment and make the
state more investor-friendly provides for interest subsidies to MSME units that are making a
new investment or existing units that are investing in capacity addition or diversification or
existing units that are investing in modernization of machinery to newer technology. MSME’s
are the backbone of any economy and this subsidy is set up to make Gujarat among the highly
industrialized state in the country today.
Through this scheme, an interest subsidy of upto 7% for micro-enterprises and 5% for
small and medium enterprises is provided. An additional 1% interest subsidy is provided to
youth having less than 35 years of age in case of first project. Woman entrepreneurs are also
accorded priority. The maximum amount of interest subsidy provided per annum is Rs.25 lakhs
for upto a period of 5 years. Click here to know more about Gujarat Interest Subsidy Scheme for
MSME’s.

Capital Subsidy for Solar Lighting and Small Capacity PV Systems

The Government of India has launched the Jawaharlal Nehru National Solar Mission
(JNNSM) to promote sustainable energy generation and support the growing need for energy in
India while addressing India’s energy security challenge. The JNNSM provides a host of
subsidies and soft loans for the promotion and penetration of solar energy generation in the
nation.
Through the capital subsidy for solar lighting and small capacity PV systems, the JNNSM
provides capital subsidy of upto 40% of the approved unit cost (benchmark cost) for solar
lighting systems and small capacity Photovoltaic systems. Capital subsidy of 90% of the
benchmark cost, would be available for special category states, viz. NE, Sikkim, J&K, Himachal
Pradesh and Uttarakhand. Click here to know more about subsidy for solar power.

Support for International Patent Protection in Electronics & IT

Department of Information Technology, MCIT, GOI has started a scheme to provide
financial support to SMEs and Technology Start-Up units for international patent filing so as to
encourage indigenous innovation and to recognize the value and capabilities of global IP and
capture growth opportunities in the area of information technology and electronics.
Through this scheme, all patent processing costs including Attorneys’ Fees, Patent Office

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filing fees, Examination Fees, Patent Search cost, Additional cost for entering National Phase
upto grant/issue is subsidized. The scheme provides reimbursement of upto 50% of the total
patent cost. Support will be limited to Rs.15 lakhs or 50% of the total expenses incurred on
filing each invention whichever is less. Click here to know more about the subsidy for
International Patent Protection.

Jawaharlal Nehru National Solar Mission

The Government of India after launching the aforementioned scheme promotes
sustainable energy generation and provides subsidy and soft loans for promotion of solar
energy generation in the nation. The JNNSM provides for capital subsidy of up to 40% of the
approved unit cost for solar lighting systems, whereas in special
categorized states capital subsidy of 90% would be allowed.
Some of the extra subsidies that one should be aware about is that of Integrated
Development of Leather Sector where the scheme aims at up gradation of the existing
tanneries, footwear components and leather products by granting 30% of cost of plant to SSI
and 20% to the other units. Another such industry is that of coir industry where the coir board
runs subsidy schemes for the improvement in the same sector.
Furthermore there are various schemes that are being set up to encourage new
entrepreneurs to come together and solve their problems. Thereafter Rajiv Gandhi Udyami
Mitra Yojana aims at facilitating technology up gradation by providing capital subsidy to SSI
units, including tiny, khadi, village and coir industrial units, on institutional credit availed of by
them for modernization of their production equipment. With every scheme there is an
opportunity to avail the same and uplift the country in the global economy.

Some of the major incentives to small scale industries in India that deserves special mention
are as follows:
An incentive is a motivational factor which induces a person to work hard or to do his
work more efficiently.
Many incentives are provided both by the Central and State Governments to promote
the growth of small-scale industries and also to protect them from the onslaught of the large-
scale sector. Among the various incentives given to small-scale industries the following deserve
special mention:

Reservation:
To protect the small-scale industries from the competition posed by large-scale
industries, the Government has reserved the production of certain items exclusively for the
small-scale sector. The number of items exclusively reserved for the small-scale sector has been
considerably increased during the Five Year Plan Periods and now stands at 822.
However, prior to the 1997 – 98 Budget the number of items reserved for the small-
scale sector stood at 836. The Finance Minister de-reserved 14 items in the 1997 – 98 Budget.

