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Entrepreneurship: the word is derived from the French word Entrependne and Schumpters innovation theory: John Schumpter

ohn Schumpter an economist was the first to


the German word Uternchmen both of which refers to individuals who are put human agents at the centre of the process of economic development. To him
undertakers i.e. who can undertake risk by setting up a new enterprise. They are an entrepreneur is an innovator i.e. he has the potential to do things in a new way.
contractors who bear the risk of profit as well as loss. They are soldiers of fortune, This economic development is not a spontaneous or automatic process. It must be
adventurers or merchants. deliberately and actively promoted by some agency within the system. According to
Benefits of Entrepreneur: 1. provides opportunities for self expression and Schumpter, there are five different ways to act as an entrepreneur: 1. Introduction
realization of ones own passion of doing something new and different. 2. Offer of better quality or new product or services. 2. Introduction of new production
opportunities for growth and self development. 3. Monetary rewards are more. 4. technology. 3. Discovery of new market. 4. Discovery of new sources of supply of
he has the power of decision making. 5. Rewards of working for oneself is highly raw materials. 5. New form of organization structure in industry. -- The entrepreneur
satisfying and motivating. 6. Contributes to the development of the community as provides leadership. By nature, he is neither a technician nor a financer.
one generates employment for others. 7. Entrepreneur initiates and constitutes Entrepreneurship is not a profession nor it is the permanent occupation.
change in the economic development and structure of business. Psychologically entrepreneurs are not motivated by profits or rewards. The profits
Characteristics ENTPSHP: 1. Hardworking 2. Desire for high achievement 3. come out of the economic progress. Such kind of entrepreneurs are mostly
Highly optimistic 4. Independent 5. Have excellent foresight 6. Good organizers 7. motivated by the desire to establish a personal kingdom and the will to conquer.
Innovative 8. Excellent communication skills 9. Excellent technical knowledge 10. Criticism: 1. Conceived in the context of industrial revolution. 2. Modeled on big
Have very clear objectives 11. High risk taking capability. private enterprises and not applicable to developing countries.
Types of risk faced by entrepreneur: 1. Financial risk 2. Family and social risk 3. McClellands need for achievement theory: David McClelland an American,
Career risk 4. Psychological risk. psychologist in 1960 gave the concept of need for achievement. It is the need for
Roles of entrepreneur: 1. Combining factor of production 2. Risk acceptance. 3. achievement (also known as n-Ach) which provides drive to the entrepreneur to set
maximizing shareholders return 4. Using market information for opportunities. up a new enterprise, to achieve goals or targets, to innovate, to identify problems
Steps in the process of entrepreneurship: 1. Identifying opportunities 2. and opportunities, to take risk and most importantly to run the business
Establish vision 3. Persuade others 4. Gather resources (Capital, land and successfully. The entrepreneurs strive for personal satisfaction rather than profits or
manpower) 5. Organize these resources to develop new product 6. Create the rewards. They have a desire to do something new or something of better quality
product 7. Adapt according to market changes. that has been done before, high achievement differentiate themselves from others
Difference between Entrepreneur and Entrepreneurship: by their desire to do something better, they seek situations where they can attain
Entrepreneurship: 1. process 2. organized form of initiation 3. risk taking activity 4. personal responsibility for finding solutions to the problems. High achievers are not
innovative process 5. crux of leadership 6. decision making activity 7. planning gamblers. They take up reasonably challenging goals. They dislike succeeding by
process of a new enterprise 8. Result of a vision 9. initiating activity of setting up chance rather they like to take calculated amount of risks, they prefer the challenge
an enterprise. of working for a problem and accepting personal responsibility for success or
Entrepreneur: 1. person 2. organizer 3. risk taker 4. innovator 5. leader 6. decision failure, rather than learning outcomes to chances or action of others.
maker 7. good planner 8. a visualize 9. initiator. R. A. Sharma categorized the factors that motivate entrepreneurs into two types: 1.
