Entrepreneurship Development Notes
Introduction of Entrepreneurs and Entrepreneurship
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In the post I have given a brief introduction of Entrepreneurs and Entrepreneurship. These notes are useful for the students of B.Com, BBA and MBA of various universities covered under NEP 2023 Syllabus and CBCS Pattern.
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Table of Contents |
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1. Meaning of Entrepreneur, Entrepreneurship and Enterprise 2. Difference between entrepreneurs and entrepreneurship 3. Comparison of entrepreneurs and traditional managers 4. Comparison of Entrepreneurs and Intrapreneurs 5. Comparison of Entrepreneurs and Businessman 6. Difference between Innovative entrepreneur and imitative entrepreneur 7. Traits and Qualities of an Entrepreneur: 8. Functions of an Entrepreneur 9. Types of Entrepreneurs 10. ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT |
Entrepreneur, Entrepreneurship and Enterprise:
Entrepreneur: The word “entrepreneur” is derived
from the French word entreprendre which
means to initiate or undertake. In the early sixteenth century, the Frenchmen
who organised and led military expeditions were referred to as “entrepreneurs”.
The term entrepreneur was applied to business in the early eighteenth century
by French Economist Richard Cantillon. According to him, the entrepreneur buys
factor services at certain prices with a view to sell their products at
uncertain prices in the future. Richard Cantillon conceived of an entrepreneur
as a bearer of non-insurable risk.
An
entrepreneur is a person who starts an enterprise. He searches for change and
responds to it. A number of definitions have been given of an entrepreneur. The
economists view him as a fourth factor of production along with land labour and
capital. The sociologists feel that certain communities and cultures promote
entrepreneurship. Some others feel that entrepreneurs are innovators who come
up with new ideas for products, markets or techniques. Some of the popular
definitions are given below:
J.B. Say: An
entrepreneur is an economic agent who unites all means of production- land of
one, the labour of another and the capital of yet another and thus produces a
product. By selling the product in the market he pays rent of land, wages to
labour, interest on capital and what remains is his profit. He shifts economic
resources out of an area of lower and into an area of higher productivity and
greater yield.
Schumpeter:
According
to him entrepreneurs are innovators who use a process of shattering the status
quo of the existing products and services, to set up new products, new
services.
David
McClleland: An entrepreneur is a person with a high need for achievement
[N-Ach]. He is energetic and a moderate risk taker.
Peter
Drucker: An entrepreneur searches for change, responds to it and exploits
opportunities. Innovation is a specific tool of an entrepreneur hence an
effective entrepreneur converts a source into a resource.
To put it very simply an entrepreneur is
someone who perceives opportunity, organizes resources needed for exploiting
that opportunity and exploits it.
Entrepreneurship:
Entrepreneurship can be described as a process of action an entrepreneur
undertakes to establish his enterprise. It is a creative activity. It is the
ability to create and build something from practically nothing. It is a knack
of sensing opportunity where others see chaos, contradiction and confusion.
Entrepreneurship is the attitude of mind to
seek opportunities, take calculated risks and derive benefits by setting up a
venture. It comprises of numerous activities involved in conception, creation
and running an enterprise.
According to Peter Drucker Entrepreneurship is defined as ‘a systematic
innovation, which consists in the purposeful and organized search for changes,
and it is the systematic analysis of the opportunities such changes might offer
for economic and social innovation.’
Entrepreneurship is a discipline with a
knowledge base theory. It is an outcome of complex socio economic,
psychological, technological, legal and other factors. It is a dynamic and
risky process. It involves a fusion of capital, technology and human talent.
Entrepreneurship is equally applicable to big and small businesses, to economic
and non-economic activities.
Enterprise:
Entrepreneur
is a person who starts an enterprise. The process of creation is called
entrepreneurship. The entrepreneur is the actor and entrepreneurship is the
act. The outcome of the actor and the act is called the enterprise. An
enterprise is the business organization that is formed and which provides goods
and services, creates jobs, contributes to national income, exports and overall
economic development.
