ENTREPRENEURSHIP

The word ‘entrepreneur’ is derived from French word ‘Entreprendre’ which

was used to designate an organizer of musical or other entertainments.
Later in 16th century it was used for army leaders. It was extended to cover
civil engineering activities such as construction in 17th century. But it was
Richard Cantillon, an Irishman living in France who first used the term
entrepreneur to refer to economic activities. According to Cantillon “An
entrepreneur is a person who buys factor services at certain prices with a
view to selling its product at uncertain prices”. Entrepreneur, according to
Cantillon, an entrepreneur is a bearer of risk, which is non-insurable.
SchumPeter gave a central position to the entrepreneur who believed that
an entrepreneur was a dynamic agent of change; that an entrepreneur was
a catalyst who transformed increasingly physical, natural and human
resources into correspondingly production possibilities. Since then the term
entrepreneur is used in various ways and various views.
CONCEPT OF ENTREPRENEUR
As said above entrepreneur is used in various ways and various views. These
views are broadly classified into three groups, namely risk bearer, organizer
and innovator.
Entrepreneur as risk bearer: Entrepreneur as an organizer
Entrepreneur as an innovator: Hence an entrepreneur can be defined
as a person who tries to create something new, organizes production
and undertakes risks and handles economic uncertainty involved in
enterprise.
Some more important definitions of entrepreneur
1. According to F.A.Walker: “Entrepreneur is one who is endowed with
more than average capacities in the task of organizing and coordinating the
factors of
production, i.e. land, labour capital and enterprises”.
Entrepreneurship // 97
2. Marx regarded entrepreneur as social parasite.
3. According to Gilbraith: “An entrepreneur must accept the challenge and
should be willing hard to achieve something”.
4. Peter F. Drucker defines an entrepreneur as one who always searches
for change, responds to it and exploits it as an opportunity. Innovation is the

basic tool of entrepreneurs, the means by which they exploit change as an

opportunity for a different
business or service.
5. According to E.E.Hagen: “An entrepreneur is an economic man who
tries to maximize his profits by innovation, involve problem solving and gets
satisfaction from
using his capabilities on attacking problems”.
6. According to Mark Casson: “An entrepreneur is a person who
specializes in taking judgmental decision about the coordination of scarce
resources”.
7. Frank Young defined entrepreneur as a change agent.
8. According to Max Weber: “Entrepreneurs are a product of particular
social condition in which they are brought up and it is the society which
shapes individuals
as entrepreneurs”.
9. International Labour Organization (ILO) defines entrepreneurs as
those people who have the ability to see and evaluate business
opportunities, together with the necessary resources to take advantage of
them and to initiate appropriate action to
ensure success.
10. Akhouri describes entrepreneur as a character who combines
innovativeness,
readiness to take risk, sensing opportunities, identifying and mobilizing
potential
resources, concern for excellence, and who is persistent in achieving the
goal.
5.3 CHARACTERISTICS OF AN ENTREPRENEUR
Entrepreneur is a person of telescopic faculty drive and talent who perceives
business opportunities and promptly seizes them for exploitation.
Entrepreneur needs to possess competencies to perform entrepreneur
activities. Table 5.1 gives core competencies.
Core competencies Entrepreneurial activities
1. Initiative Does things before asked for or forced to by events and acts to

extend the business to new areas, products or services.

2. Perceiving opportunities Identifies business opportunities and mobilizes
necessary resources
to make good an opportunity.
3. Persistence Takes repeated or different actions to overcome obstacles.
4. Information gathering Consults experts for business and technical advice.
Seeks information of client or supplier’s needs. Personally undertakes
market research and make use of personal contacts or information networks
to obtain useful information.
5. Concern for quality work
States desire to produce or sell a better quality product or service. Compares
his performance favorably with that of others.
6. Commitment to contractual obligations Makes a personal sacrifice or
expands extraordinary effort to complete a job, accepts full responsibility in
completing a job contract on schedule, pitches in with workers or work in
their place to get the job done and shows utmost concern to satisfy the
customer.
7. Efficiency orientation Finds ways and means to do things faster, better
and economically.
8. Planning Various inter-related jobs are synchronized according to plan.
9. Problem solving Conceives new ideas and finds innovative solutions.
10. Self-confidence Makes decisions on his own and sticks to it in spite of
initial setbacks.
11. Experience Possesses technical expertise in areas of business, finance,
marketing, etc.
12. Self-critical Aware of personal limitations but tries to improve upon by
learning from hispast mistakes or experiences of others and is never
complacent with success.
13. Persuasion Persuades customers and financiers to patronize his
business.
14. Use of influence strategies. Develops business contacts, retains
influential people as agents and restricts dissemination of information in his
possession.

