1 Entrepreneur and Entrepreneurship 11 INTRODUCTION Entrepreneur is an Economic Agent who plays a vital role in the economic development of a country. Economic development of a country refers steady growth in the income levels. This growth mainly depends on its entrepreneur. An entrepreneur is an individual with knowledge, skills, initiative, drive and spirit of innovation who aims at achieving goals. An entrepreneur identifies ‘opportunities and seizes opportunities for economic benefits. Entrepreneurship is a dynamic activity which helps the entrepreneur to bring changes in the process of production, innovation in production, new usage of materials, creator of market etc. It is a mental attitude to foresee risk and uncertainty with a view to achieve certain strong motive. It also means doing something in a new and effective manner. 12 THE CONCEPT OF ENTREPRENEUR The word “Entrepreneur” is derived from the French verb entrepredre. It means to undertake. In the early 16th century, the Frenchmen who organised and led military expeditions were referred as ‘Entrepreneur’, In the early 18th century French economist Richard Cantillo used the term entrepreneur to business. Since that time the word entrepreneur means one who takes the risk of starting @ new organisation or introducing a new idea, product or service to society. According to J.B. Say, “An Enwrepreneur is the economic agent who unites all means of production, land of one, the labour of another and the capital of yet another and thus produces @ 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”. Thus an Entrepreneur is an organiser who combines various factors of Production to produce a socially viable product.2__Entrepreneurship Development According to Joseph Schumepeter, “An entrepreneur in an advanced econo is an individual who introduces something new in the economy a method of Production not yet tested by experience in the branch of manufacture con. cerned, a product with which consumers are not yet familiar, a new source of raw material or of new markets and the like”. The functions of an entrepreneur. ship according to Schumepetér 1. Introduction of a new product, 2. Introduce. tion of methods of production, 3. Developing new markets and finding fresh source of raw materials, and 4. Making changes. According to Cantillon “An entrepreneur is the agent who buys factors of production at certain prices in order to combine them into a product with g view to selling it at uncertain prices in future”. To conclude an entrepreneur is the person who bears risk, unites various factors of production, to exploit the perceived opportunities in order to evoke demand, create wealth and employment. 1.3 CHARACTERISTICS OF AN ENTREPRENEUR ‘An entrepreneur is a highly achievement oriented, enthusiastic and energetic individual, who has following characteristics. 1. Entrepreneurs are action oriented, highly motivated individuals who takes risks to achieve goals. 2. Entrepreneurs will have unwavering determination and commitment. They ate creative and result-oriented. They work hard in return for personal and financial rewards. 3. Entrepreneur accept responsibilities with enthusiasm and endurance. 4. Entrepreneurs have self-confidence, they are dedicated, setting self deter- mined goals and markets for their ideas responding to existing market. 5. Entrepreneurs are both thinkers and doers, planners and workers. ). Entrepreneurs can forsee the future, as a salesman’s persuasiveness, @ financial talent for manipulating funds, as an auditors precision etc. 7. Entrepreneur depends on the intelligence, imagination and strength of purpose of the individual. 14 QUALITIES OF AN ENTREPRENEUR Essential qualities of entrepreneurs are as follows: 1. Success and Achievement: The entrepreneurs are self determined to achieve ‘high goals in business, this achievement motive strengthened them to surmount the obstacles, suppress anxieties, repair misfortunities and de- sire expedients, to run a successful business. 2. Risk Bearer: Entrepreneur accept risk they select a moderate risk situa- a rather than gambling or avoiding risk, they understand and manage risk. 3. Opportunity Explorer: Always entrepreneur identifies opportunities. He Seize opportunity and convert them into realistic achievable goals.Entrepreneur and Entrepreneurship 3 4. Perseverance: Entrepreneut make extreme efforts and work hard till the goal is successfully accomplished. They are deterred by uncertainities risks and difficulties coming in the way of achievement of ultimate goal S. Facing Uncertainity: Achievement oriented people tend to tackle an un- familiar but interesting situation. They go ahead with solutions for the problems even without the guidelines. 6. Feedback: Entrepreneur like to have prompt immediate feedback of their performance. 7. Independence: Entrepreneut like to be theit own master and want to be responsible for their own decision. An entrepreneur is a job giver and not a job seeker. 8. Flexibility: Entrepreneur makes decisions based on the prevailing situa- tions. Successful entrepreneur do not hesitate in revising their decision. Entrepreneur is a person with open minds not rigid. 