Distinguish between the terms entrepreneur and entrepreneurship.
Though both the terms entrepreneur and
entrepreneurship are almost similar they possess several differentiating terms
with them. The differences between the entrepreneurs and entrepreneurship are
as follows:-
|
Entrepreneur |
Entrepreneurship |
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An
entrepreneur one who undertakes and operates a new enterprise and assumes
some accountability for the inherent risks. |
Entrepreneurship
is the practice of starting new organizations, particularly new businesses
generally in responses to identified opportunities. |
|
Entrepreneur
is often synonymous with founder. |
Entrepreneurship
ranges in scale from solo projects to major undertakings creating many job
opportunities. |
|
The person who starts and operates a business enterprise is an
entrepreneur. |
The process
in which an entrepreneur starts and operates his business enterprise is
entrepreneurship. |
|
The
entrepreneur is a coordinator as he coordinates all the three elements of
production i.e. land, labor and capital. |
Entrepreneurship
is the coordination maintained by an entrepreneur. |
|
The person
who innovates something new is an entrepreneur. |
The
innovation of something new or the process of innovation is entrepreneurship. |
|
He who leads
an enterprise towards its vision thorough leadership, motivation is an
entrepreneur. |
The way in
which an entrepreneur leads his manpower, motivates them for the achievement
of the firms goal is entrepreneurship. |
|
He who bears
risk of the firm for the sake of making a reasonable profit is an
entrepreneur. |
The risk
bearing practice that is done by an entrepreneur is entrepreneurship. |
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Comparison of Entrepreneurs and Traditional Managers
|
Basis |
Traditional
Managers |
Entrepreneurs |
|
Primary motives |
Promotional and other Traditional corporate Rewards, such as
office, Staff, and power |
Independence, Opportunity to create And money |
|
Time Orientation |
Short-term meeting quotas and budgets, weekly monthly,
quarterly, and the annual planning horizons. |
Survival and achieving 5-10 year growth of business. |
|
Activity |
Delegates and supervises More than direct involvement |
Director involvement |
|
Risk |
Careful |
Moderate risk taker |
|
Status |
Concerned about status symbols. |
No concern about status symbols. |
|
Failure and mistakes |
Tries to avoid mistakes and surprises |
Deals with mistakes and failures. |
Comparison of Entrepreneurs and Intrapreneurs
|
Entrepreneurs |
Intrapreneurs |
|
Independence, Opportunity to create
And money |
Independence and Ability to advance
in the corporate rewards. |
|
Survival and achieving 5-10 year growth of business. |
Between entrepreneurial and traditional managers, depending on
urgency to meet self-imposed and corporate timetable. |
|
Director involvement |
Direct involvement more than
delegation. |
|
Moderate risk taker |
Moderate risk taker |
|
No concern about status symbols. |
Not concerned about traditional
corporate status symbols-desires independence. |
|
Deals with mistakes and failures. |
Attempts to hide risky projects from
view until ready. |
Comparison of Entrepreneurs and Businessman
|
Entrepreneur |
Businessman |
|
Entrepreneur is a person who starts a
commercial enterprise with a new concept and idea. |
Businessman is a person who starts a
commercial enterprise with an existing idea and concept. |
|
Entrepreneurs are intuitive in nature. |
Businessman are calculative in nature. |
|
In case of entrepreneurship competition is
very low. |
In case of a business, competition is very
high. |
|
Entrepreneurs creates a new market. |
Businessman creates place in existing
market. |
|
Method of doing things by an entrepreneur is
unconventional. |
Method of doing things by a businessman is
conventional. |
Difference between Innovative entrepreneur and imitative entrepreneur
1. Cost: An
innovating entrepreneur is one who introduces new goods, inaugurates new method
of production to produce a new product. An innovator has to maintain more cost
than imitative entrepreneurs. But the developing countries cannot afford to
bear this cost. On the other hand, an imitative entrepreneur follows the
innovator entrepreneurs. They copy the product that has been innovated before.