Types of entrepreneurs: 1. Based on ownership {a. Pure entrepreneur b. Second Internal factors: a. Desire to achieve something. b. Educational background. c.
generation business owned entrepreneur c. Franchisee d. Owner manager} 2. Experience. 2. External factors: a. Government assistance and support. b. Easy
Based on personality Traits {a. Personal achievers b. Induced entrepreneurs c. availability of raw materials and cheap labor. c. Encouragement from big business
expert idea generators d. Real manager e. Real achievers} 3. Based on type of houses. d. Promising demands for the product.
business {a. Business enterprise entrepreneur b. Trading entrepreneur c. Industrial Hoselitzs theory of entrepreneurship based on managerial skills and
entrepreneur d. corporate entrepreneur e. Agricultural entrepreneur} 4. Based on leadership: According to him, a person desirous of becoming an industrial
use of technology {a. Technical Entrepreneur b. Non-technical entrepreneur} 5. entrepreneur, must have additional personality traits extending beyond a desire to
Based on Motivation {a. Pure entrepreneur b. Induced entrepreneur c. gather wealth in addition of being motivated by an expectation of profit. He must
Spontaneous entrepreneur d. motivated entrepreneur} 6. Based on growth {a. have managerial and leadership abilities. Financial skills have secondary role.
Growth entrepreneur b. Super-growth entrepreneur}7. Based on stages of There are 3 types of business leaders (merchant money lenders, manager type
development {a. First generation entrepreneur b. Modern entrepreneur c. Classical leader, entrepreneur type leader).
entrepreneur d. Women entrepreneur} 8. Other kinds of entrepreneurs {a. Harbisons theory of entrepreneurship as an organization building function:
Innovative entrepreneur b. Initiative entrepreneur c. Fabian entrepreneur d. Drone According to F. Harbison, organization building is the most important and critical
entrepreneur} skill needed for industrial development. Entrepreneurship is the skill which is
essential to build an organization. The crux of entrepreneurship consists in the
ability to multiply oneself by effectively delegating responsibilities to others, he lays
more emphasis on managerial skills and creativity and harnesses innovative ideas
for use in organization. To him, entrepreneur is an organization builder and if
organization is absent, it cannot stimulate economic growth.

Entrepreneurial motivation: The term motivation has been derived from the word Entrepreneurship and economic growth / development: economic development
motive which means drive i.e. motivation is the drive and efforts to achieve goals. of any region is the outcome of purposeful human activities. According to
There may be several reasons as to why an entrepreneur may undertake risk and Schumpter, the economic development consists of employing resources in a
start a new enterprise. It may be financial scarcity, family or social status, or different way bringing in new factors of production or combination of the factors.
dissatisfaction from present life. Classifying entrepreneurial motivation according The entrepreneur looks for innovative ideas and puts them into effect for economic
to Maslows need theory, they would fall in the category of the higher order development. The entrepreneur occupies a crucial place in the process of
needs (sociological, esteem and self actualization needs) but this does not mean economic development by acting as a trigger head to give spark to economic
that the lower order needs of physiological and safety needs dont contribute to activities. Some of the development activities are as follows: 1.increase in the
entrepreneurial motivation. If we categorize the same in McClellands theory of income. 2. Brings change in the structure of business and society. 3. Wealth
needs, the entrepreneur would generally be labeled as an individual with a high creation. 4. New products, services and business. 5. Generation of employment. 6.
need for achievement, moderate need of power and low need for affiliation. Increase in the standard of living.
Researchers have pointed out varied ranges of entrepreneurial motivation like Entrepreneurial development program (EDP): it is designed to help a person in
need for achievement, dissatisfaction from present job, work and family situations strengthening and fulfilling his entrepreneurial motives and in acquiring skills and
etc. but most of them have agreed that need for achievement is the most important capabilities necessary to play his role effectively and efficiently.
