Foundations of

Entrepreneurship
Development
Concept of Entrepreneurship Development

Entrepreneurship Development [ED] is a process of developing &

enhancing entrepreneurial Knowledge and skills through training and
development programmes. Entrepreneurship is considered as the
backbone of economic development.

The basic aim of ED is to increase the supply of entrepreneurs so that

new ventures or business units. ED Concentrates more on the growth
potential and innovation in business units.
Need of Entrepreneurship Development

1. Establishing Business Units.

2. Employment
3. Economic Development
4. Self- Reliance
5. Social Development
6. Standard of Living
7. Regional Development
8. Revenue to the Government
Concept of Entrepreneur

An Entrepreneur is a person who develops a new idea and takes the risk of
setting up an enterprise to produce a product/service which satisfies
customer needs. It is noted that there can be broadly two types of entrepreneur
1. Economic Entrepreneur who is driven by profit objective.
2. Social Entrepreneur who operates with the objective of social welfare.

Definition:-
Webster’s Dictionary defines the term Entrepreneur as
“ a person who organizes and manages a business undertaking, assuming the
risk for the sake of profit.”
Characteristics & Qualities of Entrepreneur:-

1. Innovator
2. Decision making Skills
3. Open-Mindedness
4. Locus of Control
5. Organizer
6. Personality
7. Risk Taker
8. Technical Knowledge
9. Patience
10.Desire to achieve goals
11.Human Relations
12.Communication Skills
13.Leadership
14.Other Qualities
Functions of Entrepreneur
1. Planning for Business Activities
2. Organizing Resources:-
a. Financial Resources
b. Physical Resources
c. Human Resources
3. Decision Making
4. Motivating Employees
5. Innovation
6. Risks Bearing
7. Research & Development
8. Market Development
9. Financial Management
10.Management of Human Resources
Concept of Entrepreneurship
Entrepreneurship is a distinct activity relating to production/distribution
of goods & services to earn rewards and to assume risks. It can be said
that Entrepreneurship is what the modern World all about.

Entrepreneurship management is a process of planning, organizing,

directing & Controlling, performed to determine and accomplish objectives
in business enterprises.

Robert Hisrich states, “Entrepreneurship is the process of creating

something new & assuming the risks and rewards.
Nature/Characteristics of Entrepreneurship

1. Process
2. Purposeful Activity
3. Individual or Group Activity
4. Future Oriented Activity
5. Innovation & Creativity
6. Proactiveness
7. Exploits Change into an Opportunity
8. Risks & Rewards
9. Organizing Abilities
10.Social & Economic Development
Importance/Significance of Growth of Entrepreneurship
1. Economic Development
2. Social Development
3. Regional Development
4. Capital Formation
5. Employment
6. Foreign Exchange
7. Reduction in Income inequalities
8. Revenue to the Government
9. Facilities Competition
10.Consumer Welfare
11.Infrastructure Development
12.Standard of Living
Evolution of Entrepreneurship

 Earliest Period
 Middle Ages [476-1450 AD]
 17th Century
 18th Century
 19th Century
 20th Century
 21st Century
Innovation Theory of Entrepreneurship
Joseph Schumpeter’s Innovation Theory of Entrepreneurship advocates
that innovation in business is the major reason for increased investments
and for business cycle fluctuations. Joseph Schumpeter’s believed that an
entrepreneur can earn profits by introducing successful innovations.

According to Schumpeter, innovation involves:

1. Development of new technology [new methods of production & distribution]
2. Introduction of new product
3. Creation of new form of organization structure
4. Development of new sources of raw materials
5. Entry in new market, [which no other firm in the industry has done so far]
Innovation can be classified into two categories:

The first category of innovation includes all those activities which reduce the
overall cost of production such as:

1. The Introduction of a new technology or new method of production.

2. The Introduction of new machinery.
3. The Introduction of new organization structure.
4. Introduction of new sources of Raw materials.
5. Innovation schemes to motivate personnel of operations department.
The second category of innovation includes all such
activities which increase the demand for a product such as:

1. The Introduction of a new product.

2. The Introduction of new design of an exiting product
3. Entry in the new market
4. Innovative ways of sales promotion
5. Innovative ways of distribution
Theory of High Achievement by David Mcclelland
Need for Achievement [ N-Ach] refers to an individual’s desire for significant
accomplishment, mastering of skills, control, or high standards.

Sources of high N-Ach include:

1. Parents who encouraged independence in childhood
2. Praise & rewards for success
3. Association of achievement with positive feelings
4. Association of achievement with one’s own competence & effort, not luck
5. A desire to be effevtive or challenged
6. Intrapersonal strength
7. Desirability
8. Feasibility
9. Goal Setting Abilities
N-Ach & Entrepreneurship

David Mcclelland states that there is a relationship between interest in

profit and the need for achievement.

1. Persons with high need for achievement [N-Ach] are less influenced
by profit or Monetary rewards as compared to persons with lower need
for achievement
2. For persons with N-Ach, profit is merely a measure of success &
competency & not an ultimate goal.
Characteristics of Entrepreneurs:

1. Moderate realistic & attainable goals

2. Calculated risk
3. Personal responsibility for solving problem
4. Concrete Feedback
5. Achievement
6. Financial Reward
7. Recognition
8. Motivated people
9. Flexibility & opportunity
10.Growth & Development
 X-Efficiency Theory

In 1966, Harvey Leibenstein popularized the concept of X-efficiency, in the

article “ Allocative Efficiency v/s X-Efficiency” in American Economic Review.
X-Efficiency describes a company’s inability to get the maximum output for
its inputs due to a lack of competitive pressure.

X-Efficiency theory states that when a company is not competitive its workers
don’t work efficiently because the workers know that being more efficient
would not make any difference. This means the x-efficiency of the workers
declines.

A Major element of X-efficiency is motivation or rather the lack of motivation.

This theory assumes that if a company does not face competition at all or if a
company is not competitive at all.
Roles of an Entrepreneur

Leibenstein states two roles of an entrepreneur:

1. Input Provider
2. Gap Filler

According to Leibenstein, there are two types of entrepreneurship

3. Routine Entrepreneurship
4. Innovative Entrepreneurship
Theory of Profit

Introduction
Important Aspects of Theory of Profit
1. Risk creates Profit
2. Different Degrees of risk
3. Profit if Uncertain
Theory of Social Change

Withdrawal of Status & Personality Types:

1. Retreatist
2. Ritualist
3. Reformist
4. Innovator
Socio-Cultural Influences on Entrepreneurship Development

1. Community Attitude towards Risks

2. Caste System
3. Family Background
4. Education
5. Attitude of the Society
6. Role Models
Economic Influences

1. Capital
2. Labour
3. Raw Materials
4. Market
5. Infrastructure
6. Economic Conditions
Role of Entrepreneurial Culture in ED

1. Ethical Behaviour
2. Productivity Culture
3. Communication Culture
4. Recognition & Rewards Culture
5. Quality Culture
6. Corporate Citizenship Culture
7. Concern for Environment
8. Concern for Social Development
Thank-you