Since innovative entrepreneurs need to expense a lot of money that imitative
entrepreneurs. So developing countries need imitative entrepreneurs.
2. Technology: From
the technology the developed countries are better than the developing countries
in case of technology. An innovative entrepreneur uses the modern technology.
But developing countries cannot use digital technology. So in the developing
countries need imitative entrepreneurs.
3. Discovery
of Market: Discovery of market is easy for the developed countries. So the
developed countries can expect innovative entrepreneurs. On the other hand, in
the developing countries it is difficult to spread the market of product. So
developing countries need imitative entrepreneurs.
4. New method
of production: It is very difficult to make a new method of production for
the developing countries. As innovative entrepreneurs adopt new methods of
production. So developing countries need to choose the imitative ones to re3duce
the risk of loss.
5. Reorganizing: An
innovating entrepreneur reorganizes the enterprise. But the enterprises in the
developing countries like India cannot be re-formatted. So the imitative
entrepreneurs are most suitable for the developing countries.
6. Challenge: An
innovating entrepreneur can take challenge. But the developing countries cannot
let the public in the face of the Black hole. That is why the imitative entrepreneurs
are suitable for the developing countries.
7. Intention: In
the developing countries like India the people are less educated for what they
are not intentionally keen to engage in the entrepreneurial activities.
8. Less
initiative: There is a lack of opportunities in the developing countries
for what the individuals do not come forward to take initiative to form an
enterprise.
9. Risk: In
a developing country the people do not take a chance in using the new product
for what the innovators do not take chance of inventing new products.
10. Imitation: In
a developing country like ours the people do not possess any knowledge on the
latest technology for what they take the path of imitation. They bring out the
products that are being sold worldwide.
Traits and Qualities (Characteristics or Matching of situational requirements) of an Entrepreneur:
The true entrepreneur is one who is endowed
with more than average capacities in the task of organizing and co-coordinating
the various other factors of production. He should be a pioneer, a captain of
industry. The supply of such entrepreneurship is however quite limited and all
are not endowed with such talent. The modern entrepreneur is one who detects
and evaluates a new situation in his environment and directs the making of such
adjustments in the economic systems as he deems necessary. He conceives a new
industrial enterprise, displays considerable initiative, grit and determination
in bringing his project to fruition. Some of the qualities of an entrepreneur
are mentioned below:
1) Initiative:
Initiation of any business activity should come from the entrepreneur. It is
the entrepreneur who takes action that goes beyond job requirements or the
demand of the situation. He does things before being asked or forced by the
events.
2) Looking for opportunities: A successful entrepreneur is one who always
is on the look for and takes action on opportunities. He must be always in
readiness to exploit it in maximizing the interest of the organization.
3) Persistence: An entrepreneur
should take repeated actions to overcome the obstacles that get in the way of
reaching goals. He should never be disheartened by failures. He should believe
in the Japanese proverb, "Fall seven times, and stand up eight".
4) Information seeking: An entrepreneur is always in search of new
ideas and information’s from various sources to help reach objectives or
clarify problems. He can consult experts for business or technical advice. He
personally undertakes research, analysis or investigation on his own to get information
in realizing his goals.
5) Concern for quality products: Successful entrepreneurs always believe in
high quality standards of their products with reasonable prices. They believe
in excellence. They act to do things that meet or beat existing standards of
excellence.
6) Commitment to work: Successful entrepreneurs do every sacrifice
to get the task completed. They put highest priority for accomplishing their
objective. They are committed to their work. They also express a concern for
satisfying their customers.
7) Efficiency orientation: Successful entrepreneurs find ways to do
things faster with fewer resources at lower costs. They are always interested
in devising new methods aimed at promoting efficiency.
8) Systematic Planning: Entrepreneurs develop and use logical,
step-by-step, realistic and proper plans to accomplish their goals. They
believe in systematic planning and its proper execution to reach goals.