motivation for an entrepreneur. Entrepreneurial development in India: Stage 1 (emergence of entrepreneurial
Objectives of Government policy measures: 1. create immediate employment classes; pre-independence period): During British era, large portion of India
opportunities on a massive scale at low cost. 2. to meet the demands of the consisted of villages which were self sufficient. The villages and economy were
customer by producing simpler goods at low cost. 3. help in modernization of constituted by farmers, craftsmen and gram-panchayats. They produced various
resources which may otherwise remain unutilized. 4. helps in increasing the products and provided services. They represented the culture and possessed the
income and the standard of living of village entrepreneurs. 5. to make export characteristics of an entrepreneur. The barter system mainly prevailed in the
orientation of small industries and help in export promotion. economy. The art, sculptures, crafts, textile, spices and minerals attracted world-
Industrial policy measures: 1948: supported deve of cottage and SSI and played wide attention. Village craftsmen used to receive patronages from kings for their
a big role for overall development of country. advocated that healthy expansion of work. Exports of these were also done throughout the world. Stage 2 (Decline of
cottage and SSI depends on a number of factors like provision of raw materials, entrepreneurship during the British rule; pre-independence period): During this
cheap power and labor, technical advice and organized marketing of products. period, Indian entrepreneurship received a huge blow because of the
1956: it supported development of cottage and SSI by restricting the volume of mechanization in the British industries which initiated the industrialization process
production, differential rates of taxation and exercising direct subsidies. 1977: It in Britain. Moreover, the British industries that required raw materials were supplied
supported development of cottage and SSI and their promotion and dispersal in by India. The raw materials received from India were then converted into machine
small towns and rural areas. Industrious centers and tiny industry sectors were made cheap products that flooded the Indian markets pushing out the handmade
established. 1980: objectives: 1. Deve and boosting of economy. 2. Making steady (more expensive) products which contributed in the complete destruction of the
flow of capital to SSI. 3. Encouraging markets to satisfy the needs of customers. 4. Indian handicraft industry. Stage 3 (Post independence growth of
Creating various provisions for subsidies and facilities to SSI units. 5. Organizing entrepreneurship): Post independence, the Indian economy was full of interesting
appropriate training programs to strengthen the quality of entrepreneurs. 6. developments in the field of entrepreneurial development. It was conditioned by
Providing preferential treatment for industries in backward regions. 1990: It was various economic, social and political factors. The industrial policy (1947)
established for creating agro-based small industries in particular. Major objectives: introduced governments help in starting, supporting and maintaining small and
1. explore employment opportunities by promotion of SSI in backward regions. 2. medium scale industries.
disperse fruits of industries in rural areas order to improve quality and standard of Objectives of EDP: 1. promote development of small and medium scale industries
living. 3. enhance the export feasibility of nation. For this purpose a new scheme that encourages self employment among potential entrepreneurs. 2. To provide, in
known as the central investment subsidy was introduced exclusively for SSI unit. the rural areas, special programs designed to stimulate new ventures and
1991: it was announced by the government of India to promote and develop tiny encourage expansion of existing activities of small and medium scale industries. 3.
industries. essence of this policy lies in the growth of small sector with special generate employment and self employment opportunities in the society. These
reference to village and cottage industries. The major objective of the policy was to objectives focused to help achieve the following objectives: 1. Develop and
make easy provision of funds by simplifying the credit plan of nationalized banks. strengthen their quality and motivation. 2. Analyze environment related to small and
Relevance of EDP: 1. EDP proved that entrepreneurs can be made and are not medium scale industries. 3. Select the project or product. 4. Formulate the projects.
born. 2. EDP are expected to bring about economic and social change in behavior 5. Understand the procedure of setting up of small and medium scale industries. 6.
of entrepreneur. 3. EDP can convert ordinary persons to risk takers, innovators Acquire quality management skills.
and above all business leaders. 4. EDP can develop individuals to become the
economic leaders upon whom the economic wellbeing of the society depends. 5.
helps the people sense innovativeness and as a result the trainees are expected
to produce things that common people have never dreamt of. 6. helps the
entrepreneurs create conditions for env improvement. 7. EDP are expected to
create the sense of social responsibility in the minds of budding entrepreneurs.