15. Assertiveness Instructs, reprimands or disciplines for failing to perform.

16. Monitoring Develops a reporting system to ensure that work is
completed and quality norms.
17. Credibility Demonstrates honesty in dealing with employees, suppliers
and customers even if it means a loss of business.
18. Concern for employee welfare Expresses concern for employees by
responding promptly to their grievances.
19. Impersonal relationship Places long-term goodwill over short-term gain
in a business relationship.
20. Expansion of capital base
Reinvests a greater portion of profits to expand capital of the firm.
21. Building product image Concerned about the image of his products
among consumers and does everything possible to establish a niche for his
products in the market.
5.7 FUNCTIONS OF AN ENTREPRENEUR
An Entrepreneur has to perform a number of functions right from the
generation of idea up to the establishment of an enterprise. He also has to
perform functions for successful running of his enterprise. Entrepreneur has
to perceive business opportunities and mobilize resources like man, money,
machines, materials and methods. The following are the main functions of
an Entrepreneur.
1. Idea generation: The first and the most important function of an
Entrepreneur is idea generation. Idea generation implies product selection
and project identification. Idea generation is possible through vision, insight,
keen observation, education, experience and exposure. This needs scanning
of business environment and market survey.
2. Determination of business objectives: Entrepreneur has to state and
lay down the business objectives. Objectives should be spelt out in clear
terms. The Entrepreneur must be clear about the nature and type of
business, i.e. whether manufacturing concern or service oriented unit or a
trading business so that he can very well carry on the venture in accordance
with the objectives determined by him.
3. Raising of funds: All the activities of the business depend upon the
finance and hence fund raising is an important function of an Entrepreneur.
An Entrepreneur can raise the fund from internal source as well as external

source. He should be aware of different sources of funds. He should also

have complete knowledge of government sponsored schemes such as PMRY,
SASY, REAP etc. in which he can get government assistance in the form of
seed capital, fixed and working capital for his business.
4. Procurement of machines and materials: Another important function
of an Entrepreneur is to procure raw materials and machines. Entrepreneur
has to identify cheap and regular sources of raw materials which will help
him to reduce the cost of production and face competition boldly. While
procuring machineries he should specify the technical details and the
capacity. He should consider the warranty, after sales service facilities etc
before procuring machineries.
5. Market research: Market research is the systematic collection of data
regarding the product which the Entrepreneur wants to manufacture.
Entrepreneur has to undertake market research persistently to know the
details of the intending product, i.e. the demand for the product, size of the
market/customers, the supply of the product, competition, the price of the
product etc.
6. Determining form of enterprise: Entrepreneur has to determine form
of enterprise depending upon the nature of the product, volume of
investment etc. The forms of ownership are sole proprietorship, partnership,
Joint Stock Company, co-operative society etc. Determination of ownership
right is essential on the part of the entrepreneur to acquire legal title to
assets.
7. Recruitment of manpower: To carry out this function an Entrepreneur
has to perform the following activities.
(a) Estimating man power requirement for short term and long term.
(b) Laying down the selection procedure.
(c) Designing scheme of compensation.
(d) Laying down the service rules.
(e) Designing mechanism for training and development.
8. Implementation of the project: Entrepreneur has to develop schedule
and action plan for the implementation of the project. The project must be
implemented in a time bound manner. All the activities from the conception
stage to the commissioning stage are to be accomplished by him in
accordance with the implementation schedule to avoid cost and time
overrun. He has to organize various resources and coordinate various
activities. This
implementation of the project is an important function of the Entrepreneur.
All the above functions of the Entrepreneur can precisely be put into three
categories of innovation, risk bearing, and organizing and managing
functions.
ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT
Economic development essentially means a process of upward change
whereby the real per capita income of a country increases for a long period
of time. The economic history of the presently developed countries, for
example, USA and Japan tends to support the facts that the economy is an
effect for which the entrepreneurship is the cause.
The crucial role played by the entrepreneurs in the western countries has
made the people of underdeveloped countries conscious of the significance
of entrepreneurship
in economic development. After the Independence, India has realized that,
for achieving
the goal of economic development, it is necessary to increase the
entrepreneurship both qualitatively and quantitatively in the country. Parson
and Smelter described entrepreneurship as one of the two necessary
conditions for economic development, the other being increased output of
capital. Y.A. Say high describes entrepreneurship as a necessary dynamic
force for economic development. The important role that an
entrepreneurship plays in the economic development of an economy can be
put in a more systematic manner as follows.
1. Entrepreneurship promotes capital formation by mobilizing the idle saving
of
the public.
2. It provides immediate large-scale employment. Thus it helps to reduce
unemployment in the country.
3. It provides balanced regional development.
4. It helps reduce the concentration of economic power.
5. It stimulates the equitable redistribution of wealth, income and even
political

