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Entrepreneurship……………………………………
UNIT…..1

Entrepreneur--An entrepreneur perceives a need and brings together the

manpower, materials and capital required to meet that need. Entrepreneurs search
for the change, respond to it and exploit it as an opportunity.

Entrepreneurial culture-- entrepreneurial culture implies a set of values, norms

and traits that are conducive to the growth of entrepreneurship. It is corporate
culture that focuses on the emergence of new opportunities, the means of
capitalizing on them, and the creation of the structure appropriate for pursuing
them.

Economic factors that affect entrepreneurship-

• Market incentives
• Availability of capital
Non economic factors which affect the entrepreneurship-
• Political ideology and legal structure which promote free enterprise
• Social mobility
• Psychological factors like need achievement
• Competency
• Cultural factors
Socio-economic factors which effect entrepreneurship-
• Caste origins
• Family background
• Early entry to entrepreneurship
• Religious background
• Education and technological know how
• Occupational background
• Migratory character
• Type of industry started
• Type of ownership preferred
Environmental factors which effect entrepreneurship-
• Sudden changes in government policy
• Sudden political upsurge
• Outbreak of war
• Regional conflicts
• Political instability
• Corruption among government agencies
• Ideological and social conflicts
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• Unreliable supply of power, materials, finance, lab our and other inputs
• Rise in cost of inputs
• Unfavorable market fluctuations
• Non cooperative attitude of banks and financial institutions
Factors internal to entrepreneurs-
• Strong desire to do something independent in life
• Technical knowledge or manufacturing experience
• Business experience in the same or related line
Factors external to entrepreneurs-
• Financial assistance from institutional sources
• Accommodation in industrial estates
• Machinery on hire purchase
• Attitude of the government to help new units
• Financial assistance from non government sources
• Encouragement from big business
• Heavy demand
• Profit margin
• Unsound units available at a cheap price
Concept of entrepreneurship-
The word entrepreneurship has been derived from the French root which means ‘to
undertake’
According to Higgins, “entrepreneurship is meant the function of seeking
investment and production opportunity, organizing an enterprise to undertake a
new production process, raising capital, hiring labor, arranging the supply of raw
materials, finding site, introducing a new technique and commodities, discovering
new sources of raw materials and selecting top managers of day to day operations
of the enterprise.
In this definition entrepreneurship is described as the function of handling economic
activity, undertaking risk, creating something new and organizing and coordination
resources.
Nature and characteristics of entrepreneurship/ functions of entrepreneur-
• Innovation
• A function of high achievement
• Organization building function
• A function of group level pattern
• A function of managerial skills and leadership
• gap filling function
• A function of status withdrawal
• A function of social, political and economic structure
• A function of religious belief
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Conceptual model of entrepreneurship-

• The person:- personality, skills, experience, motives and psychological

preferences
• The task:- perceiving opportunity, marshalling resources, providing
leadership
• The environment:-availability of resources, infrastructure, competitive
pressures, social values, rules and regulations, state of technology etc.
• The organization:- structure, rules, policies, culture, human resource system,
communication system
Theories of entrepreneurship-
• Economic theory
• Sociological theory
• Psychological theory
Economic theory- This theory was given by G.F. Papanek and J.R. Harris.
According to them entrepreneurship and economic growth will take place in those
situations where particular economic conditions are most favorable. They also state
that economic incentives are the main drive for the entrepreneurial activities. In
some cases, it is not so evident but the persons’ inner drives have always been
associated with economic gains.

Sociological theory-Sociologists argue that entrepreneurship is most likely to

emerge under a specific social culture. According to them social sanctions, cultural
values and role expectations are responsible for the emergence of
entrepreneurship.

Psychological theory-According to advocates of this theory, entrepreneurship is

most likely to emerge when a society has sufficient supply of individuals possessing
particular psychological characteristics. Schumpeter believes that entrepreneurs are
primarily motivated by an atavistic will to power, will to find a private kingdom or
will to conquer.