Libensteins gap filling or input completing theory: theory was postulated in Linkage of innovation and creativity on entrepreneurship: innovation is
1968. He identified two broad categories of entrepreneurial activities: 1. Routine different from invention and invention is the discovery of new methods whereas
entrepreneurship: it is associated with the managerial functions of the innovation is the utilization of invention to produce better quality of products. The
entrepreneurs. 2. New entrepreneurship: Schumpters kind of innovation. importance of innovation and creativity has risen from the increased competition
Entrepreneurship consists of filling gaps in knowledge about the production amongst the corporates. Successful entrepreneurs are realizing that creativity,
function. The gaps here represent deficiencies. The gap in production function innovation and implemental value addition are necessary ingredients to survive in
exists because some of the inputs like leadership and motivation are vague in their the rising competition. (Now write Schumpter model)
nature. Hence, the output cannot be exactly measured. The entrepreneur moves Difference between Entrepreneur and Manager:
for work to fill up these gaps. His function is input completing. According to Entrepreneur: 1. undertakes the combination of resources to introduce change in
Libenstein, entrepreneur is an individual or a group of individuals having these 4 production. 2. launches a new enterprise, main function is to change the factor
characteristics: 1. Establishment of connection between different markets. 2. combinations to increase productivity and profits. 3. takes calculated risks by
Capability to identify and make up the market deficiencies i.e. gap filling activities. defining and confining risk. operates in uncertain environment and gains are also
3. Input completion. 4. Creation or expansion of inputs transforming entities like uncertain and irregular. 4. Profits constitute the rewards of an entrepreneur (Profit /
business firms. The supply of entrepreneurs is governed by: 1. Input completion loss). 5. Innovation is the essence of entrepreneurship. It consists of bringing about
capacity. 2. Motivational capacity. 3. Investment criteria. 4. Training. changes in the factor combination to maximize profits. 6. skills are different from
Hagens theory of entrepreneurship as a function of status withdrawal: manager (innovator, creator and capable risk taking. 7. a relatively independent
Everett Hagen considered the process of change in a society as transition to person who owns the enterprise.
economic growth on the basis of the analysis of traditional societies. He Manager: 1. combines the resources to produce. 2. operates in an enterprise and
discovered that the position of authority is based not on ability but on status. deals with the daily affairs. 3. has a low risk taking tolerance. does not participate in
Persons of status in societies have authoritarian personalities. Since traditional uncertainty. Failure means little more than looking for a job. 4. gets his reward as
societies are stable, strong forces are needed to disrupt them. According to fixed and regular remuneration. rewards are never negative. 5. main function of
Hagen, such disruption is necessary for the emergence of creative personalities manager is to translate the entrepreneurs idea into practice, he simply executes
such kind of personalities emerge when members of social group experience the ideas prepared by the entrepreneur. 6. they are professionally trained persons
status withdrawal i.e. displacement from their established positions by some other who apply conceptual skills and theories for running enterprise. 7. He is a salaried
groups. On account of displacement of status, the affected group may give any of employee who works under the instructions of the entrepreneur.
the following responses: 1. Ret realism: the group continues to work in the society Innovation: Innovation is the successor of creativity. When a series of actions and
but remains indifferent to its work. 2. Ritualism: the group develops defense thoughts which create new ideas are given the shape of a physical objective or
mechanism and begins to act with the ways acceptable to the society but without service, the action is called innovation.
the hope of improvement. 3. Reformism: the group develops rebellion power and Types: 1. Invention 2. Extension 3. Duplication 4. Synthesis.
attempts to establish a new society. 4. Innovation: The group members focus on Internal and External sources of innovation: 1. Unexpected occurrences. 2.
creativity and develop the possibility of setting up a new enterprise. Incongruities. 3. Process needs. 4. Demographic changes. 5. Market changes. 6.
Hagens works are based on experiences of the back ward areas of Asia and Latin Knowledge based concepts.
America, hence, in his theory he has identified status withdrawal to be the prime Creativity: it is the process of developing a new or original product, service or idea
factor of becoming an entrepreneur. that makes a socially recognized contribution, hence creativity is the ability to bring
Max Webers theory of entrepreneurship as a function of religious beliefs: something new into existence.
Max Weber analyzed religion and its impact upon the enterprise culture. The spirit Stages of creativity process: 1. Inception 2. Preparation 3. Incubation 4. Idea
of capitalism is a set of attitude towards acquisition of money and the activities generation 5. Idea validation 6. Outcome assessment.
necessary to achieve the goal. This spirit of capitalism can be generated only Intrapreneurship: It refers to the entrepreneurial activities that acquire
when mental attitude of the society is favorable to capitalism. Such an attitude is organizations sanction and commitment of resources for the sole objective of
prevalent in the society and professional culture as well as protestant culture but innovative results. It aims at boosting the entrepreneurial activities and spirit with
had been singularly absent in Hinduism culture with its belief in karma and the limits of the organization. Thus creating a development oriented environment. It
immunity to external values and influences. The spirit of capitalism infuses beliefs centers around restructuring and reemergence of the firms capacity to develop
which lead to systematic and intensive exertion in occupational pursuits and innovative skills and new ideas.
