ENTREPRENEURSHIP DEVELOPMENT

UNIT II

Syllabus - Unit II:

• Entrepreneurial growth : Factors -Economic factors, non-economic factors,
Government actions;

• Entrepreneurial competencies –meaning, major competencies, developing

competencies;

• Entrepreneurship Development Programs (EDPs) -Need, objectives, course

content of EDPs, phases of EDPs, evaluating EDPs.

Previous Years’ Question :

Summer 2019
2.(a)State the economic and noneconomic factors influencing entrepreneurial growth.8

(b)Explain the term 'Entrepreneurial Competencies'.8

OR

(c)Write the objectives and contents of EDP (Entrepreneurship Development Programme).8

(d)Explain phases of EDP (Entrepreneurship Development Programme).

5. b)Write Govt's role in entrepreneurial growth.

Winter 2018
2.(a)What are the non-economic factors contributing entrepreneurial growth ?8

(b)What are the major entrepreneurial competencies ?8

OR

(c)Appreciate the need for entrepreneurship development programs.8

(d)Explain the course contents of entrepreneurship development programme.

5. (b)Evaluation of EDP.

Notes by- Richa Singh

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Entrepreneurial growth: Factors Affecting Entrepreneurship:

Entrepreneurship is a complex phenomenon influenced by the interplay of a wide variety of

factors. Some of the important factors are listed below:

Economic Factors

Economic environment exercises the most direct and immediate influence on entrepreneurship.
The economic factors that affect the growth of entrepreneurship are the following:

1. Capital
Capital is one of the most important factors of production for the establishment of an enterprise. Increase
in capital investment in viable projects results in increase in profits which help in accelerating the process
of capital formation. Entrepreneurship activity too gets a boost with the easy availability of funds for
investment. Capital is therefore, regarded as lubricant to the process of production.

2. Labor
Easy availability of right type of workers also effect entrepreneurship. The quality rather than
quantity of labor influences the emergence and growth of entrepreneurship. The problem of labor
immobility can be solved by providing infrastructural facilities including efficient transportation.

3. Raw Materials
The necessity of raw materials hardly needs any emphasis for establishing any industrial activity
and its influence in the emergence of entrepreneurship. In the absence of raw materials, neither
any enterprise can be established nor can an entrepreneur be emerged.

4. Market
The role and importance of market and marketing is very important for the growth of
entrepreneurship. In modern competitive world no entrepreneur can think of surviving in the
absence of latest knowledge about market and various marketing techniques. The size and
composition of market both influence entrepreneurship in their own ways.

5. Infrastructure
Expansion of entrepreneurship presupposes properly developed infrastructure, communication
and transportation facilities. It not only helps to enlarge the market, but expand the horizons of
business too.

Non-Economic Factors
1. Education
Education enables one to understand the outside world and equips him with the basic knowledge
and skills to deal with day-to-day problems. In any society, the system of education has a
significant role to play in inculcating entrepreneurial values.

2. Attitude of the Society

A related aspect to these is the attitude of the society towards entrepreneurship. Certain societies
encourage innovations and novelties, and thus approve entrepreneurs’ actions and rewards like
profits. Similarly, some societies have an inherent dislike for any money-making activity.
Notes by- Richa Singh
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3. Personality Factors:
Personal factors, becoming core competencies of entrepreneurs, include:
(a) Initiative (does things before being asked for)
(b) Proactive (identification and utilisation of opportunities)
(c) Perseverance (working against all odds to overcome obstacles and never complacent with
success)
(d) Problem-solver (conceives new ideas and achieves innovative solutions)
(e) Persuasion (to customers and financiers for patronisation of his business and develops &
maintains relationships)
(f) Self-confidence (takes and sticks to his decisions)
(g) Self-critical (learning from his mistakes and experiences of others)
(h) A Planner (collects information, prepares a plan, and monitors performance)
(i) Risk-taker (the basic quality).