9) Problem solving: Successful entrepreneurs are challenging by
nature. They always try to find out ways and means to overcome the problems
that come in their way. They also identify new and potentially unique ideas to
achieve their targets.
10) Self-Confidence: Successful entrepreneurs must have a strong
belief in themselves and in their own abilities. They have full faith and
confidence on their own knowledge, skill, and competency to complete a task or
meet a challenge. They are not at all cowed down by difficult situations.
11) Assertiveness: A successful entrepreneur must be assertive
in nature so that he can assert his issues with others for promotion of
interest of his enterprise. He tells others what they have to do and rebuke or
disciplines those failing to perform as expected.
12) Persuasion:
A successful entrepreneur must be able to persuade others to do the work the
way he wants them to do. He is able to convince others through his knowledge
and competence. He asserts strong confidence in his own company's product or
services. He must possess the ability to convince everybody - sellers,
consumers, employees, creditors etc.
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Also Read:1. Introduction to Entrepreneurs, Traits and Qualities of Entrepreneurs************************************Also Read (Dibrugarh University)
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Functions of an Entrepreneur:
An entrepreneur frequently has to wear
many hats. He has to perceive opportunity, plan, organize resources, and
oversee production, marketing, and liaison with officials. Most importantly he
has to innovate and bear risk. The main functions of an entrepreneur are as
follows:
1.
Innovation: Innovation is one of the most important functions of an
entrepreneur according to Schumpeter. 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 new products, services or processes.] Systematic innovation
means monitoring the following for innovative opportunity:
Ø The
unexpected success or failure or any unexpected outside event, (e.g. when the
IT bubble burst the ITES sector started growing.)
Ø Innovation
based on process need [e.g. plate based cameras, film based cameras, digital
cameras]
Ø Changes in
industry and market structure [e.g. video cassette VCD, DVD, Blue ray disc]
Ø Demographics
changes (e.g. increasing number of working women and nuclear families in most
metropolitan cities)
Ø New
knowledge (e.g. Pentium chip)
2. Risk
and uncertainty bearing: According to Hozelist an entrepreneur
performs the function of risk and uncertainty bearing. Every decision
pertaining to development of new products, adapting new technologies, opening
up new markets involves risk. Decision-making in an environment of uncertainty
requires anticipation of risk. Profit is said to be the reward for anticipating
and taking such risks. However it is pertinent to mention that the entrepreneur
is not a gambler, he only takes calculated risks. An entrepreneur develops the
art of decision making under conditions of uncertainty as a matter of survival.
3.
Organization building: An entrepreneur has to organize men, material
and other resources. He has to perform the functions of planning, co-ordination
and control. He has to use his leadership qualities to build a team, generate
resources and solve problems. With his organizational skills an entrepreneur
builds an enterprise from scratch, nurtures it and makes it grow. His vision
sows the seeds for a sound and vibrant organization and synergies are built in
the enterprise.
According to Kilby in a developing country
even the imitator entrepreneurs are very important and the entrepreneurial role
encompasses the following:
a) Perception
of market opportunities
b) Gaining
command over scarce resources
c) Purchasing
inputs
d) Marketing
the products
e) Dealing
with bureaucrats
f) Managing
human relations within the firm
g) Managing
customer and supplier relations
h) Managing
finance
i)
Managing production
j)
Acquiring and overseeing assembly of the
factory
k) Industrial
engineering
l)
Upgrading process and product
m) Introducing
new production techniques and products
Types of Entrepreneurs
Entrepreneurs
are classified as under different heads as given below. This helps the
potential entrepreneurs to choose his own nature and style of entrepreneurship.
a) According
to the Type of Business: Entrepreneurs are found in various types
of business occupations of varying size. We may broadly classify them as
follows:
Business Entrepreneur: Business
entrepreneurs are individuals who conceive an idea for a new product or service
and then create a business to materialize their idea into reality. They tap
both production and marketing resources in their search to develop a new
business opportunity. They may set up a big establishment or a small business
unit.