systematic ordering of means and documentation of assets. The Hindu ethical Characteristics: 1. They bridge the gap between the investors and managers.
ideas are more directed towards individuals than the society as a whole. They like new ideas and turn them into profitable ventures. 2. They have proper
Criticism: Tripathy has criticized Webers theory and assumptions as simplistic. vision and courage to accomplish what they think. 3. They can imagine what
Hinduism according to him is a collective name for many beliefs. Rapid growth of business realities will follow from the way customers respond to their innovations.
entrepreneurs in India after independence is a proof that Hinduism is not averse to 4. They have the ability to plan necessary steps for the actualization of their ideas.
the spirit of capitalism and that Weberian model is inadequate for explaining 5. They have high need for achievement and can take moderate calculated risks.
entrepreneurship in Indian context.

Role of EDP: A. Stimulatory Roles: 1. Entrepreneurial education. 2. Publicity for Business plan: it is an outline of business which deals with all the aspects of the
identifying opportunities. 3. Identification of potential entrepreneurs through business such as finance, assets, staff, products and services, market etc. it guides
various scientific methods. 4. Motivational training for new entrepreneurs. 5. the entrepreneur by identifying and solving suitable problems and is also used in
Guides in selecting products and project report formulation. 6. Availability of local finding applications. A business plan sets out how the owner of the business
professional agencies with trained personnel for training and development of new intends to achieve his objectives.
entrepreneurs. B. Supporting Roles: 1. Registration of units. 2. Arranging sources Functions: 1. Enables the entrepreneur to think through the business in a logical
of finance. 3. Providing factors of production. 4. Guidance for selecting and and structured way and sets out the stages in the achievement of the business
identifying suitable machinery. 5. Supply of scarce raw materials. 6. Providing objectives. 2. Helps the entrepreneur to plot, progress against the plan. 3. Ensures
common facilities. C. Sustaining Roles: 1. Helps in modernization. 2. Helps in the resources needed to carry out the plan. 4. Ensures that the entrepreneur has
diversification or expansion. 3. Helps in assisting with additional finance for gone through the crucial aspects of the venture. 5. It is a means for making all the
sustained growth of enterprise. 4. Help in maintaining quality through Total Quality employees of the business aware of their function. 6. It is an important document
Management (TQM). D. Socio-Economic Roles: 1. Augmenting or introducing the for discussion with prospective investors and leaders of finance. 7. If the
qualities of a person to become an entrepreneur. 2. Providing and utilizing raw management intends to start a new phase of growth, the business plan is an
materials for building entrepreneurship. 3. Helps in regional development. 4. important tool to articulate the activities with the ideas alongside suitable manpower
Creating employment opportunities in small scale industries. 5. Ensuring equal in the place.
distribution of national income and wealth in different regions. Project: a project is a course of planned actions intended or considered for
Entrepreneurship development institutions: A. NIESBUD (National Institute for implementation. It is a scheme to be performed within a definite time and estimated
Entrepreneurship and Small scale Business Development): Location: New Delhi. cost.
Activities: 1. Helps in evolving model syllabus for training several groups. 2. Characteristics: 1. Diversity in actions. 2. Planned activities. 3. Management. 4.
Provides effective training strategies, methodologies, tools etc. 3. Helps in Profitability. 5. Controlling. 6. Transferability of resources.
conducting training programs for trainers and entrepreneurs. 4. Helps in Sources of business ideas: 1. Present and potential customers. 2. Existing
supporting and facilitating central and state government institutions. 5. Help in companies. 3. Raw material providers. 4. Distributors and retailers. 5. Researchers.
developing entrepreneurial culture in the society. B. EDII (Entrepreneurship 6. Existing employees.
