Post on 17-May-2018
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CHAPTER II
ENTREPRENEURSHIP: AN OVERVIEW
2.1 - INTRODUCTION
2.2 - A BRIEF HISTORY OF ENTREPRENEURIAL THOUGHT
2.3 - ENTREPRENEURSHIP: AN INTERDISCIPLINARY CONCEPT
2.4 - IMPORTANCE OF ENTREPRENEURSHIP
2.5 - ENTREPRENEURSHIP AND GOVERNMENT
2.5.1. - THE PROPER ROLE OF GOVERNMENT ON
ENTREPRENEURSHIP
2.6 - ENTREPRENEURSHIP POLICY
2.7 - ENTREPRENEURSHIP AND ECONOMIC GROWTH
2.8 - ENTREPRENEURSHIP AND INCUBATORS
2.9 - ENTREPRENEURSHIP AND INDUSTRIALISATIONS
2.10 - CREATIVE ENTREPRENEURSHIP
2.10.1 - HISTORY OF CREATIVE ENTREPRENEURSHIP
2.10.2 – DEFINITION
2.10. 3 - SPECIFIC SKILLS
2.11 - BUSINESS ENVIRONMENT
2.11.1 - BUSINESS STRATEGY
2.11.2 - INVESTMENT STRATEGIES
2.11.3 - PRODUCTION STRATEGY
2.11.4 - OUTSOURCING STRATEGY
2.11.5 - MARKETING STRATEGY
2.12 - ENTREPRENEURSHIP AND RISK TAKING
2.12.1. - DEFINITIONS AND CONCEPT OF RISK
2.12.2. - ECONOMIC RISK
22.12.3. - IN BUSINESS
2.12.4. - RISK-SENSITIVE INDUSTRIES
2.12.5. - FINANCIAL RISK
2.12.6. - RISK VS. UNCERTAINTY
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2.12.7. - RISK- BEARING
2.12.8. - ENTREPRENEUR AS A RISK-BEARER
2.13 - ENTREPRENEURSHIP AND OPPORTUNITY
2.13.1 - WHAT IS AN OPPORTUNITY?
2.13.2- OPPORTUNITY RECOGNITION
2.13.3 - WHY IS OPPORTUNITY IMPORTANT?
2.13.4. – TYPES OF DIFFERENT OPPORTUNITY:
2.13.5 - HOW CAN OPPORTUNITIES BE SPOTTED?
2.13.6 - WHAT DO WE NEED TO DO TO SPOT OPPORTUNITIES?
2.13.7 - ACHIEVEMENT MOTIVATION
2.14 - SUMMARY AND CONCLUSION
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ENTREPRENEURSHIP: AN OVERVIEW
2.1 - INTRODUCTION
The field of entrepreneurship is a well researched discipline yielding
many theorists dating as far back as the 17 century. To date there is no
agreed upon theory of entrepreneurship [Hisrich and Peters: 1998] yet various
economists have attempted to delimit the meaning and composition of the
term entrepreneur and processes of entrepreneurship, resulting in varying
degrees of definition. Some classic contributors to the field are include Jean-
Baptiste Say (1767-1832) in the 18 century, Alfred Marshall (1842-1924) in
the 19 century and Joseph Schumpeter (1883-1950) in the 20 century [ Alka
Srivastva,2004: 15]. More recently, psychological and sociological studies
have been incorporated into entrepreneurship research such as those done
by McClelland [1961] who attribute social and economic change as well as
personality to the study of an archetypal entrepreneur.
Casson [1990] employs a cultural approach to understanding
entrepreneurship and other contemporary theorists such as Lead beater and
Stevenson have expanded on classic economic thought, extending the
concept of entrepreneurship beyond the business sector into the social sector.
The next sections will encompass various thoughts on the field of
entrepreneurship including defining the term through past research, exploring
the concepts of social entrepreneurship and contrasting knowledge learned in
the fields of business and social entrepreneurship.
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2.2 - A BRIEF HISTORY OF ENTREPRENEURIAL THOUGHT
A great deal of information has been written about the field of
entrepreneurship. Historically, it was shown that entrepreneurial actions and
undertakings were a vehicle to fortify economic activity and promote
capitalistic growth. The lack of theory in entrepreneurship research is in part
due to disparate perspectives on how and what the economics of a system is
doing at any given period in time [Van Praag, 1999: 311-35].