Trading
entrepreneur: Trading entrepreneur is one who undertakes trading activities
and is not concerned with the manufacturing work. He identifies potential
markets, stimulates demand for his product line and creates a desire and
interest among buyers to go in for his product. He is engaged in both domestic
and overseas trade.
Industrial Entrepreneur:
Industrial entrepreneur is essentially a manufacturer who identifies the
potential needs of customers and tailors product or service to meet the
marketing needs. He is a product oriented man who starts in an industrial unit
because of the possibility of making some new product.
Corporate
Entrepreneur: Corporate entrepreneur is essentially a manufacturer who
identifies the potential needs of customers and tailors product or service to
meet the marketing needs. He is a product oriented man who starts in an
industrial unit because of the possibility of making some new product.
Agricultural
Entrepreneur: Agricultural entrepreneurs are those entrepreneurs who undertake
such agricultural activities as raising and marketing of crops, fertilizers and
other inputs of agriculture. According to the use of Technology.
Technical
Entrepreneur: A technical entrepreneur is essentially an entrepreneur of
“Craftsman type”. He develops a new and improved quality of goods because of
his craftsmanship. He concentrates more on production than marketing.
Non-technical
Entrepreneur: Non-technical entrepreneurs are those who are not concerned with
the technical aspects of the product in which they deal. They are concerned
only with developing alternative marketing and distribution strategies to
promote their business.
Professional
Entrepreneur: Professional entrepreneur is a person who is interested in
establishing a business but does not have interest in managing or operating it
once it is established.
b) According
to Motivation: Motivation is the force that
influences the efforts of the entrepreneur to achieve his objectives. An
entrepreneur is motivated to achieve or prove his excellence in job
performance. He is also motivated to influence others by demonstrating his
power thus satisfying his ego.
Pure Entrepreneur: A pure
entrepreneur is an individual who is motivated by psychological and economic
rewards. He undertakes an entrepreneurial activity for his personal
satisfaction in work, ego or status.
Induced
Entrepreneur: Induced entrepreneur is one who is being induced to take up an
entrepreneurial task due to the policy measures of the government that provides
assistance, incentives, concessions and necessary overhead facilities to start
a venture.
Motivated
Entrepreneur: New entrepreneurs are motivated by the desire for
self-fulfillment. They come into being because of the possibility of making and
marketing some new product for the use of consumers. If the product is
developed to a saleable stage, the entrepreneur is further motivated by reward
in terms of profit and enlarged customer network.
Spontaneous
Entrepreneur: These entrepreneurs start their business out of their natural
talents and instinct. They are persons with initiative, boldness and confidence
in their ability which motivate them to undertake entrepreneurial activity.
Growth
Entrepreneur: Growth entrepreneurs are those who necessarily take up a high
growth industry. These entrepreneurs choose an industry which has substantial
growth prospects.
Super-Growth
Entrepreneur: Super-growth entrepreneur are those who have shown enormous growth
of performance in their venture. The growth performance is identified by the
liquidity of funds, profitability and gearing.
c) According
to Stages of Development
First-Generation
Entrepreneur: A first generation entrepreneur is one who starts an industrial
unit by means of an innovative skill. He is essentially an innovator, combining
different technologies to produce a marketable product or service.
Modern
Entrepreneur: A modern entrepreneur is one who undertakes those ventures which
go well along with the changing demand in the market. They undertake those
ventures which suit the current marketing needs.
Classical
Entrepreneur: A classical entrepreneur is one who is concerned with the
customers and marketing needs through the development of a self supporting
venture. He is a stereo type entrepreneur whose aim is to maximize his economic
returns at a level consistent with the survival of the firm with or without an
element of growth.
Innovating
Entrepreneurs: Innovating entrepreneurship is characterized by aggressive
assemblage of information and analysis of results, deriving from a novel
combination of factors. Men/women in this group are generally aggressive in
experimentation who exhibit cleverness in putting attractive possibilities into
practice.