9. Planner: Entrepreneur frames realistic business plans and follows them rigorously to achieve the objectives ina stipulated time limit. 10. Self Confidence: Entrepreneur directs his abilities towards the accom- plishment of goals with the help of his strengths and weaknesses. 11. Motivator: Entrepreneur influence and initiate people and make them think in his way and act accordingly. 12. Stress Taker: Entrepreneur as a focal point he will make many right- decisions which may involve lot of physical and emotional stress. He keeps cool under a lot of tension while decision making. Above discussed qualities determines entrepreneurs are born not made. In other words business family background, knowledge and skills, education and experience is essential for a successful entrepreneur. 15 DISTINCTION BETWEEN AN ENTREPRENEUR AND A MANAGER Point or Entrepreneur ‘A Manager Reve 1. Goal “An entrepreneur starts aven- But the main aim of a man- Management ture by setting up anew en- _ager is to render his service terprise for his personal in an enterprise already set up gratification by someone. : 2. Status Entrepreneur is the owner of ‘A manager is the servant in ‘enterprise. the enterprise. — 3, Risk ‘An entrepreneur bears all ‘A manager being a servant uncertainity in- does not bear any risk in- crore petnbeeeT |. Rewards “Entrepreneur for his risk A manager receives as . ‘bearing role he receives prof- eae4 Bnerepreneurship Development ee “Point or Entrepreneur A Mea Ber hot only uncertaln which is fixed an I ix pe ritregular but can at times evar te pan ry be negative ote AS an innovator he is called A mana tahtne® Agent who intro. the cep ml Cn duces goods and services to manager translates 9, M8 4 meet changing needs of the " S the j customer. into practice, ideag 1.6 FUNCTIONS OF AN ENTREPRENEUR An entrepreneur Performs all the Necessary functions whi ich , the point of view of expansion of the enterprise, Te Sse frp 5. Innovation Functions of Entrepreneur 1 ee i ae Primary Other functions Functions important for function developing countries 1. Planning 1. Diversification of 1. Management of share 2. Organisation production Tesource 3. Decision making 2, Expansion of the 2. Dealing with public 4. Management enterprise bureaucracy 5. Innovation 3. Maintaining cordial emp- 3, Acquiring and 6. Risk bearing loyer and employee relations assembly of the factory 7. Uncertainity 4. Tackling labour problem 4. Engineering bearing 5. Co-ordination with outside 5. New product agencies 6. Parallel opportunities 7. Marketing 8. Management 9. Customer relation 10. Public bureaucracy Entrepreneur performs various primary functions from the mae mare an enterprise to its success level. These functions are in the sequenti i 1. Planning: Planning is the first step in the direction of sine . enterprise. He prepares blue print of proposed project in a formal ne rr format. It is submitted to the authorities concerned for obtaining sanction for the venture. 3 Planning process involves the following steps: a. Scanning of the best suitable idea. b. Selection of product line.Entrepreneur and Entrepreneurship _5 c. Determination of type of business organisation (Individual or partnership, or corporate) Estimation of the capital needed. Selection of capital resources. Selection of location | Studying the government, rules, regulation and policies. Selecting the way to fulfill the govt. formalities. . Study of availability of labour force. Study of market and market strategy to be adopted. 2 Organisation: An entrepreneur co-ordinates assembles and supervises land, labour and capital during the promotion stage and at the performance stage, for optimum utilisation of the resources. Efficient expansion and growth of the enterprise largely depends on the efficiency of the organisational net- work employed and monitored by the entrepreneur. 3. Decision Making: Aruther H. Cole has described the entrepreneur as a Gecision maker. As a decision maker he takes various decisions regarding following matters: ‘a. Determination of the business objectives of the enterprise. b. Decision regarding procurement of machine, material, men, money and market. c. Decision regarding requisition of efficient technology and new equip- ments. 4. Decision regarding development of a market for the product. e. Maintenance of good relations with public authorities and with society at large. 4. Management: The management with reference to entrepreneur stands for not only the working of the venture but also managing of the day-to-day problems. It includes future expansion and policies in the long run. Direction of men, machine, material, money, organising of land, labour and capital for the enter- prise. 5, Innovation: Implies “doing of new things or doing of things that are already being done in a new way". Schumepeter considered economic development as a desire dynamic change brought by entrepreneur by instituting new combina- tions of production. According to him innovation may occur in any one of the following five forms. a. Launching of new product in the market b. Introduction of new technology in the production c. Creation of new market 4. Discovery of new and better source of raw-material €. Creation of monopoly or breaking up monopoly. 