The history of the term dates back to the 1700’s when French
economist Richard Cantillon [1931] described the entrepreneurial function as
a role to facilitate an exchange of goods at a price to be later sold at an
uncertain price, thus operating as a risk-taker. The Industrial Revolution of
the 1800’s brought changes into the market economies that demanded new
ways of thinking in order to keep up with rapid industrial development. During
this era, new technologies were born by inventors yet financed by capitalists.
French economist Jean-Baptiste Say expanded on Cantillon’s definition of the
entrepreneurial function by proclaiming that entrepreneurs created value and
were their own managers. He defined an entrepreneur as one who raises
their own capital in addition to organizing the production and distribution of
goods and services [1971].
With the growth of small business owners in the mid 1800’s came the
advent of middle-level managers and overall organizational development,
resulting in an increased division of labor. Alfred Marshall [1930] incorporated
this into his interpretation of the meaning, adding that an entrepreneur must
have the capabilities to manage with and through other people and must be
constantly alert to seek opportunities or innovate in order to minimize costs
and make progress. The 1900’s brought modern economics into existence.
German economist Joseph Schumpeter [1934] heralded the cause for
innovation and leadership as critical and necessary components to his
economic theory of entrepreneurship, of which he incorporated psychological
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theory into his defense. The Schumpeterian model identified the entrepreneur
as motivated intrinsically and not by profits; he also felt that entrepreneurs
were the driving force in economic development. In this vein, he believed it
was essential for entrepreneurs to engage in ‘mental freedom’ and
emphasized the importance of creativity and dynamism in the economics of
any system; he felt this would propel the equilibrium of economy onto the next
higher level promoting growth and constant renewal. In other words,
discontinuity in the economics of a system would propel development in
society. The concept of entrepreneurship in the history of economic thought
has taken the individual as the unit of analysis and the role of the
entrepreneur has been viewed as a risk-taker, leader, coordinator, manager,
innovator and arbitrageur.
2.3 - ENTREPRENEURSHIP: AN INTERDISCIPLINARY CONCEPT
Entrepreneur is the catalyst of the process of entrepreneurship, which
is a behavioural characteristic related to perceiving and creating new
economic opportunities. It is a process by which individuals either on their
own or inside organizations pursue opportunities without regard to the
resources they currently control. Peter Drucker [1985] has defined
entrepreneurship as “always searching for change, responding to it and
exploiting it as an opportunity”.
Creativity and innovations are conditions inherent in the role of
entrepreneurship. Entrepreneurship [Berna, J. J House. 1970] has been
studied in a variety of disciplines including economics, sociology,
anthropology, psychology, management, and finance. Economists define
entrepreneurship as a dependent variable by stating that it is influenced by
favorable economic conditions Kirchhoff [1991: 93-112]. They see it in
changes reported by organizations in terms of profits, prices, efficiency, etc.
Sociologists and psychologists, on the other hand, explain entrepreneurship
as an independent variable by saying it is endowed with social and
psychological characteristics [MacMillan and Katz: 1992:71-8]. Wilken [1987:
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18] proposes three factors that influence the emergence of entrepreneurship.
They are the economic factors like market incentives and availability of
capital, non-economic factors like social mobility, ideology, and culture, etc
and psychological factors like need-achievement, withdrawal status, etc.
At individual level, there is no doubt that motive of people play a major
role and therefore early studies about the origins of the entrepreneur
concentrated almost entirely on motivations and personal traits [ Beveridge:
1978]. It was described as ‘innovative drive’ [Schumpeter, 1934: 103], ‘need
for achievement’ [McClelland, 1961: 6-24], etc. People with certain personality
traits are more likely to succeed as entrepreneurs than others.
Social sciences can help to explain the causes of entrepreneurship
(‘what’?); they have nothing to contribute to the understanding of
entrepreneurial behaviour (‘how?). For this, there should be a shift from ‘what
entrepreneurs are’ to ‘what entrepreneurs do’. It invites an interdisciplinary
approach.
Culture is related to the ways in which societies organise social
behaviour and knowledge. To Hofstede [1980] culture is to a collectively what
personality is to an individual that is “the interactive aggregate of common
characteristics that influence a human group’s response to its environment.”