Imitative
Entrepreneurs: Imitative entrepreneurship is characterized by readiness to adopt
successful innovations by innovating entrepreneurs. They first imitate
techniques and technology innovated by others.
Fabian
Entrepreneurs: These categories of entrepreneurs are basically running their
venture on the basis of conventions and customary practices. They don’t want to
introduce change and not interested in coping with changes in environment. They
have all sorts of inhibitions, shyness and lethargic attitude. They are
basically risk aversor and more cautious in their approach.
Drone
Entrepreneurs: Entrepreneurs who are reluctant to introduce any changes in their
production methods, processes and follow their own traditional style of
operations. Though they incur losses and looses their market potential, will
not take any effort to overcome the problem. Their products and the firm will
get natural death and knockout.
Forced
Entrepreneurs: Sometimes, circumstances made many persons to become
entrepreneurs. They do not have any plan, forward looking and business
aptitude. To mitigate the situational problem, they are forced to plunge into
entrepreneurial venture. Most of the may not be successful in this category due
to lack of training and exposure.
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Also Read:1. Introduction to Entrepreneurs, Traits and Qualities of Entrepreneurs************************************Also Read (Dibrugarh University)
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ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT
The entrepreneur is the key to the creation of new enterprises
that energise 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:
1. Capital formation: Entrepreneurs
mobilise the idle savings of the public through the issues of industrial
securities. Investment of public savings in industry results in productive
utilisation of national resources. Rate of capital formation increases which is
essential for rapid economic growth. Thus, an entrepreneur is the creator of
wealth.
2. Improvement in per capita income: Entrepreneurs
locate and exploit opportunities. They convert the talent 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.
3. 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 standard of life of a
common man. These offer goods at lower costs and increase variety in
consumption.
4. 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.
5. 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.
6. Generation of Employment: Entrepreneurship
development training which helps in strengthening informal and unorganised
sector is expected to motivate enterprising people to opt for self employment
and entrepreneurial career. It will therefore, help in solving the problem of
increasing unemployment to some extent.
7. Harnessing Locally Available Resources and
Entrepreneurship: India is considered to be very rich in natural
resources. In spite of about five decades of planned development a large
number of states have remained economically backward. A few large scale
industries started by entrepreneurs from outside the state in an
economically backward area may help as model of pioneering efforts, but
ultimately the real strength of industrialisation in backward areas
depends upon the involvement of local entrepreneurship in such activities:
Increased activities of local entrepreneurs will also result in making use of
abundantly available local resources.
8. Balanced Regional Growth: Medium and
large scale industries can only be started with huge investment which is
either available with well established industrial houses or need to be
drawn from public exchequer. Also, promotion of such industries does not
help in reducing disparities of income and wealth. On the other hand, an
important advantage of small scale enterprises is that they can be
started with meager financial ‘resources and little or no previous
experience or entrepreneurial background.
9. Reducing Unrest and Social Tension amongst
Youth: Many problems associated with youth unrest and social tensions are
rightly considered to be due to youth not being engaged in productive work. In
the changing environment where we are faced with the problem of recession in
wage employment opportunities, alternative to wage career is the only viable
option. The country is required to divert the youth with latent entrepreneurial
traits from wage career to self employment career. Such alternate path through
entrepreneurship could help the country in defusing social tension and unrest
amongst youth.
10. Innovations in Enterprises: Business enterprises need to be innovative for their survival and better performance. It is believed that smaller firms have relatively higher necessity and capability to innovate. The smaller firms do not face the constraints imposed by large investment in existing technology. Thus they are both free and compelled to innovate: The National Science Foundation, an organisation in USA found that small companies produce four times more innovations per research dollar than do bigger companies. Entrepreneurship development programmes are aimed at accelerating the pace of small firms growth in India. Increased number of small firms is expected to result in more innovations and make the Indian industry compete in international market.
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