Difference between entrepreneurs and managers-

• Innovation
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• Risk taking
• Reward
• Skills
• Status
• Response to authority
Barriers to entrepreneurship-
• Lack of viable concept
• Lack of market knowledge
• Lack of technical skills
• lack of seed capital
• Lack of business know how
• Lack of motivation
• Social stigma
• Time pressure and distraction
• Legal constraints and regulation
• Monopoly
• Inhibitions due to patents
Qualities of a successful entrepreneur-
• Total commitment, determination and perseverance
• Drive to achieve and grow
• Opportunity and goal orientation
• Taking initiative and personal responsibility
• Persistent problem solving
• Realism and a sense of humor
• Seeking and using feedback
• Internal locus of control
• Calculated risk taking and risk seeking
• Low need for status and power
• Integrity and reliability
• Technological knowledge and willing to change
• Will to conquer and impulse to fight
• Capacity to take risk
• Capacity to work hard
• Self motivation
• Vision and foresight
• Flexibility and sociability
• Desire to take personal responsibility
• Mobility and drive
• Creative thinking
• Strong need for achievement
Types of entrepreneurs –
• Innovating entrepreneurs
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• Adoptive or initiative entrepreneurs
• Fabian entrepreneurs
• Drone entrepreneurs
• Some other entrepreneurs-
-individual and institutional entrepreneurs
-entrepreneurs by inheritance
-technologist entrepreneurs
-forced entrepreneurs
Innovating entrepreneurs--An innovating entrepreneur sees the opportunity for
introducing the new technique or a new product or a new market. Innovative
entrepreneurship is characterized by aggressive assemblage of information and the
analysis of results derived from sound combination of factors.

Adoptive or initiative entrepreneurs--This kind of entrepreneurs are ready to

adopt successful innovations created by innovative entrepreneurs. Instead of
innovating the changes themselves, they just imitate the technology and
techniques innovated by others.

Fabian entrepreneurs--Entrepreneurs of this type are very cautious and skeptical

while practicing any change. They have neither the will to introduce new changes
nor the desire to adopt new methods innovated by the most enterprising
entrepreneurs. Their dealings are determined by custom, religion, tradition and past
practices.

Drone entrepreneurs--Drone entrepreneurship is characterized by a refusal to

adopt and use opportunities to make changes in production. Such entrepreneurs
may even suffer losses but they do not make changes in their methods.

Individual and institutional entrepreneurs--In small scale sector individuals’

entrepreneurs are dominant. Such entrepreneurs have the advantages of flexibility,
quick decision making etc. But a single entrepreneur can establish, operate and
control an organization up to a limit. Thereafter, it becomes necessary to
institutionalize entrepreneurship.

Entrepreneurs by inheritance--At times, people become entrepreneurs when

they inherit family business.

Technologist entrepreneurs--With the decline of the 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.

Functions of an entrepreneur-
• Perceiving market opportunities
• Gaining command over scarce resources
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• Purchasing inputs
• Marketing of the products and responding to competition
• Dealing with the public bureaucracy
• Managing human relations within the firm
• Managing customer and supplier relations
• Managing finance
• Managing production
• Acquiring and overseeing assembly of the factory
• Industrial engineering
• Upgrading process and product quality
• Introducing new production techniques and products
Motivating factors of entrepreneurship-
• Educational background
• Occupational experience
• Desire to work independently
• Desire to branch out to manufacturing
• Family background
• Assistance from government
• Assistance from financial institutions
• Availability of technology
• Other factors
o demand of particular product
o utilization of excess money
Stages in entrepreneurial process-

Steps in Development of entrepreneurship-

1. Search for the business idea
2. Process the ideas
3. Select the best idea
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4. Assemble the necessary inputs resources
5. Establish the enterprise

1. Search for the business idea- Sources of ideas-

-observing markets
-prospective consumers
-Developments in other nations
-Study of project profiles
-Government organization
-trade fairs and exhibitions
2. Idea processing and selection:- it includes-
-technical feasibility
-commercial viability
-detailed analysis
3. Idea selection: - the feasibility report is analyzed to finally choose the most
promising idea.
4. Inputs requirements:-It includes-
-information and intelligence
-finance
-personnel
5. Managing the enterprise:- after resources are acquired the entrepreneur
use them to implement the business plan. The operational problem of
enterprise must also be examined. This involves implementing a management
style and structure as well as determining the key variables success. A control
system must be established so that any problem areas can be quickly identified
and resolved.