He identified four dimensions of culture: Power distance, Individualism,
Uncertainty avoidance, and Masculinity.
2.4 - IMPORTANCE OF ENTREPRENEURSHIP
One of the important inputs in any economic and industrial
development of a country is entrepreneurship. More the entrepreneurship
activity better is the development. Entrepreneurship is the life blood of any
economy and it applies more to a developing economy like India and Iran.
Any economy can develop to its advantage if it has entrepreneurship. It is
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necessary to recognize entrepreneurial role as a separate and important
factor of production [ R.v. Badi N.v. Badi, 2007:14-15].
The role of entrepreneurship in the economy has changed dramatically
over the last half century. During the post-World War II era, the importance of
entrepreneurship and small businesses seemed to be fading away. Giant
corporations were seen as the most powerful engine of economic and
technological progress in the early post-war period. Large firms were thought
to have a competitive advantage over small and new ones, due to scale
economies in the production of new economic and technological knowledge[
1950]. There are several reasons for the revival of small business and self-
employment in the world economies. Notably, in many sectors, new
technologies have reduced the necessity of scale economies to arrive at
competitive advantages. Developments like globalization, the ICT-revolution
and the increased role of knowledge in the production process have led to
increased dynamics and uncertainty in the world economy from the 1970s
onwards. In turn, these developments have created room for (groups of) small
firms to act as agents of change. The larger role in technological development
for small and new firms is referred to by Audretsch and Thurik [2001: 267-
315]as a regime switch from the ‘managed’ to the ‘entrepreneurial’ economy.
In particular, Audretsch and Thurik argue that the model of the
managed economy is the political, social and economic response to an
economy dictated by the forces of large-scale production, reflecting the
predominance of the production factors of capital and (unskilled) labor as the
sources of competitive advantage. By contrast, the model of the
entrepreneurial economy is the political, social and economic response to an
economy dictated not just by the dominance of the production factor of
knowledge – which Romer [1994: 3-22] identified as replacing the more
traditional factors as the source of competitive advantage – but also by a very
different, but complementary, factor they had overlooked: entrepreneurship
capital, or the capacity to engage in and generate entrepreneurial activity
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2.5 - ENTREPRENEURSHIP AND GOVERNMENT
Governments in each country implemented various types of policies
toward entrepreneurship. They improved their regulatory environment for
entrepreneurship by offering SMEs financial assistance and simplifying
bureaucratic rules. They improved their cognitive environment for
entrepreneurship by offering programs to medium industrial enterprise. And
they strengthened their normative environment for entrepreneurship by
working to improve society’s perception of the entrepreneurial sector. The
field of entrepreneurial development is a new one, and in many cases, policy
makers are learning as they work with this potential new client base and trying
to respond to new needs as they emerge. Economic developers are "learning
by doing" in an effort to capture a new market niche. In other words, they are
acting much as entrepreneurs do. The shift towards a knowledge-driven,
small-firms-dominated, and highly dynamic industrial structure has prompted
policymakers around the world to emphasize the importance of
entrepreneurship. Many countries, are now exploring further what they need
to do to create a vibrant entrepreneurship culture and increase the supply of
new entrepreneurs (and hence new businesses).
Good governance is important not only for the maintenance of law and
order, but also to maintain and expand social, industrial and economic
infrastructure. Governments should see their role as being “facilitators” of
good governance and promoters of economic development. This involves a
wise blend of addressing global and local challenges and opportunities. Good
governance will contribute to a stable business climate for local
entrepreneurs. Local entrepreneurs will in turn contribute to civil society and
sustain good governance. Moreover, good governance can promote sound
macroeconomic policies and reduce currency overvaluation and exchange
rate fluctuations, which are potentially damaging to young entrepreneurs and
young firms, especially those involved with traded goods. In many developing
countries, policies for pricing, licensing, infrastructure, education and trade
tend to favour the large-scale formal sector, and neglect labour-intensive,
small-scale entrepreneurial efforts. The solution to this imbalance is for
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governments to support the development of human entrepreneurial resources,
and to reduce the needless obstacles flowing from bureaucratic red tape.
