Characteristics of Entrepreneurship

Economic Activity:
Entrepreneurship is primarily an economic activity because it involves the creation and operation of an
enterprise. It is basically concerned with the production and distribution of goods and services and
optimally utilizes the resource towards productive use.

Entrepreneurship Involves Innovation:

Entrepreneurship involves changing, revolutionizing, transforming, and introducing new approaches.
Entrepreneurship is an innovative function as it involves doing things in a new and better way

Goal-oriented Activity:
The entrepreneur who creates and operates enterprises seeks to earn profits through satisfaction of
needs of consumers; hence, entrepreneurship is a goal-oriented activity.

Value Creation:
Next, we find that the process of creating value is a characteristic in describing entrepreneurship.
Through entrepreneurship, new products, services, transactions, approaches, resources, technologies,
and markets are created that contribute some value to a community or marketplace. We can also see
value created when, through entrepreneurship, resources are transformed into outputs such as
products or services.
Enterprise Creation:
The next characteristic of entrepreneurship is enterprise creation. In order to pursue the
perceived opportunities for innovation and to create value, there must be organized efforts
and actions.

A Function of Risk Bearing:

Risk is an inherent and inseparable element of entrepreneurship. An entrepreneur works
under uncertainties and he assumes the uncertainty of future. In the pursuit of profit, there
is possibility of loss also.

Entrepreneurship Implies Growth:

The next characteristic in entrepreneurship is growth. One major difference between
entrepreneurial ventures and other small businesses is the emphasis on growth.
Entrepreneurship is about growing a business and pursuing opportunities as they arise.

Managerial Skill and Leadership Function:

Managerial skill and leadership are the most important facets of entrepreneurship. An
entrepreneur must have the ability to lead and manage.
Recognition that it is a process:
The characteristics commonly found in entrepreneurship is the recognition that it is a process,
very simply, is a set of ongoing decisions and actions. Entrepreneurship is not a one-time
phenomenon; it occurs over time. It involves a series of decisions and actions from initial
start-up to managing the entrepreneurial venture.

Gap Filling Function:

The gap between human needs and the available products and services filled by
entrepreneurship. An entrepreneur determines the needs of people and combines resources to
produce goods and services of requirements.

Dynamic Process:
Entrepreneurship is a dynamic function. Entrepreneur thrives on changes in the environment,
which bring useful opportunities for business. An entrepreneur deals proactively with
changing markets and environment.

Organizing Function:
It is the ability to bring together productive resources of society. Entrepreneur
coordinates and control the efforts of all the persons engaged in his enterprises.
Knowledge-based Practice:
Drucker writes, “Entrepreneurship is neither a science nor an art. It is a practice. It has a
knowledge base. He uses his experiences for high achievements. The enterprising quality is
generated after a long practice of risk-bearing behaviour.”

Other Characteristics :

(1) It relates to updating of knowledge relating to entrepreneurship promotion on a regular

basis.
(2) It aims at development of skills ad capabilities in identifying latent entrepreneurial traits
of entrepreneurs.
(3) It is a means of rapid economic development which is likely to result in creation of
gainful employment in society.
(4) It believes in the fact that entrepreneurs are not born, they can be created. In the light of
this, large numbers of Entrepreneurship Development Programs are conducted to
promote entrepreneurship in the country.
(5) It optimizes the use of resources by arriving at the most productive combination that will
provide the society the need good sand services.
Why Entrepreneurship?
 Entrepreneurship has many functions to perform and roles to play in every
type of economy.
 Entrepreneurship is the life blood of any economy and it applies more to a
developing economy.

 Innovation: Innovating is a process of creating, changing, experimenting,

transforming and revolutionizing. Innovation is one of the key
distinguishing characteristics of entrepreneurial activity.

 Job Creation: We know that job creation is vital to the overall long-term
economic health of communities, regions, ad nations. Entrepreneurial
ventures play very important role in it. Small business create more jobs
than large business do.
Why Entrepreneurship?
 Opportunity to Contribute to Society and Be Recognized for Your
Efforts:
 Often, small business owners are among the most respected and most
trusted members of their communities. Business deals based on trust and
mutual respect are the hallmark of many established small companies.

 Entrepreneurship Serve Small Markets With New Technology:

 Large firms, with their crippling overheads, do not find it profitable to
serve small populations. This is where small entrepreneurial firms serve an
invaluable role by providing specialized products to niche customers.