Factors Impacting Emergence of Entrepreneurship (Barriers to Entrepreneurship):

1. Political Factors
Political factors play a huge role in the development of entrepreneurship in a given geographical
area. This is because politicians decide the type of market that is in place. The market could be
capitalistic, communist or some countries have adopted a mixed economy. Each of these three
markets has very different implications for the way in which entrepreneurs are required to
function. Capitalism requires breakthrough innovation whereas communism requires
entrepreneurs to be well connected with the political class. Therefore, it has been observed that
the more capitalistic any country is, the more entrepreneurship flourishes in the region.

2. Legal Factors
Entrepreneurs are dependent upon law for a wide variety of factors. The strength and fairness of
the legal system of a nation affect the quality of entrepreneurship to a large extent. This is
because entrepreneurs require a wide variety of legal services to function. For instance,
entrepreneurs would require the courts to enforce the contracts that were entered to between
parties. In many countries such contracts are not enforceable and therefore the resultant risk
prohibits the development of entrepreneurship. Then again, the entrepreneurs are dependent on
the courts for the protection of their property rights. Also, many advanced countries have noticed
that the provision of declaring bankruptcy has been positively associated with the development of
entrepreneurship. Entrepreneurs do fail a few times before they find the right innovation that
leads to their success. The United States is amongst the countries with the highest rate of
entrepreneurial development and it is also known to have one of the most advanced bankruptcy
laws! Even business legends like Henry Ford had declared bankruptcy in their early days.

3. Taxation
The government can also influence a high degree of control on the market through provisions of
taxation. Some amount of taxation is necessary for the government to maintain the legal and
administrative systems in place for the entire economy. However, a lot of times governments
resort to excessive taxation. They usually adopt the policy of beggaring the rich and giving it off to
the poor. This goes against the basic tenets of entrepreneurship which believes in survival of the
fittest. Therefore, countries where tax regimes are restrictive find an outflow of entrepreneurs.

Notes by- Richa Singh

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4. Availability of Capital
The degree to which the capital markets of a nation are developed also play a huge role in the
development of entrepreneurship in a given region. Entrepreneurs require capital to start risky
ventures and also require instant capital to scale up the business quickly if the idea is found to be
successful. Therefore, countries which have a well developed system of providing capital at every
stage i.e. seed capital, venture capital, private equity and well developed stock and bond markets
experience a higher degree of economic growth led by entrepreneurship.

5. Labour Markets
Labour is an important factor of production for almost any kind of product or service. The fortunes
of the entrepreneurs are therefore dependent on the availability of skilled labour at reasonable
prices. However, in many countries labour has become unionized. They demand higher wages
from the entrepreneurs and prohibit other workers from working at a lower price. This creates an
upward surge in the costs required to produce and as such has a negative effect on
entrepreneurship.
With the advent of globalization, entrepreneurs have witnessed the freedom to move their
operations to countries where labour markets are more favourable to them. This is the reason
why countries like China, India and Bangladesh have witnessed a huge rise in entrepreneurial
activity in their countries.

6. Raw Materials
Just like labour, raw material consisting of natural resources is also an essential product required
for any industry. In some countries this raw material is available through the market by paying a
fair price. However, in some countries seller cartels gain complete control over these natural
resources. They sell the raw materials at inflated prices and therefore usurp most of the profit
that the entrepreneur can obtain. Therefore, countries where the supply of raw material faces
such issues witness depletion in the number of entrepreneurial ventures over time.

7. Infrastructure
Lastly, there are some services which are required by almost every industry to flourish. These
services would include transport, electricity etc. Since these services are so basic, they can be
referred to as the infrastructure which is required to develop any business. Therefore, if any
country focuses on increasing the efficiency of these services, they are likely to impact the
businesses of almost all entrepreneurs in the region. Therefore, countries which have a well
developed infrastructure system witness high growth of entrepreneurship and the opposite is also
true.