power in the interest of the country.

6. It encourages effective resources mobilization of capital and skill which
might
otherwise remain unutilized and idle.
7. It also induces backward and forward linkages which stimulated the
process of economic development in the country.
8. It promotes country’s export trade i.e. an important ingredient for
economic development.
5.14 STAGES IN THE ENTREPRENEURIAL PROCESS
Entrepreneurship is a process of comprising several distinct stages. The first
stage in
the entrepreneurial process is some change in the real world. For example, a
war may destroy country’s manufacturing facilities but spare its trained work
force that has happened in West Germany during Second World War. Such a
change leads to changes in every aspect of life in the country. It creates
needs for new goods and services. The
distraction of Japan’s industry during the Second World War allowed the
country to
rebuild its industry from scratch.
The second stage in the entrepreneurial development is the ‘idea’. For
example, microprocessor, the brain of personnel computer had been in the
American market since
the early 1970s. A company called ‘Altair’ had put out a computer that was
so personal
that one had to put it together oneself. But it was Apple Computer, which
perceived that computer market was potentially very big.
One may become an entrepreneur in various ways. He may start a new
enterprise. Alternatively, he may acquire a franchise. Franchising is an
entrepreneurial system
whereby an individual runs a business based on the right to make a product
or service granted by a manufacturer or other organization. Intrapreneuring
is another strategy.

It is the process of extending the firms domain of competence by exploiting

new opportunities through new combinations of its existing resources.
5.15 BARRIERS TO ENTREPRENEURSHIP
A large number of entrepreneurs particularly in the small enterprises fail due
to several
problems and barriers. The greatest barrier to entrepreneurship is the failure
of success.
Karl. H. Vesper has identified the following entrepreneurship barriers:
1. Lack of a viable concept
2. Lack of market knowledge
3. Lack of technical skills
4. Lack of seed capital
5. Lack of business know how
6. Complacency—lack of motivation
7. Social stigma
8. Time presence and distractions
9. Legal constraints and regulations
10. Monopoly and protectionism
11. Inhibitions due to patents
ROLE OF SMALL SCALE INVESTMENTS(SSI) IN ECONOMIC
DEVELOPMENT
Economic development is defined in a number of ways; the commonest
definition could be ‘an increase in real per capita income of a person
resulting in improvement in the levels of living’. The developments of small-
scale industries contribute to the increase in per capita income. The role of
SSI in economic development is given below.
1. Employment
SSI use labour intensive techniques and therefore provide employment on a
large scale, SSI accounts for 75% of the total employment in the industrial
sector. SSI provides self-employment to artisans, technically qualified