6. Risk bearing: An entrepreneur undertakes the responsibility for loss that may arise due to unforeseen contingencies in future. He guarantees interest to creditors, wages to labour and rent to the landlord and risk can be insured. 7. Uncertainity bearing: Risk which cannot be insured against and it is incaleu- lable. Entrepreneur bears uncertainity refers to the uncertain trends of market, FE moeEntrepreneurship Development trade credits etc. which by its nature cannot be insured, nor salaried too. “ADitay Besides the above functions, the entrepreneur has per to Perfo, 4 Activities at the later stage ™m 1. Diversification of production ms, 2. Expansion of the enterprise 3. Maintaining cordial employer-employee relations 4. Tackling of labour problems 5. Co-ordination with out side agencies, The functions of an entrepreneur with reference to the Uunderdey, 1 tries include wide range of activities has been provided by Kilby, “Py, 1. Management of scarce resources 2. Dealing with public bureaucracy (concessions licenses, taxesy 3. Acquiring and Overseeing assembly of the factory 4. Industrial designing and engineering 5. Marketing of product and responding to competitions, 6. Industrial new product 7. Perception of market Opportunities (novel or immitative) 8. Financial and Production management 9. Management of Customers and supplies relations. 10. Management of scarce resources, 1.7 TYPES OF ENTREPRENEUR Following are the classification of entrepreneurs on the basis of common, acteristics, a Entrepreneur L Z 7a Mt Ww A. Clarence Danhof, B. Arthur C. On the basis D. On the basis of Classification 4H. Cole of ownership scale of enterprise Classification 1 Aggressive/Innovative 1. Empirical 1, Private 1. Small scale z Immitative 2. Rational 2. Public 2. Large Scale . Fabian 3. Cognitive 4. Drone A. Clarence Danhof Classification; i Danhof classifies entre i ae ; ; Preneurs into four types, “information aYe: Innovative entrepreneur is one who assembles and synthesis es Immicative: tees new combinations of factors of production. “ner He simply fh ci lative entrepreneur is also known as adoptive entrepre- Successful ‘novation introduced by other innovators.Entrepreneur and Entrepreneurship _7 3, Fabian: The Fabian entrepreneur 1s timid and cautious. He immitates other innovations only if he is certain that failure to do so may damage his business. 4, Drone: His entrepreneurial activity may be restricted to just one or two innovations. He refuses to adopt changes in production even at the risk of reduced returns. B. Aruther H. Cole Classification: ‘Aruther H. Cole classifies entrepreneurs as 1. Empirical: He is an entrepreneur hardly introduces anything revolution- ary and follows the principle of rule of thumb. 2. Rational: The rational entrepreneur is well informed about the general economic conditions and introduces changes which look more revolutionary. 3. Cognitive: Cognitive entrepreneur is well informed, draws upon the ad- vice and services of experts and introduces changes that reflect complete break from the existing scheme of enterprise. C. Classification on the Basis of Ownership: 1. Private: Private entrepreneur is motivated by profit and it would not enter those sectors of the economy in which prospects of monetary rewards are not very bright. 2 Public entrepreneurship: In the underdeveloped countries government will take the initiative to share enterprises. D. Classification Based on the Scale of Enterprise: 1. Small scale: This classification is specially popular in the underdeveloped countries. Small entrepreneurs does not posses the necessary talents and re- sources to initiate large scale production and introduce revolutionary techno- logical changes. 2 Large scale: In the developed countries most entrepreneurs deal with large scale enterprises. They possess the financial and necessary enterprise to initiate and introduce new technical changes. The result is the developed coun- tries are able to sustain and develop a high level of technical progress. 18 CONCEPT OF ENTREPRENEURSHIP ‘The term ‘entrepreneurship’ is often used synonymously with the term “Entre- preneur’ though, they are two sides of the same coin, conceptually they are different. Entrepreneurship is the indivisible process flourishes, when the interlinked dimensions of individual psychological entrepreneurship, entrepreneur traits, Social encouragement, business opportunities, Government policies, availabil- ity of plenty of resources and opportunities coverage towards the common good, development of the society and economy. Entrepreneurship is the process of identifying opportunities in the market place, arranging the resources required to pursue these opportun and investing the resources to exploit the opportunities for long term gains. It8 Entrepreneurship Development involves creating wealth by bringii terprise. ; ea oup of associated individuals