Public assistance can also be targeted to productivity enhancing
entrepreneurial behaviour so that small firms can sustain job-creation capacity
through improved productivity and higher earnings. Local policies, including
those of municipal governments, can also assist or hinder young firms. For
example, do local governments help small street vendors obtain fixed
locations and legal status, or do they treat them as a problem and subject
them to police harassment? Favourable policies open up a path for
entrepreneurial expansion, in contrast to repressive policies which threaten
business and stifle the potential of economic growth. Governments can further
contribute to entrepreneurial development by ensuring that young firms have
appropriate access to training, particularly relevant to the acquisition of
management skills. Reaching young entrepreneurs and young firms presents
a challenge to public officials. While training can have a positive impact on
small enterprises, the content and delivery of such training curricula must be
relevant to the needs of entrepreneurs and young firms and help them acquire
and upgrade appropriate business and technical skills.
Examples of institutions that do this are Entrepreneurship Development
Institutes in India, Entrepreneurship centres in Iran, SENA in Colombia, SIDO
in Tanzania, the Malawian Enterprise Development Institute, and self-
employment programs of Nigeria’s National Directorate of Employment.
However, there is a need for far more such training and learning venues. In
the Malawi programme, entrepreneurial training targeted at educated
unemployed youths has proved successful. The program offers vocational
training, as well as training in business management and entrepreneurship. At
the end of the course, graduates are given a “tool set” and a loan to
encourage entrepreneurial behaviour, instead of a certificate which might only
encourage them to seek wage employment in bleak markets [ Calarco Anne,
2005: 7-8].
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2.5.1. THE PROPER ROLE OF GOVERNMENT ON ENTREPRENEURSHIP
A - Establish a growth policy (vision) – channel self interest
1-Prioritize initiatives which have greatest impact on sustainable lon term
growth.
- Invest in R & D and ensure IP protection
- Invest in technically talented people
- Open new markets
- Establish a robust and dependable infrastructure
- Financial markets.
B - Create productive ‘ecosystem’ for entrepreneurship
1 - People are the number 1 critical successe factor
C - Develop the right resources
1- Education system which encourages and supports entrepreneurship
2 - The right networks and support programs to ensure 1+1=3
D - Be an active partner
1 - Promulgate clear long term strategies,
2 - Undertake a few practical initiatives, with explicit timelines and outputs
3 - Provide proactive communication strategy including success stories,
profile building and education
4 - Provide dependable funding and support
E - “Set rules of the road and get out of the way”
1 - Create a few of the right regulations.
- Enact and enforce them very well
2 - Let the market pick winners and loser; enable more winners.
F - Consider and plan for the social and environmental impacts of
growth in technology industry [ Calarco Anne, 2005: 7-8].
If government policy is directed towards maximizing the number of
start-ups by subsidizing entry, this may stimulate individuals to start
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businesses for the wrong reason, i.e. not because, for instance, they have an
idea that they want to try and commercialize, but simply because they can get
an amount of money for starting a business. Particularly unemployed
individuals may be attracted to start subsidized businesses, as the opportunity
cost of not starting a subsidized business is higher for them, compared to
wage-earners.
As the unemployed often have relatively low human capital levels, the
new firms are likely to be unsuccessful once the subsidy is removed. The
effect is to erode confidence, both of the customers and of the failed business
owners, which leads to declining economic performance of the region. Hence,
policies just focusing on the quantity of entrepreneurial supply without
considering the quality of the entrepreneurs may not lead to the intended
results.
2.6 - ENTREPRENEURSHIP POLICY
‘Entrepreneurship policy is defined as policy measures taken to
stimulate entrepreneurship, that are aimed at the pre-start, start-up and post-
start-up phases of the entrepreneurial process, and designed and delivered to
address the areas of motivation, opportunity and skills, with the primary
objective of encouraging more people in the population to consider
entrepreneurship as an option, to move into the nascent stage of taking steps
to get started and to proceed into the infancy and early stages of a
business’[Stevenson, Lois & Anders Lundstrom , 2001: 132].
Entrepreneurship policy focuses on improving the culture and climate
for entrepreneurial activity. Its objectives are broader-based than traditional
small and medium enterprises (SME) policy, going beyond improving the
access of individual firms to resources to increasing the future supply of
knowledgeable entrepreneurs. Entrepreneurship policy appears to embrace
four areas not routinely found in SME policy: 1) entrepreneurship education,
2) reduction of business entry and exit barriers, 3) widespread promotion of
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an entrepreneurial culture, and 4) specific strategies and measures to help
entrepreneurs through the nascent and start-up stages (new products,
supports and tools) [Lundstrom, Anders & Lois Stevenson, 2002: 14].