 Other Contribution:
 Entrepreneurship in small businesses helps in distribution of products of
large business. They, thus ,support the large business houses.
 It offers business avenues to w omen and minorities. Women and minorities are allowed
the benefit of financial independence and a chance to exhibit the ability to manage
business enterprises.

 Dispersal of economic activities to different sectors of economy and identifying new

avenues of growth.
 Improvement of the standard of living of different weaker sections in the society.
 Bring socio political change in the society.
 Develop technological know-how.
 Improve culture of business and expand commercial activities.
 Entrepreneurship acts as a change agent to meet the requirements of the changing
markets and customer preferences.

 Develop a culture of achievement orientation.

 It helps in bringing about change and development of the civilization through change in
trade, comment be and industrialization.
 It arouses the need for achievement in individuals which brings about a change in the
economic scenario through economic development and growth.
 It results in exploitation of economy’s resources, such as labour, capital and technology
to the full extent.
Factors Affecting Entrepreneurship
 Following factors contribute to the success of entrepreneurship:

 Economic Factor: Factors such as availability of finance, labour, land,

accessibility of customers, suppliers are the factors that stimulate entrepreneurship.
Capital is one of the most important prerequisites to establish an enterprise.
Availability of sufficient capital affects the introduction, survival and growth of a
business enterprise.
 Socio-Economic Factors: The entrepreneurial activity at any time and place is
governed by varying combination of socio-economic factors. The empirical studies
have identified the following socioeconomic factors:
 Cast/religion
 Family background
 Level of Education
 Level of perception
 Legitimacy of Entrepreneurship
 Migratory character
 Social Mobility
 Social Security
 Investment capacity
Factors Affecting Entrepreneurship
 Personal Factors: McClelland assumes ‘that achievement motivation is the
immediate cause of the origin of entrepreneurship. He explained entrepreneurial
growth in terms of need for achievement motivation. Thus, he found high
correlation between need for achievement and successful economic activities.
 Political: Some researchers felt that the growth of entrepreneurship cannot be
explained fully unless the political set-up of a country is taken into consideration.
Boulding held that political structure was the deciding factor in entrepreneurial
growth of France and Russia.
 Internal Control System: Entrepreneurship largely depends upon the control
system designed for controlling the business activities. If the control system is
effective they will result in optimal as inventory, good quality products and high
profit margins.
 Government Incentives ad Subsidies: entrepreneurship is being encouraged
in many countries with a variety of incentives such as tax breaks, preferred
sourcing or grants. Performance, in terms of economic growth, is shaped by the
degree to which the prevalent industry structure efficiently utilizes scarce
resources.
Factors Affecting Entrepreneurship
 Increasing Demand for Variety: The increasing demand for new products is
of advantage to smaller firms. A number of studies have shown the
comparative advantage of smaller firms in being innovative and coming up
with new products
 Work Environment: If the environment that a individual is working in is
unsatisfactory, that is, not conducive to his growth needs, it is likely that the individual
will quit his job and start his own business as an entrepreneur. Unsatisfied personal
needs for growth and achievement in employment conditions results in successful
entrepreneurship.
 Easier Access to Resources Promotes Entrepreneurship: Today, it is easier
for an entrepreneur to access debt and equity finance than ever before. Not just
capital, most other factors of production are now easily available to entrepreneurs.
 Career Transitions: “Career transition points are circumstances in which an
individual is moving between one type of career-related activity and another.”
Retirement from existing service or completion of a degree course is the factors
that boost up a person’s morale to start a venture of his own.
Misconceptions about Entrepreneurship:
Successful Entrepreneurship Needs Only a Great Idea. Having a great idea is
only part of the equation for successful entrepreneurship. Understanding the demands
of the different phases of the entrepreneurial process, taking an organized approach to
developing the entrepreneurial venture, and coping with the challenges of managing the
entrepreneurial venture are also key ingredients to successful entrepreneurship.
Entrepreneurship is Easy. Entrepreneurship is not easy! It takes commitment,
determination, and hard work. And even if you have these qualities, it still isn’t
effortless! Entrepreneurs often encounter diff iculties and setbacks, but the successful
entrepreneurs are those who push on in spite of the difficulties.
Entrepreneurship is a Risky Gamble. Although entrepreneurs aren’t afraid to
take risks, entrepreneurship involves calculated risks, not unnecessary ones. In fact,
there are times when successful entrepreneurship means avoiding or minimizing risks.
Entrepreneurship is Found Only in Small Businesses. Many people have the
mistaken idea that entrepreneurship is associated only with small organizations. The
truth is that entrepreneurship can be found in any size organization. On the other hand,
just because an organization is small doesn’t automatically make it entrepreneurial.
 The Entrepreneurial Process
 Entrepreneurial process is a leadership function which centers round the
dynamics of entrepreneurial growth and change. It is a process comprising
several distinct stages.
 From exploring the various aspects of the entrepreneurial context to
identifying opportunities, to starting and managing the entrepreneurial
venture, choosing the competitive strategy in action. Let’s look at each of
these decisions and activities in figure