undertaken to initiate, Sue profit by production or distribution of economic Bods Ser, vid aggrandise profit by Lcd cording to Higgins “Entrepreneurship is meant the function o¢ fores ‘a new production process, raising capital, hiring ee arranging the set raw materials, finding site, introducing @ new technique, discovering in selecting top managers for day to day Operations of sources or raw materials a the enterprise.” ng together resources in ney, Ways Oy an Maintgj, Md 'Y og to The above definitions highlights risk bearing, innovating and ye organising aspects and an individual or group of people achieve goa) throug production or distribution of products or services. To conclude entrepreneurship is set of activities performed by an entree. neur thus, entrepreneur proceeds entrepreneurship. The relationship between entrepreneur and entrepreneurship is Biven in the following table. Entrepreneur Entrepreneurship person process visualiser vision organiser organisation Decision maker Decision making Innovator Innovation Risk bearer Risk bearing Motivator Motivation Creator Creation Leader Leadership Marazen Management Initiator Initiation Planner Planning Technician Seka Communicator Cor my Administrator saaicatar Administration eu and Services, ‘own that the process of entrepreneur e Say entrepreneur is what an entrepre- Characteristics of entrepreneurship. ; Peneushin eee i tion ann urship is Primarily an economic eration of an enterprise. It is basi- Of customer with the help of produe-Entrepreneur and Entrepreneurship 9 2. Organising function: An entrepreneur brings together various factors of production fot an economic use. He co-ordinates and controls the factors of production, effotts of are the persons engaged in his enterprise. 3. Innovation: Enttepreneutship is an automatic, spontaneous and creative response to changes ih the envitonment. It involves innovation of something new to cause dynamic change and spectacular success in the economy, and create conditions for growth of the economy. 4, Risk bearing capacity: Risk is an inherent and inseparable element of entrepreneurship. He assumes the uncertainity of future. An entrepreneur guar- antees rent to the landlord, wages to employees and interest to the investors in the hope of earning more than the expenses. 5. Managerial and leadership functions: An industrial entrepreneur must have additional personality traits such’as managerial and leadership skills. Mana- gerial and leadership qualities predominant orientation is in the direction of productivity, working relation and creative integration along with desire to make profit. Entrepreneurship demands tactful handling of risk and uncertainities because new commodity and its acceptability is uncertain. 6 Gap filling: The gap filling between human needs and the available products and services leads to Entrepreneurship. An entrepreneur identifies the gap and takes necessary corrective measures to fill the gap, to achieve his action oriented motive in the enterprise as an entrepreneur with the help of Entrepreneurship process. ‘Ability t0 loreate enterprise Risk bearing Fig. 1.2 Characteristics of Entrepreneurship. 1.10 SCOPE OF ENTREPRENEURSHIP Entrepreneurship and the economic development compliment each other. An economic system of country determines the nature and scope of entrepreneur- ship. Entrepreneurship can bring about drastic changes in the very structure of the economy. ; Entrepreneurship works in different ways in different economic systems such as capitalism, socialism and mixed economy . Capitalism—A capitalist economy represents free enterprise, means free- dom to save and invest, free competition, consumer sovereignty and very less interference from the government.10 Entrepreneurship Development « of the force of demand Price of the product will be determined on the basi ee Popiols all and supply with reference to cost of production. The entrepre! od. diesen the activities with reference to the process of production Mr 4 oo” Entrepreneurs play vital and prominent role in the enterpris : itor « trols domestic market by assuming the role of i comp socialist economic sys- Socialism—Private entrepreneurship is absent in 8°74. development of tem. Economic and financial experts play Te hip mainly 0 serve the soci- entrepreneurship in the system. Such ee ety not to mint money or to make profit only: by the Governmen- Central Authority in the socialism economy '* sopoiniat ee ed acters tal to make policies, frame plans and procedures for me Py eaiical tous mobilisation of resources, and mobilisation and allocati ip pete those industries of national prominence. ae system 0! entrepreneur has neither a role or responsibility. , ee iD i is characterised by co-e of Mixed Economy—The mixed economy 1s cha e both the private aa, public sectors in the same line of prodnciee Soper goods are left to the private enterprises. Government undertakes the p! ‘on of capital goods po og In a mixed economy, restrictions are placed by the Government to eliminate the problems of monopoly capitalism. Government under this type of economy