Collectively these areas comprise ‘holistic’ entrepreneurship policy –
the ideal type. In the formulation and implementation of entrepreneurship
policy several aspects appear to matter [ Lundstrom, Anders & Lois
Stevenson, 2002: 19-20 ]. Context: The starting point for E-policy differs
depending on the social and economic context of an economy, e.g., history,
culture, social values, industrial structure, the current state of entrepreneurial
activity, economic and business support infrastructure. A government has to
examine its own cultural and economic framework to determine the areas of
E-policy in need of the most attention.
Structure: E-policy is policy interdependent and integrates a number of
other policy areas, such as taxation, labour and employment, regional
development, science and technology, social affairs, education and training,
regulatory and public administration are all implicated. Countries with holistic
E-policies in place adopt more horizontal approaches to the policy agenda.
This demands the co-operative involvement of several ministries as well as
engagement of other levels of government on a regional basis. A review of all
areas affecting business start-up: A necessary step in the process of
developing entrepreneurship policy measures is reviewing existing small
business policy and program measures to examine their relevance to and
impact on people who are actually in the start-up and early development
stages.
Governments in various countries are reviewing their system of small
business support with the goal of providing better and more appropriate
services to meet the needs of potential and nascent entrepreneurs, including
access to seed capital, mentoring, peer networks, start-up facilities, one-stop
shops and web-based information portals. Emphasis on individuals more than
on firms: Individuals are the focus of entrepreneurship policies. Governments
are adopting more strategic and tailored approaches to increasing the start-up
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rates of particular target groups of the population, whether they are under-
represented as business owners or among the segment of the population with
high-potential for becoming innovative entrepreneurs. Integration of E-policy
measures: Regardless of the starting point for a government’s E-policy,
integration of policy measures is important. Promotion and education go
hand-in-hand (insight from Finland).
Respect for entrepreneurship as a career is a necessary but insufficient
condition to drive higher levels of entrepreneurial activity (insight from
Australia). Removing obstacles to business entry will not be sufficient in
stimulating higher levels of entrepreneurial activity IF entrepreneurship is not
already sufficiently embedded in the culture (insight from the Netherlands).
Effective E-policy integrates measures. Performance indicators and
measures: A new set of performance indices and measures is needed for the
evaluation of E-policy. These should be explored and adopted for use by
more governments.
2.7 - ENTREPRENEURSHIP AND ECONOMIC GROWTH
Entrepreneurship is increasingly being recognized as a primary engine of
economic growth. By combining existing resources with innovative ideas,
entrepreneurs add value through the commercialization of new products, the
creation of new jobs, and the building of new firms. The Global
Entrepreneurship Monitor indicates that nations with higher levels of
entrepreneurial activity enjoy strong economic growth. In short, entrepreneurs
are the link between new ideas and economic growth [ Jason Henderson,
2007: 4].
Entrepreneurship is widely credited with playing a crucial role in
economic growth. One of the most interesting and challenging issues faced by
economists and other social scientists is the relationship between
entrepreneurship and economic growth [ Héctor Salgado-Banda,2005: 3].
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Researchers are increasingly recognizing the importance of
entrepreneurship in economic growth. The first link between entrepreneurship
and economic growth has been attributed to Schumpeter’s (1934) notion of
creative destruction where new innovations by entrepreneurs destroy older
markets and fuel new growth. Recent work recognizes that entrepreneurship
supports economic growth by turning knowledge into new products, new jobs,
and new firms. Empirical studies are now confirming the strong relationship
between entrepreneurship and economic growth at various levels of economic
aggregation.