Notes by- Richa Singh

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Government actions:

The Government by its actions or failure to act also does influence both the economic and non-
economic factors for entrepreneurship. Any interested Government in economic development
can help through its clearly expressed industrial policy; promote entrepreneurship in one way or
other.

By creating basic facilities, utilities and services, the Government can create a facilitative set up to
establish enterprises by the entrepreneurs. Development of industrial estates, export promotion
zones, special economic zones, etc. aims at, among other things, to create a facilitative
environment for establishing enterprises in these areas.

Similarly, the Government can also encourage prospective entrepreneurs to establish enterprises
by providing them various incentives and concessions to offset the initial costs involved in
establishing enterprises.

As a result, there has been continuous growth in the number of MSMEs in the country.
Government’s such measures minimize the risk involved in setting up enterprises, on the one
hand, and encourage the prospective entrepreneurs to plunge into entrepreneurial career, on the
other.

One way of examining the role of Government in influencing entrepreneurship may be the extent
to which the Government is a competitor with entrepreneurs from private sector. The greater the
extent of this competitive role, the less favourable the opportunity conditions for private
entrepreneurship will be.

THE CONCEPT OF ENTREPRENEURIAL COMPETENCY

Definitions of competency may be drawn from the domain of knowledge, skill, attitude and
performance indicators. The term competency has a number of definitions which depend on the
specific task to be performed by individuals under different conditions.

Entrepreneurial competencies are defined as underlying characteristics possessed by a person

which result in new venture creation, survival, and/or growth
The business operation is considered to be very complex in a competitive business environment
which is constantly changing with fast technological advancements. An entrepreneur is expected
to interact with these environmental forces which require him to be highly competent in different
dimensions like intellectual, attitudinal, behavioural, technical, and managerial aspects.
Entrepreneurs are therefore permanently challenged to deploy a set of competencies to succeed
in their entrepreneurial endeavours.

Notes by- Richa Singh

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Major competencies:

These 10 competencies are:

 Opportunity-seeking and initiative

Entrepreneurs seek opportunities and take the initiative to transform them into business
situations.
 Persistence
When most people tend to abandon an activity, successful entrepreneurs stick with it.
 Commitment
Entrepreneurs keep their promises, no matter how great the personal sacrifice.
 Demand for efficiency and quality
Entrepreneurs try to do something better, faster or cheaper.
 Taking calculated risks
Taking calculated risks is one of the primary concepts in entrepreneurship.
 Goal setting
This is the most important competency because none of the rest will function without it.
Entrepreneurs set goals and objectives which are meaningful and challenging.
 Information seeking
Entrepreneurs gather information about their clients, suppliers, technology and
opportunities.
 Systematic planning and monitoring
Systematic behaviour means acting in a logical way. Planning is deciding what to do.
Monitoring means checking.
 Persuasion and networking
Entrepreneurs influence other people to follow them or do something for them.
 Independence and self-confidence
Entrepreneurs have a quiet self-assurance in their capability or potential to do something.

Developing Entrepreneurial Competencies

How to develop and sharpen the entrepreneurial competency is suggested in four steps:

1. Competency Identification and Recognition

2. Competency Assessment

3. Competency Mapping

4. Development Intervention

Notes by- Richa Singh

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1. Competency Identification and Recognition:

Acquisition of a new behavior like entrepreneurial behaviour begins with understanding,

identifying and recognizing of what entrepreneurial behaviour means. In other words, the first
step involved in developing the entrepreneurial competency is first to identify and recognize the
set of competencies required to effectively behave like an entrepreneur.

2. Competency Assessment:

Once the set of competencies is identified and recognized to behave like an entrepreneur, the
next step is now to see what entrepreneurial competencies the person actually possesses. In other
words, the actual competencies possessed by an entrepreneur are examined against the required
set of competencies to effectively behave or act like an entrepreneur.

Where one stands with respect to a set of required competencies to act like an entrepreneur or
what is the level of one’s competence can be ascertained by asking the relevant questions to a
competence.