Development Institution of India): Location: Ahmedabad, Gujarat. Activities: Factors in preparation of project: 1. Environmental protection. 2. Economy in
1.conducts research, training and institutions building activities for encouraging production. 3. Objective orientation: A. upgradation and optimum use of available
participation of backward regions and special target groups in entrepreneurship. 2. technology. B. removal of poverty. C. generation of massive employment
Its EDP consists of: a. Practical training and work experience. B. Identifying and opportunities to create higher purchasing power and raise the standard of living. 4.
selecting potential entrepreneurs. C. Product selection and project report Adequate provisions: A. use of non-conventional energy. B. good quality of control.
formulation. D. Training for motivation. E. Business management training. The C. safety and protection in operation. D. Consideration of water. E. Use of natural
program run by EDII is said to be the largest, most comprehensive, organized and gas and coal. F. partial replacement of old or obsolete plant and machineries. G.
successful EDP in the country. C. NISIET (National Institute for Small Scale better production system. H. Renewal of existing plant and machinery. 5. Social
Industry Extension and Training): Location: Hyderabad. Activities: 1. impart welfare.
training to the persons engaged in small industry service institute sector. 2. Objectives of a successful project report: 1. A project should be appropriately
undertake EDP and MDP for entrepreneurs. 3. undertake research studies relating arranged with an executive summary, a table, of contents and its chapters in the
to small scale industries. 4. provide small and medium scale enterprises. Conducts correct order. 2. A project report should have an impressive and bright attractive
short term courses in business management, industrial management, appearance. 3. It should give a sense of what one and his company wants to
management services and export management for benefit of entrepreneurs and an accomplish. 4. It should explain in qualitative and quantitative terms the benefits to
enterprises as a whole. D. Small Institute for Service Sector Industry: Location: 28 the user of the companys products or services. 5. It should provide hard evidence
offices across country. Activities: 1. Provide assistance to trade related activities. of the marketability of the companys products and services and also should justify
2. undertake consultancy services. 3. Helps prepare projects and profit report for financial means and channels of selling the product. 6. It should describe the
SSI. 4. Organizing various EDPs and MDPs. manufacturing and operating process and its process and its associated cost. 7. It
should portray the management as an experienced team with appropriate business
skills. 8. It should contain believable financial projections with the key data and
documentation.
Project feasibility study/report factors: 1. Applicability of the project. 2.
Applicability of new products and services. 3. Technical application of the project. 4.
Effectiveness or profitability of the project. 5. Financial viability of the project. 6.
Marketability of the products and services. 7. Cost effectiveness of the project. 8.
Social adaptability of the project. 9. Ecological adaptability of the project.
Sources of Finance: 1. Debt. 2. Equity. 3. Other sources: i. Internal sources: A.
Retained profit. B. Controlling working capital. C. Sale of assets. D. Owners
personal savings. E. Reducing stock. F. Trade credit. Ii. External Sources: A.
Debentures. B. Share issues. C. Commercial banks. D. Venture Capital.
Project Feasibility study: the most important elements in the project feasibility
study are: 1. Market analysis. 2. Technical analysis. 3. Financial analysis.
Market Analysis: conducted for the following reasons: 1. to estimate the
aggregate demand of proposed product or services. 2. estimate the mkt share of
the proposed product or service in the future.
The demand analysis and mkt share are the important facts of mkt analysis. These
are based on number of factors like consumption pattern, availability of substitute
products or services, type of competition etc. Steps to conduct mkt analysis: 1.
setting objectives for mkt feasibility: first step of mkt feasibility analysis where a
preliminary comprehensive discussion with retailers, distributors, suppliers and
consumers are needed to answer all the basic questions. 2. collection of primary
data: primary data are those which are directly collected from the field of enquiry. It
is generally undertaken through mkt survey (census / sample survey).
Entrepreneurs must perform the research on mkt survey effectively and efficiently
as it is very crucial and important for preparation of feasibility report.
Technical / Operational Analysis: It is done to assess the operational ability of
the proposed business enterprise. The cost and availability of technology is of
critical importance to feasibility of the project. It collects data on the following
parameters: 1. material availability (availability of quality and quantity, factors on
which availability depends, price sensitivity, time of transfer of material from
source). 2. material requirement planning. 3. plant location. 4. analysis of the
choice of technology.
Financial analysis: it is undertaken to assess the financial issues of proposed
business. Following cost estimates have to be done: 1. cost of land and building.
2. cost of plant and machinery. 3. preliminary cost estimation to assess the
quantity of capital required. 4. working capital expenses required for running the
business. 5. estimates of the cost of production which includes raw material, labor
costs, power, fuel, water etc.