Entrepreneurship stimulates economic growth through the creation and
transformation of knowledge. Carree and Thurik (2005) recognize that
entrepreneurship stimulates growth through knowledge spillovers, increased
competition, and expanded diversity [Carree and Thurik, 2005: 437-471]. The
theoretical building blocks of their argument stem from the earlier writings of
Romer [1986: 94] that established the important role of knowledge spillovers
in endogenous growth models. Recognizing the role of knowledge spillovers,
Audretsch and Thurik [2004: 105] indicate that entrepreneurship leads to
economic growth because it is the mechanism by which knowledge spillovers
develop. Knowledge is endowed in a person or economic agent. As a result, it
requires an individual entrepreneur to start a new enterprise thereby capturing
the value of the knowledge embodied in the individual. Thus,
entrepreneurship is the mechanism in which knowledge is commercialized
and used to stimulate economic growth. The second way entrepreneurship
stimulates economic growth is through increased competition brought on by
the creation of new enterprises. Interestingly, this second conduit by which
entrepreneurship influences growth also contains a knowledge component.
Carree and Thurik [2005: 480-5] recognize that knowledge externalities, both
within industries and across industries, emerge from competition for new
ideas not the competition of product markets. As a result, knowledge
externalities are more likely to emerge in competitive environments than in
environments of local monopolies. By creating new firms, entrepreneurship
stimulates the competition for new ideas and fuels the process of developing
knowledge externalities.
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Empirical evidence in Glaeser et al. [1992] and Feldman and Audretsch
[1999] support the notion that local competition is more conducive to
innovative activity and economic growth. The third way entrepreneurship
supports economic growth is by spawning diversity among firms in a specific
location. Jacobs [1969] develops a model where a diverse economic
environment allows for increased knowledge spillovers across industries that
yield a larger economic return than spillovers simply internal to industries.
Audretsch and Thurik [2004] and Carree and Thurik [2005: 311-21] argue that
entrepreneurship contributes to economic growth by creating diversity and
developing channels for knowledge spillovers across firms. Recent economic
research has empirically tested the links between entrepreneurship and
economic growth at various levels of aggregation.
van Stel, Carree, Thurik [2005] analyze the impact of entrepreneurial
growth on national gross domestic product growth in a sample of 36 countries.
This study used multiple measures of entrepreneurial activity from the Global
Entrepreneurship Monitor (GEM). Using data from 1999 to 2003,
entrepreneurial activity, the number of nascent entrepreneurs and owners of
businesses less than 42 months old, was found to have a positive relationship
with national economic growth. However, the relationship did depend on the
level of per capita income.
Acs, Audretsch, Braunerhjelm, and Carlsson [2006: 911-27] also
analyze the relationship between entrepreneurship and economic growth at
the national level. Using data on 18 countries from 1981 to 1998, Acs et. Al.
focus on the role of entrepreneurs as facilitators of knowledge spillovers
where entrepreneurship is defined as the rate of self-employment. The
relationship between entrepreneurship and GDP growth is tested in an
endogenous two-stage least squares model of economic growth that also
accounted for the country’s knowledge stock, labour, capital, and institutional
factors.
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Countries with a greater degree of entrepreneurial activity exhibited
higher rates of economic growth. Empirical work has also studied the
relationship between entrepreneurship and economic growth at the sub-
national level. Using proprietary Census Bureau data on establishments, Acs
and Armington [2004] analyze employment growth in labour market areas
from 1991 to 1996.Labor market areas with more business starts, both single
and multi-units establishments, and a larger share of proprietors had higher
levels of employment growth. They found that business starts were more
important to employment growth than proprietors and suggest that the flow or
creation of entrepreneurial activity is more important than the stock of
entrepreneurs.
Camp. S. Michael [2005] analyzes entrepreneurial activity and
economic growth in U.S. labor market areas. Recognizing the multiple facets
of entrepreneurship, an index of entrepreneurial activity was developed and
used in the analysis. Using Census Bureau data from 1990 to 2000, the
entrepreneurial index was composed of new firm births, the rate of new firm
births, and the share of young firms that are growing. Regions with a higher
entrepreneurial index activity were found to have higher levels of employment,
wage, and productivity growth. For example, in the most entrepreneurial
labour market areas, employment growth was 1.9 percent compared to 0.7
percent in the least entrepreneurial labour market areas. When analysis was
conducted by labour market size, among the smallest regions, the most
entrepreneurial regions realized 73 percent greater annual employment
growth than the least entrepreneurial. Regions with smaller populations,
however, were found to have greater difficulty reaching their entrepreneurial
potential as they produced less entrepreneurship than predicted in the
empirical models.