Preference in Government purchases:

The Government as well as Government organisations shows preference in procuring
their requirements from the small-scale sector. For instance, the Director General of Supplies
and Disposals purchases 400 items exclusively from the small-scale sector. The National Small-
Scale Industries Corporation assists the SSI units in obtaining a greater share of Government
and defence purchases.

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Price preference:
The SSI units are given price preference up to a maximum of 15 per cent in respect of
certain items purchased both from small-scale and large-scale units.

Supply of raw materials:

In order to ensure regular supply of raw materials, imported components and
equipment’s, the Government gives priority allocation to the small-scale sector as compared to
the large-scale sector. Further, the Government has liberalised the import policy and
streamlined the distribution of scarce raw materials.

Excise duty:
In respect of SSI units excise duty concessions are granted to both registered and
unregistered units on a graded scale depending upon their production value. Full exemption is
granted up to a production value of Rs.30 lakhs in a year and 75 % of normal duty is levied for
production value exceeding Rs.30 lakhs but not exceeding Rs.75 lakhs. If the production value
exceeds Rs.75 lakhs, normal rate of duty will be levied.

RBI’s credit guarantee scheme:

In 1960, the RBI introduced a Credit Guarantee Scheme for small-scale industries. As per
the Scheme, the RBI takes upon itself the role of a guarantee organisation for the advances
which are left unpaid, including interest overdue and recoverable charges. This scheme covers
not only working capital but also advances provided for the creation of fixed capital.

Financial assistance:
Small-scale industries are brought under the priority sector. As a result, financial
assistance is provided to SSI units at concessional terms by commercial banks and other
financial institutions. With a view to providing more financial assistance to the small-scale
sector, several schemes have been introduced in the recent past the Small Industries

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Development Fund (SIDF) in 1986, National Equity Fund (NEF) in 1987 and the Single Window
Scheme (SWS) in 1988.
SIDF provides refinance assistance to small-scale and cottage and village industries and
the tiny sector in rural areas. NEF provides equity type support to small entrepreneurs for
setting up new projects in the tiny/small-scale sector. In 1996, the small-scale sector received
42.3 per cent of the total priority sector advances from public sector banks.

Technical consultancy services:

The Small Industries Development Organisation, through its network of service and
branch institutes, provides technical consultancy services to SSI units. In order to provide the
necessary technical input to rural industries, a Council for Advancement of Rural Technology
was set up in October, 1982.
The Technical Consultancy Organisation renders consultancy services to SSI units at a
subsidised rate. Many financial institutions are also providing subsidies to SSI units for availing
of consultancy services. For instance, small entrepreneurs proposing to set up rural, cottage,
tiny or small-scale units, can get consultancy services at a low cost from the Technical
Consultancy Organisations approved by the All-India and State-level financial institutions.
They have to pay only 20% of the fees charged by a technical consultancy organisation.
The entire balance of 80% or Rs.5, 000 whichever is lower is subsidised by the Industrial Finance
Corporation of India.

Machinery on hire purchase basis:

The National Small Industries Corporation (NSIC) arranges supply of machinery on hire
purchase basis to SSI units, including ancillaries located in backward areas which qualify for
investment subsidy. The rate of interest charged in respect of technically qualified persons and
entrepreneurs coming from backward areas are less than the amount charged to others. The
earnest money payable by technically qualified persons and entrepreneurs from backward
areas is 10% as against 15% in other cases.

Transport subsidy:
The Transport Subsidy Scheme, 1971 envisages grant of a transport subsidy to small-
scale units in selected areas to the extent of 75 % of the transport cost of raw materials which
are brought into and finished goods which are taken out of the selected areas.

Training facilities
The Entrepreneurship Development Institute of India, financial institutions, commercial
banks, technical consultancy organisations, and NSIC provide training to existing and potential
entrepreneurs.

Marketing assistance:
The National Small Industries Corporation (NSIC), the Small Industries Development
Organisation (SIDO) and the various Export Promotion Councils help SSI units in marketing their
products in the domestic as well as foreign markets. The SIDO conducts training programmes
on export marketing and organises meetings and seminars on export promotion.
District Industries Centres (DICs):
The 1977 Industrial Policy Statement introduced the concept of DICs. Accordingly a DIC
is set up in each district. The DIC provides and arranges a package of assistance and facilities for
credit guidance, supply of raw materials, marketing etc.

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