3. Competency Mapping:

Now, the actual competencies possessed by an entrepreneur are compared with the
competencies required to become a successful entrepreneur to ascertain the gap in the
entrepreneurial competencies of an entrepreneur (Cooper 2000). This is called in the human
resource training and development lexicon as ‘Competency Mapping.’ In other words, this is just
like ‘training needs identification’ in case of HR training.

This is presented as follows:

4. Development Intervention:

After understanding, internalising and practicing a particular behaviour or competence, one needs
to make an introspection of the same in order to sharpen and strengthen one’s competency. This
is called ‘feedback’.

In simple terms, feedback means to know the strengths and weaknesses of one’s new behaviour.
This helps one know how the new behaviour has been rewarding. This enables one to sustain or
give up the exhibition of a particular behaviour or competence in his future life.

Notes by- Richa Singh

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Entrepreneurship Development Programs (EDPs)
Meaning:

As the term itself denotes, EDP is a programme meant to develop entrepreneurial abilities among
the people. In other words, it refers to inculcation, development, and polishing of entrepreneurial
skills into a person needed to establish and successfully run his / her enterprise. Thus, the concept
of entrepreneurship development programme involves equipping a person with the required skills
and knowledge needed for starting and running the enterprise.

National Institute of Small Industry Extension Training (NISIET), Hyderabad defined EDP as “an
attempt to develop a person as entrepreneur through structural training.

The main purpose of such entrepreneurship development programme is to widen the base of
entrepreneurship by development achievement motivation and entrepreneurial skills among the
less privileged sections of the society.”

TiE, VIA, CII, MIA, VMA, FICCI, MCED, Educational institutions organise EDPs.

Need for Entrepreneurship Development Programs (EDPs)

Following are the various needs for EDPs:

(i) Eliminates Poverty and Unemployment:

One of the important problems of any developing country is unemployment. The problem of
poverty is severe and of longstanding duration in India, and is at its most acute in rural areas.

(ii) Balanced Regional Development and Growth:

One of the objectives of setting up of public enterprises is to promote balanced regional

development. It can be possible through the expansion of the employment opportunities in
backward regions.

(iii) Prevents Industrial Slums:

Slums are an outcome of imbalanced urban growth resulting from over-concentration of

economic activities. As per the census 2001, 42.6 million of India’s population lives in slums. EDPs
help in removal of industrial slums as the entrepreneurs are provided with various schemes,
incentives, subsidies and infrastructural facilities to set up their own enterprises in all the regions.

(iv) Harnessing Locally Available Resources:

Since abundant resources are available locally, proper use of these resources will help to carve out
a healthy base for sound economic and rapid industrialisation. The EDPs can help in harnessing
these resources by training and educating the entrepreneurs.

Notes by- Richa Singh

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(v) Defuses Social Tension:

Self-employment and entrepreneurship become increasingly important in our modern economies.

Many people have an ambition to “run their own business”, and these days more people than
ever are starting up their own businesses. With redundancies on the increase in the recession,
many people will take the chance of “working for themselves” and will relish the opportunity of
being their own boss and not being answerable to anybody else.

(vi) Capital Formation:

Getting equity from family and friends has many advantages over other types of financing.
Entrepreneurship development programmes helps an individual to raise capital to start a business
or to grow an existing business.

(vii) Improvement in per Capita Income:

Entrepreneurs play a vital role in achieving a higher rate of economic growth. Entrepreneurs are
able to produce goods at lower cost and supply quality goods at lower price to the community
according to their requirements. When the price of the commodities decreases, consumer gets
the power to buy more goods for their satisfaction. All this are possible through entrepreneurship
development programmes.

(viii) Facilitating Overall Development:

Entrepreneurship development programmes are great and successful in India. If everything goes
in proper channel with proper judgment, it will flourish to fill up the sky. Entrepreneurship
development programmes inspires innovations, creative ideas and provide new solution to the
problems.