 Exploring the Entrepreneurial Context: Why is it important to look

at the entrepreneurial context? Because the context determines the “rule” of
the game and what decisions are likely to be successful. The context
includes the realities of the new economy, society’s laws and regulations
that compose the legal environment, and the realities of the changing world
of work.
 Entrepreneurs should be aware of the context within which entrepreneurial
decision are made. Only through exploring the context can entrepreneurs
discover the untapped opportunities and competitive advantage(s) that may
lead to the development of a potentially successful entrepreneurial venture
Components of Entrepreneurial Process
Identifying Opportunities: A crucial aspect of entrepreneurial process is
identifying opportunities. What are opportunities? These opportunities are
positive external trends or changes that provide unique and distinct
possibilities for innovating and creating value. There are thousand of
opportunities available to an entrepreneur. Some of them are not real
opportunities with high potentials. Some opportunities have growth prospects.
Entrepreneurs make search for profitable ones and then selects an attractive
business opportunity.

However, just identifying an opportunity isn’t enough. The entrepreneurial

process also involves pinpointing a possible competitive advantage. A
competitive advantage is what sets an organization apart; it’s an organization’s
competitive edge. Having a competitive advantage is crucial for an
organization’s long-term success and survival.
Starting the Venture: Once entrepreneurs have explored the external context
and identified possible opportunities and competitive advantage(s), they must look
at the issues involved with actually starting up their entrepreneurial venture.
Included in this phase of the entrepreneurial process are the following activities;
researching the feasibility of the venture, planning the venture, organizing the
venture and launching the venture. Financial, physical and managerial resources
must be collected to launch the venture.

Managing the Venture: Once the entrepreneurial venture is up and running the
next step in the entrepreneurial process is managing the venture. An entrepreneur
also must effectively manage the venture by managing processes, managing people
and managing growth. This requires the talents of leading, decision making,
executing, controlling and various managerial skill
Choosing the Competitive Strategy: One the entrepreneurial venture is up
and running, the last step is to choose competitive strategy. Peter Drucker mentions
following specific entrepreneurial strategies. These are:
• Being fastest with the most.
• Creative imitation.
• Entrepreneurial judo.
• Finding and occupying a specialized ecological niche.
Changing values and characteristics by creating utility, by delivering what
represents true value to the customer, by adoption to the customer’s social and
economical reality, by appropriate pricing
 Types of Entrepreneur

 The various types of entrepreneurs are classified on certain parameters. Some

important classifications are described below:
 On the Basis of Economic Development: Clarence Danhof classified
entrepreneurs into four groups on the basis of economic development.
 Innovating Entrepreneurs: This type of entrepreneurship is characterized
by aggressive assemblage of information and the analysis of results deriving
from novel combination of factors of production. Entrepreneurs falling in this
class are generally aggressive in experimentation and exhibited shrewdness in
putting attractive possibilities into practice.
 They are the entrepreneurs who have creative and innovative ideas of starting a
new business. An innovating entrepreneur sees the opportunity for introducing a
new technique or a new product or a new market. He may raise money to launch
an enterprise, assemble the various factors, and choose top executives and the
set the organization going. Schumpeter’s entrepreneur was of this type.
Innovative entrepreneurs thus, results in the creation of something new. They are
the contributors t o the economic development of a country.
 Adoptive or Imitative Entrepreneur: There is a second
group of entrepreneurs generally referred as imitative entrepreneurs. The
imitative entrepreneurs copy or adopt suitable innovations made by the
innovative entrepreneurs. They does not innovate the changes himself.
They only imitates technology innovated by others.
 Such entrepreneurs are particularly important in developing courtiers
because they contribute significantly to the development of such
economies. Imitative entrepreneurs are most suitable for the developing
regions because in such countries people prefer to imitate the technology,
knowledge and skill already available in more advanced countries. In
highly backward countries there is shortage of imitative entrepreneurs also.
People who can imitate the technologies and products to the particular
conditions prevailing in these countries are needed.
 Sometimes, there is a need to adjust and adopt the new technologies to their
special conditions. Imitative entrepreneurs help to transform the system
with the limited resources available. However; these entrepreneurs face
lesser risks and uncertainty then innovative entrepreneurs. While innovative
entrepreneurs are creative, imitative entrepreneurs are adoptive.
 Fabian Entrepreneur: The third type is Fabian entrepreneur. By
nature these entrepreneurs are shy and lazy. This type of entrepreneurs have
neither will to introduce new changes nor desire to adopt new methods of
production innovated by the most entrepreneurs. They follow the set
procedures, customs, traditions and religions. They are not much interested
in taking risk and they try to follow the footsteps of their predecessors.
Usually they are second generation entrepreneur in a business family
enterprise.
 Drone Entrepreneur: The fourth type is Drone entrepreneurs who
refuse to copy or use opportunities that come on their way. They are
conventional in their approach and stick to their set practices products,
production methods and ideas. They struggle to survive not to grow. They
may be termed as Laggards. In such cases the organization looses market,
their operation s become uneconomical and they may be pushed out of the
market.
On the Basis of Type of Business: Under this category we can
classify entrepreneurs as described below:

Business Entrepreneurs: They are the entrepreneurs who conceive an idea for
a new product or service and then create a business to materialize their idea into
reality. They tap the entire factor of production to develop a new business
opportunity. They may set up a big enterprise or a small scale business. When they
establish small business units they are called small business entrepreneurs. In a
majority of cases, entrepreneurs are found in small trading and manufacturing
business.

Trading Entrepreneur: There entrepreneurs undertake trading activities and are

not concerned with the manufacturing work. They identifies potentiality of their
product in markets, stimulates demand for their product line among buyers. They
may go for both domestic and overseas trade. These entrepreneurs demonstrated
their ability in pushing many ideas ahead which promoted their
business.
Industrial Entrepreneur: Industrial entrepreneur is essentially a manufacturer
who identifies the needs of customers and creates products or services to serve
them. He is product-oriented who starts through an industrial unit to create a
product like electronic industry, textile unit, machine tools.

Corporate Entrepreneur: These entrepreneurs used his innovative skill in

organizing and managing a corporate undertaking. A corporate undertaking is a
form of business organization which is registered under some statute or Act like a
trust registered under the Trust Act, or a company registered under the Companies
Act. These corporate work as separate legal entity. He is thus an individual who
plans, develops and manages a corporate body.

Agricultural Entrepreneur: Agricultural entrepreneurs are those who

undertake agricultural activities as through mechanization, irrigation and
application of technologies to produce the crop. They cover a broad spectrum of
the agricultural sector and include agriculture and allied occupations.
According to the Use of Technology: The application of new technology in
various sectors of the national economy is essential for the future growth of
business. We may broadly classify these entrepreneurs on the basis of the use of
technology as follows:
Technical Entrepreneurs: With the decline of joint family business and the rise
of scientific and technical institutions, technically qualified persons have entered the
field of business. These entrepreneurs may enter business to commercially exploit
their inventions and discoveries. Their main asset is technical expertise. They raise
the necessary capital and employ experts in financial, legal- marketing and other
areas of business. Their success depends upon how they start production
and on the acceptance of their products in the market.

Non-technical Entrepreneur: Non-technical entrepreneurs are those who are

not concerned with the technical aspects of the product or service in which they
deal. They are concerned only with developing alternative marketing and
promotional strategies for their product or service.

Professional Entrepreneur: Professional entrepreneur is an entrepreneur who is

interested in establishing a business but does not have interest in managing it after
establishment. A professional entrepreneur sells out the existing business on good
returns and starts another business with a new idea. Such an entrepreneur is
dynamic and conceives new ideas to develop alternative projects
According to Motivation: Motivation is the main force that promotes the
efforts of the entrepreneur to achieve his goals. An entrepreneur is motivated to
achieve or prove his excellence in their performance. According to motivation we
can classify entrepreneur as:

Pure Entrepreneur: A pure entrepreneur is the one who is motivated by

psychological economical, ethical considerations. He undertakes an entrepreneurial
activity for his personal satisfaction in work, ego or status.
Induced Entrepreneur: This type of entrepreneur is one who induced to
take up an entrepreneurial task due to the policy reforms of the government that
provides assistance, incentives, concessions and other facilities to start a venture.
Most of the small scale entrepreneurs belong to this category and enter business due
to financial, technical and several other facilities provided to them by the various
agency of Govt. to promote entrepreneurship. Today, import restrictions and
allocation of production quotas to small units have induced many people to start a
small scale unit.
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 products for the use of consumers. They are motivated through
reward like profit
According to Growth: The industrial units are identified as high growth,
medium growth and low growth industries and as such we have ‘Growth
Entrepreneur’ and ‘Super Growth Entrepreneur.’