curbs the growth of monopolies and encourage competition. which solve the problems of produc- Mixed economy has built-in stabilisers s of | tion, pricing and distribution in a better manner, apart from satisfying and helping in the various enterprise goals, mixed economy also helps in reducing of inequality of incomes among people, fixation of minimum wages etc. in an efficient and effective way. Thus entrepreneurship plays a great and vital role in all major economic systems. Its importance stands beyond challenges and making of huge profit in every economic system. Fig 13 Scope of EnucprencurshipEntrepreneur and Entrepreneurship 11 111 FACTORS AFFECTING ENTREPRENEURIAL GROWTH rollowing are the factors of environment affecting entrepreneurial growth. These ve ptions are grouped under two categories. 1, Economic conditions 2. Non-economic conditions 1. Economic conditions Feonomic conditions includes the capital, labour, raw: material and market. Capital: Tt is the essence: of enterprise. ‘Availability of capital facilitates mobility of land, machine, material ete. is required to produce goods. Therefore, qapital is a lubricant which smoothens the working of vehicle called enterprise. Increased capital investment, capital output ratio results in profit, which ulti- mately goes Upto capital formation. Labour: Quality and quantity of labour influence the entrepreneurship mo- bility, dexterity and immobility. Low cost labour and capital intensive technol- ogy oriented enterprises influence entrepreneurship. Raw material: Availability of raw material, nature of industrial establish- ment, technological innovation and mobility of raw material encourages OF curbs the development of entrepreneurship. ‘Market: The potential of the market constitutes the major department of probable rewards from entrepreneurial function. The size ‘and composition of vrarket monopoly in a particular product influence entrepreneurship. 2. Non-economic conditions Non-economic conditions are as follows: social conditions, psychological con- ditions and political or governmental action. Sociologists and psychologists ‘ew that the influence of economic factors on entrepreneurial emergence largely depend upon the existence of non-economic factors. Social conditions are as follows: 1. Socio-cultural norms and values . 2. Degree of approval or disapproval of entrepreneurial behavior. 3, Family background, standard of education, technical knowledge and in- formation. 4, Financial stability, caste and religious affiliation. Psychological conditions are as follows. 1. David Mcdellond’s “Theory of need achievement’—According to him a constellation of personality characteristics, and high need achievement is the major determinant of entrepreneurship. 2. Individual works in the society but remains different. 3. Impact of achievement motivation and training programmes influence development of entrepreneurship. Political/Government Action. 1. Government encourage entrepreneurship by creating basic facilities, utili- ties and services and by providing incentives and concessions,12 Entrepreneurship Development 2. Government provides the prospective entrepreneurships a facilitative Socig, economic setting. 3. Deiteprioverihip development is based on the Government interes, j, economic development of the society. .¢ of entrepreneurship, The Above discussed factors influence the oe nceally reinforcing, se factors are interlocking, mutually dependent a TION AND ENTREPRENEURSHIP ENTREPRENEURSHIP MOTIVA’ NT PROGRAMME DEVELOPME! 1.12 INTRODUCTION TO MOTIVATION entrepreneur is to secure maximum performance for Se nn pm of rs Gepends mainly on their ability to perform and willogeoes 1 isl y lity is a function of education and experience and skill. Willingness to perform motivation. apr tl ls satisfy their needs and aspirations and ambitions. Human behaviour is gov- emed by needs and desires. Entrepreneurs feel motivated when their needs and expectation are satisfied as a result of working for the enterprise. 1.13 MEANING OF MOTIVATION The term ‘motivation’ has been derived from the word motive. “Motive” may be derived as an taker state of our mind that moves or activates or energies and directs our behaviour towards our goals. Motives are expression of a person’s goals or needs. They give direction to human behaviour to achieve goals or fulfill needs, motive arouse and energize a persons activities, Motivation may be defined as a Process of stimulating someone to adopt a desired course of action. In order to intensify the willingness of a Person to work hard for achievement of organisational objectives, his motives must be satisfied by offering incentives. An incentive is something an individual per- ceives as helpful towards achieving his goals. Incentives exist to satisfy human 144 DEFINITION OF MOTIVATION eee Robert-Dubin “something that moves the person to action and continues him i the course of action already initiated”. ng to Dalton E McParland “motivation refers to the way in which Wye, drives, desir ne mee bene tives, desires at @Spirations or needs direct control or explain the