Objectives-

Entrepreneurship Development Programme (EDP) in India has many objectives.

(1) Develop and strengthen their entrepreneurial quality/motivation;

(2) Analyse environment related to small industry and small business;

(3) Select project/product;

(4) Formulate projects;

(5) Understand the process and procedure of setting up of small enterprise;

(6) Know and influence the source of help/support needed for launching the enterprise;

(7) Acquire the basic management skills;

Notes by- Richa Singh

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(8) Know the pros and cons of being an entrepreneur; and

(9) Acquaint and appreciate the needed social responsibility/entrepreneurial disciplines.

Further some of the other important objectives of entrepreneurial training are:

1 To prepare him for accepting totally unforeseen risks of business after such training.

2 To enable him to take strategic decisions

3 To communicate fast, clearly and effectively

4 To develop a broad vision to see the business as a whole and to integrate his function with it.

5 To strengthen his integrity, honesty, and compliance with law, the key to success in the long
run.

Course content of EDPs:

The course contents of an EDP should be formulated as per the objectives of the EDPs.

It should consist of the following:

1. General Approach to Entrepreneurship:

The participants should be given exposure about the conceptual framework of entrepreneurship
role, expectation, Entrepreneurial environment etc. Innovative behaviour related issues should be
focused to enlighten the entrepreneurs about their future challenges and prospects. Besides,
development agencies should try to design appropriate strategies enabling the potential
entrepreneur to tackle different risk inherent in an innovation activity.

2. Motivational Training:

Motivational training inputs are meant for developing the motivation of potential entrepreneurs
and their enterprise building skills. Besides, motivational inputs also include psychological games,
tests, goal setting exercises, role play etc.

The motivational inputs will be aimed at increasing the participants, understanding of the
entrepreneurial personality and entrepreneurial behaviour and bring about through self-study,
changes in self-concept, value, skills thereby leading to positive entrepreneurial behaviour.

3. Developing Management Skills:

Prospective entrepreneurs should be given exposure in different types of management problems.

It would sharpen their management skills. The management problems take different forms and
the management patterns are peculiar to the situation. So, training for exposing managerial skills
will be arranged in keeping the situational requirements. However, managerial aspects should
Notes by- Richa Singh
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include production planning, labour laws, cost analysis, financial accounting, selling arrangements,
taxation laws etc.

4. Training for Project Management:

Project inputs are required to help the potential entrepreneurs to develop their project ideas into
bankable projects. They should be given acquaintance with the industrial opportunities in the area
and also necessary guidance on product selection. Necessary knowledge about project feasibility,
viability and implementation should also be given to the potential entrepreneurs.

5. Structural Arrangement:

Training inputs also aim at familiarising the participants about the proposed structural
arrangement for the business or industrial unit. They should be given adequate familiarisation
about government policy regarding development of industries, especially with regard to small
scale industries, registration and licensing procedures, forms of organisation like proprietary,
partnership, private company and Joint Stock Company, institutional setup etc.

6. Support System:

In most of the cases, participants are generally first generation entrepreneurs and they do not
know about the government and institutional support system. Support system may also be used
as motivational inputs to encourage the participants about their future prospects. They should be
familiarised with the incentives/concessions available, tax-incentives, tax holiday, backward/zero
industries districts concessions, soft loan scheme, special schemes for technicians etc.

This should be followed by acquainting them with procedure for approaching government
departments and agencies, applying for and obtaining these concessions from them.

7. Factory Visits/In-Plant Training:

Practical exposure is also necessary. Depending upon their products the potential entrepreneurs
may feel the need to gain more knowledge about the production process etc. by visiting some of
the similar units in production. For this purpose, factory visits may have to be arranged.

Similarly, entrepreneurs who select relatively sophisticated products will be expected to have a
good idea of the product and the process facilities should be arranged for in-plant training or
prototype development on exceptional basis.