Growth Entrepreneur: He necessarily takes up a high growth industry and

chooses an industry which has sustained growth prospects. Growth entrepreneurs
have both the desire and ability to grow as fast as large as possible.

Super-Growth Entrepreneur: This category of entrepreneurs is those who

have shown enormous growth of performance in their venture. The growth
performance is identified by the high turnover of sales, liquidity of funds, and
profitability.
According to Entrepreneurial Activity: Based on entrepreneurial activity,
entrepreneurs are classified as novice, serial, and portfolio entrepreneur.

Novice Entrepreneur: A novice is someone who has started his/her first

entrepreneurial venture. A novice entrepreneur is an individual who has no prior
business ownership experience as a business founder, inheritor of a business, or a
purchaser of a business. It is not similar to early starter; a novice can also be a 50
year old with over 25 years of experience in the industry.

A Serial Entrepreneur: A Serial Entrepreneur is someone who is devoted to one

venture at a time but ultimately starts many. It is the process of starting that excites
the starter. Once the business is established, the serial entrepreneur may lose interest
and think of selling and moving on.

Portfolio Entrepreneur: A portfolio entrepreneur is an individual who retains an

original business and builds a portfolio of additional businesses through inheriting,
establishing, or purchasing them. A portfolio entrepreneur starts and runs a number
of businesses. It may be a strategy of spreading risk or it may be that the
entrepreneur is simultaneously excited by a variety of opportunities. Also, the
entrepreneur may see some synergies between the ventures.
 Other Entrepreneurs:

 First-Generation Entrepreneurs: This category consists of those

entrepreneurs whose parents or family had not been into business and was
into salaried service. The booming economy of India has led to a multitude
of business opportunities, and with deregulation, it has become easier to
setup businesses. Also, with a change in the mindset of the middle class, it
is now more acceptable to become an 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 businesses which go well along with the changing scenario in the
market and suits the current marketing needs.
Nascent Entrepreneur: A nascent entrepreneur is an individual who is in the
process of starting a new business.

Habitual Entrepreneur : A habitual entrepreneur is an individual who has

prior business ownership experience. The nascent entrepreneur can either be a
novice or a habitual entrepreneur.

Lifestyle Entrepreneurs: Lifestyle entrepreneurs have developed an enterprise

that fits their individual circumstances and style of life. Their basic intention is to
ear an income for themselves and their families.

Copreneurs: It is related to the married couples working together in a business.

When a married couple share ownership, commitment and responsibility for a’
business, they are called “copreneurs”. As copreneurs, couples struggle in ventures
to establish equality in. their relationships. Such couples represent the dynamic
interaction of the systems of love and work.

IT Entrepreneurs: IT entrepreneurs are creating a new business platform that

takes them straight to the top. They are confident, ambitious innovative and
acquired creativity in the competitive global environment and created a niche of
their self. They are the brave new bunch of entrepreneurs who are raring to take on
the world of information technology.
Social Entrepreneur: Social entrepreneur is one who recognizes the part of
society which is stuck and provides new ways to get it unstuck. Be it dedicated
efforts for child upliftment, fighting for the conservation of Assam’s rainforests,
working for the betterment of the blind or initiatives to empower women, the
entrepreneur’s passion is very strong. Freedom, wealth, exposure, social mobility
and greater individual confidence are driving this huge wave of social innovation
and entrepreneurship. After all are tired with the Inefficiency of governments and
the indifference of corporate, and want to make a change and this is the case
everywhere.

Forced Entrepreneurs: The money-lenders of yesterday, who are thrown out of

their family business because of government legislation, the neo rich Indians
returning from abroad and the educated unemployed seeking self-employment form
this class of entrepreneurs.
Individual and Institutional Entrepreneurs: In the small scale sector
individual entrepreneurs are dominant. Small enterprises outnumber the large ones
in every country. Such entrepreneurs have the advantage of flexibility, quick
decision making. But a single individual can establish, operate and control an
organization up to a limit. Thereafter, it becomes necessary to institutionalize
entrepreneurship. The business will have to acquire a number of new
entrepreneurial skills through a corporate body.

Entrepreneurs by Inheritance: At times, people become entrepreneurs when

they inherit the family business. In India, there are a large number of family
controlled business houses. Firms in these houses are passed from one generation to
another.