persons and professionals. These industries also offer employment to

farmers when they are idle.
2. Optimization of Capital
SSI requires less capital per unit of output and provides quick returns on
investment due to shorter gestation period. Small scale units help to
molatise small and scattered savings and channelise them into industrial
activities.
3. Balanced Regional Development
SSI promotes decentralized development of industries. They help to remove
regional disparities by industrializing rural and backward areas. They also
help to improve the standard of living in suburban and rural areas.
4. Mobilization of Local Resources
SSI helps to mobilize and utilize local resources like small saving,
entrepreneurial talent etc. which might otherwise remain idle and unutilized.
These industries facilitate the growth of local entrepreneurs and self-
employed professionals in small towns and villages.
5. Export Promotion
SSI helps in reducing pressure on the country’s balance of payments in two
ways. First they do not require imports of sophisticated machinery or raw
materials. Secondly, SSI can earn valuable foreign exchange through
exports. There has been a substantial increase in exports from the small
scale sector.
6. Consumer Surplus
SSI now produces a wide range of mass conception items. Over 5000
products are being manufactured in small scale sector. About one-half of the
output of manufacturing sector in India comes from small scale industries.
7. Feeder to Large Scale Industries
SSI plays a complementary role to large scale sector. They provide parts,
components, accessories etc. to large scale industries. They serve as
ancillary units.
8. Social Advantage
Small scale sector contributes towards the development of a socialistic
pattern of society by reducing concentration of income and wealth. They
provide an honorable and independent living to people with limited

resources. They facilitate wide participation of public in the process of

development.
9. Share in Industrial Production
SSI contributes more than one-half of the total industrial production in India.
About 5000 products are manufactured in the small scale sector.
10. Development of Entrepreneurship
Small scale units have helped to develop a class of entrepreneur. These
units facilitate self-employment and spirit of self-reliance in the society.

INTRODUCTION TO ENTREPRENEURSHIP
Definition of Terms
Definition of an entrepreneur
An entrepreneur is a person who identifies a business opportunity, harnesses and obtains the
resources necessary to initiate a successful business activity.
The entrepreneur implements the idea
Undertakes to operate the business
An entrepreneur is therefore a central key individual in the society who makes things
happens for economic development.

Entrepreneurship meaning
In the broader sense entrepreneurship refers to the means of stimulating innovative and
creative undertakings for a better business community or world.
The act or process of identifying business opportunities and gathering the necessary
resources to initiate a successful business activity.
Entrepreneurship is a French word meaning to undertake and focuses on a business enterprise
Entrepreneurship can exist in any situation – therefore it is the creation of values through
establishing a business enterprise.
Entrepreneurship means having an idea of one’s own and trying to implement the idea to
create values on it.
Entrepreneurship is a term which encompasses what entrepreneurs do i.e
□ Identifying a business opportunity of a particular demand
□ Look at the opportunity as a process of creating, something that did not exist.
□ Constantly searching/ harnessing ones environment and resources to implement the
activities.
□ Creating a totally new product and using it in as new.
Entrepreneurship there is the practice of starting a new business or revitalizing existing
businesses in response to identifying opportunities.

Self-Employment
Working independently and earning a living from it.
This is a concept that arises when the entrepreneur relies on revenues from his business as a
source of income
What is Unemployment? Advantages and disadvantages of Self Employment?
What is Salaried Employment? Advantages and Disadvantages of Salaried employment?
Enterprise
A business undertaking by an individual for the purpose of making a
profit. Factors impeding the growth of Entrepreneurship
High Taxation Levels
Corruption and Official Harassment
Unregulated competition from outside countries
Decline in personal incomes
The high cost of finance
Lack of entrepreneurial culture
Poor transport and communication networks
Lack of skills and knowledge
Explain the distinctions between an Entrepreneur and a Manager
Contribution of Entrepreneurship to National Development
The economic growth, the improved quality of life, the equitable distribution of resources and
the capacity of the economy to deal with economic, social and environmental development.
Main objectives of national development include:
□ Provide basic needs to every citizen:- food, shelter, health, security, education,
clothing

□ Elimination / Reduction of poverty: reduce rural-urban migration □Provision of opportunities

for employment and personal advancement

□ Trying to narrow the income differences between the rich and the poor.
i) Employment Creation:
ii) Promotion of National Productivity: This is through production of goods and services
within the country and therefore they contribute to the Gross Domestic Product (GDP)
iii) Raising Standards of Living: It’s measured by the capacity of people of a country to buy
goods and services. Entrepreneurs contribute by employing people and giving them
salaries or wages to buy their necessities.
iv) Conservation of foreign Exchange: Entrepreneurs produce goods and services that are
needed by people and reduction in importing those goods and hence the government
saves foreign exchange.
v) Export Promotion: Entrepreneurs who produce goods and services for export earn
vi)Conservation Agent: Entrepreneurs can contribute to conservation and utilization of
resources e.g. manufacturing a Jiko that uses sawdust instead of wood charcoal
vii) Rural development which in effect.