Notes by- Richa Singh

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The Kakinada Experiment-

In January, 1864, a full-fledged training was organized by David McClelland at Kakinaka (Andhra
Pradesh) an industrial town with high literacy with a total intake of 52 persons drawn from
business & industrial community. The objectives of such programme were;

1. To induce achievement motivation.

2. To break the barrier of limited aspirations.

They were given orientation through the Small Industries Extension & Training Institutes (SIET),
Hyderabad. The Achievement Motivation Training (AMT) included the following basis which were
supposed to be accomplished by the trainees. The entrepreneurs attending the programme were
encouraged to introspect, their imagination stimulated so that they could develop community
goals & achieve personal motivation.

Four main items constituted the achievement development course.

1. The trainee entrepreneurs were asked to control day dreaming & develop a positive
attitude among themselves.
2. The participants imagined themselves in need & the challenge set before themselves was
to have realistic & carefully planned goals.
3. They tried to attain concrete & frequent feedback.
4. They watched models – heroes who performed well & tried to imitate them.

McClelland introduced TAT ( thematic appreciation test) where vague pictures were shown.
The trainees were asked to interpret what they saw & explain what was happening in the picture.
Achievement related themes were then counted & the final score showed the individuals desire
for high achievement.

This training tries to encouraged those who have great desire to achieve something in life
faster. The trainees exhibited a more active business behavior & to achieve they asked for longer
hours too. This Kakinada experiment is used to set up new enterprises. This is part of EDP which
trains the entrepreneurs.

Notes by- Richa Singh

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Phases of EDPs:
1) Initial or Pre-training Stage.
2) Training or Development stage.
3) Post-training or Follow-upstage.

(1)INITIAL OR PRE-TRAINING STAGE:-This stage includes the activities and the preparation
required to launch the training programme. Thus, it involves the identification and selection of
potential entrepreneurs and providing initial motivation to them. The main activities are:
 Creation of Infrastructure for training,
 Preparation of training syllabus.
 Tie up of guest faculties
 Arrangement for inauguration of the programme
 Designing tools and techniques for selecting the trainees,
 Formation of selection committee
 Publicity Campaign For The Programme
 Development of Application form

(2) TRAINING OR DEVELOPMENT STAGE:-In this stage the training programme is implemented to
develop motivation and skills among the participants.
The training of potential entrepreneurs covers special inputs such as,
behavioral inputs (achievement motivation) and business opportunity guidance, information and
technical inputs and managerial inputs.
The trainers have to judge how much, and how far the trainees have moved in their
entrepreneurial pursuits.
Most of the business inputs can be given through management/professional consultants,
practitioners, business and industrial executives, experts of state industrial agencies, bankers,
technical consultancy institutions and small-scale entrepreneurs.
In-house care teams can also be formed from the group of trainers or experts where resource
persons from industry and trade are not locally available.
Field trips to selected industrial units can also be arranged to expose trainees to actual operating
conditions.

(3)POST-TRAINING OR FOLLOW-UP STAGE

This stage involves assessment to judge how far the objectives of the programme have been
achieved. Each group of entrepreneurs in an entrepreneurship programme can be looked after by
the entrepreneur trainer-motivator. This involves:

 Follow-up on loan application for finance,

 Facilitating infrastructure such as land, factory shed, power, road, etc and finally,
 Trouble shooting

Evaluating EDPs:

Criteria to assess the effectiveness of EDPs in motivating the entrepreneurs:

Notes by- Richa Singh

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(i) Activity level of the respondents.

(ii) New enterprise creation.

(iii) Employment generation in quantifiable terms.

(iv) Creation of job opportunities both directly and indirectly.

(v) Increase in sales and profit.

(vi) Enterprise expansion.

(vii) Enterprise transformation.

(viii) Improvement in quality of products or services.

(ix) Repayment of loans.

(x) Total investments made.

(xi) Investments in fixed assets made.

(xii) Number of people employed.

+++++++++++++++++++++++++++END++++++++++++++++++++++++++++++++++

Notes by- Richa Singh

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