Promotes change to the formal sector from informal sector Equitable development
Reduced rural-urban migrations.
viii) Development of technology through
establishment of research institutions ii) education systems
ix) Government revenue
Through taxes. From domestic borrowing (TBs)
x) Facilitating community development through
Establishment of small businesses ii) Participation in community dev.
Projects
xi) Providing a positive role model and facilitating.
Competition between domestic entrepreneurship and imported Stimulating dev. Of
entrepreneurship.
xii) Reducing dependence on imported goods and services.
xiii) Stimulates competition through
Quality production methods are adopted
Quality products are produced
Variety goods and services are produced.
xiv) Facilitated development of the financial sector through which;
Capital accumulation is possible through savings
Loaning is facilitated
Development of the capital market.

Entrepreneurship
i) Entrepreneurship looks at particular individuals in a business set-up. It operates in large
business or organization which is business minded to make profit.
ii) Entrepreneurs operate autonomously for the welfare of the organization.
iii) The term Intra – refers to within – therefore Entrepreneurship is a process whereby an
individual or group within a large organization creates something new or different to
maximize on the available opportunities to that organization. iv)Intra can therefore be
equated to entra within the context of a large organization where the workers are a leeway to
be creative or innovative on their own.
v) They become competitive, socially and economically the idea is to allow individuals within
the organization to act and think independently.

Entrepreneurial Behavior

Several theories have been developed to explain why entrepreneurs behave the way they
do.
There has been debate on whether entrepreneurs are born or made
Born-hereditary, made-entrepreneurs are environmental influenced by where they are born.
These are;
i) Economic
The theory explains entrepreneurial behavior as influenced by economic factors
through which.

a) It is possible to introduce new methods

b) It is possible to find new sources of materials
c) It is possible to open new markets
The economic prospective is important since they create enabling environment for the
entrepreneur to combine the factors of production.
ii) Psychological factors
The theory states that entrepreneurs have unique values, attitudes and needs within
which drive them.
It is mostly concerned with personality traits as the main determinants of
entrepreneurial behavior
People are likely to become entrepreneurs because of high liking of say.
a) Independence
b) Attitude
c) Need to satisfy certain needs.

iii) Sociological factors

Maintains that environmental factors such as beliefs, culture, social structures
determine entrepreneurial behavior.
iv) Management factors
Emphasizes on the organization of resources in a specific way to attain profits
Leadership impacts on behavior and facilitates pioneership, achieving of goals and
provides vision.
The Functions of an Entrepreneur

i) The bearing of uncertainty is the primary function of the entrepreneur i.e losses
or profits.
ii) The management of the business enterprise ie can delegate iii)

Provision of risk capital and invention.

iv) Identifying gaps in the market and turning such gaps to business opportunities i.e to
initiate a business.
v) Financing the businesses, through raising and mobilizing the necessary resources to
exploit opportunity.
vi) Searching for business opportunities through environmental scans. vii) Mobilization of
resources needed to start and run a business e.g. from
a) Personal savings
b) Friends & relatives
c) Financial institutions e.t.c

viii) Evaluation of business opportunities to access viability and any other benefits that might
accrue to the business.
ix) Provide the necessary leadership for the business and those working in it.

Advantages of Entrepreneurship

i.) Financial gains

ii.) Self-employment which leads to job satisfaction and flexibility
iii.) Provide job opportunities to the unemployed or those seeking better jobs.
iv.) A means of opening up new industries especially in the rural areas
- facilitating globalization
v.) A source of generating income and increased economic growth.
vi.) Facilitates competition encouraging high quality products
vii.) Facilitates production of more goods and services
viii.) Leads to the development of newer markets
ix.) Promotes use of modern technology in especially small- scale
manufacturing to enhance higher productivity

Drawbacks of entrepreneurship
a) Challenges of a being an entrepreneur
long working hours
poor pay
unclear future
fear of losing all that has been invested
bankruptcies and closure

b) Other challenges

Fear of delegating
the problem do it yourself and know it all
competition by established business
lack of funds especially before break even
Mis- management by employees

Promotion of Entrepreneurship

Integrating entrepreneurship into the education system

Registration to encourage risk taking
National companies to promote entrepreneurship
Support of entrepreneurs through friendly loans at the appropriate time.