Using data from West German regions, Audretsch and Keilbach [2005:
457-69] analyze the relationship between entrepreneurial capital and regional
growth. They find that regions with higher levels of entrepreneurial capital,
measured as new business start-ups from 1989 to 1992, had higher levels of
gross value added output and higher rates of labour productivity. The study
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also hypothesized that the importance of entrepreneurial capital to economic
growth would vary according to its level of urbanization since knowledge
spillovers tend to be greater in urban setting and entrepreneurs are theorized
to be the mechanism creating knowledge spillovers [Jason Henderson, 2007:
6-7]. In modern, highly developed economies, growth is powered by their
capacity to innovate and to win new global markets for their technologically
advanced products.
Entrepreneurship is an important aspect of this capacity. Entrepreneurs
may introduce important innovations by entering markets with new products or
production processes. They may enhance our knowledge of what is
technically viable and what consumers prefer by introducing variations of
existing products and services in the market.
The resulting learning process speeds up the discovery of the
dominant design for product-market combinations. In other words, in highly
developed economies entrepreneurship contributes to growth by shifting the
technology frontier (technological innovation). Economies at lower stages of
economic development may grow through exploitation of economies of scale
and scope by large firms and by rapidly absorbing the advanced technologies
and capital of the highly developed economies (technology transfer), for
example through high levels of foreign direct investment from high-tech
multinationals [McArthur and Sachs, 2002: 28-51. In addition, smaller firms
may also flourish as they may.
2.8 - ENTREPRENEURSHIP AND INCUBATORS
Business incubators have their origins in the USA. In the early 1950s
the Mayor of Watertown, New York, Frank Mancuso, took over a building
previously used to incubate chickens and used it to provide space to start-up
firms. The concept was adopted in other cities and States, but growth in the
numbers of incubators was slow over the next two decades. By 1984 there
were only 26 business incubators in the USA. This figure grew to 550 by
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1998. Today there are probably more than 3,000 business incubators
worldwide. The business incubator concept has now spread and is widely
regarded as a cost-effective approach to building new sustainable businesses
with high growth potential.
The justification for government support of incubators is based on
systemic market failures that impact on the survival rate of new technology-
based firms. Because most incubated businesses remain in the region in
which they started, business incubators are a favoured mechanism for
encouraging local and regional development. Most support is provided at local
or regional government level, but central governments are also involved both
directly and indirectly [The Allen consulting group: 2003].
The role of SMEs in growth and development is universally recognized,
and is demonstrated by the quantity of studies, research, and literature
dedicated to the subject. Both in developed and developing countries,
governments have been playing a key role in defining policies, programs and
instruments which support the development of micro, small and medium
enterprises.
One of the mechanisms employed to nurture small firms for more than
two decades is business incubation. Incubators provide qualifying new start-
up businesses with a set of facilities (physical space, shared services,
business and legal advice, and financial inputs) to facilitate their creation and
assist them until graduation, when they have the capacity to survive in the
outside competitive environment. One of the major goals of business
incubators is to promote successful entrepreneurship and to improve the
business environment for SMEs, to allow them to meet the challenges faced
in today’s knowledge-based economy to realize their full potential [ The Allen
consulting group: 2003].
.
According to the US National Business incubation Association (NBIA)
definition: “A business incubator is an economic development tool designed
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to accelerate the growth and success of entrepreneurial companies through
an array of business support resources and services. A business incubator’s
main goal is to produce successful firms that will leave the program financially
viable and freestanding” [The USA National Business Incubation Association,
2003: 5].
Technological progress and entrepreneurship are dynamically
changing the global economic landscape. These factors force developing
countries to change and improve their level of innovation in business
development. Among the many solutions proposed, business incubation
seems to be one of the most effective means for assisting entrepreneurs
during the start-up period.
In simple terms, the traditional business incubator is a micro-
environment with a small management team that provides physical work-
space, shared office facilities, counselling, information, training and access to
finance and professional services in one affordable package. Incubators vary
widely in their sponsors (state, economic development group, university,
business, venture capital), objectives (from empowerment to technology
commercialization), location (urban, suburban, rural, and international),
sectoral focus (technology and mixed, now including kitchen and arts
incubators) and business model (not-for-profit or for-profit). While these can
serve a variety of businesses, in the developing countries the main focus has
been on technology incubators for commercializing innovations. That being
said, each incubator is different from another, and the above characteristics
may vary in degree of pertinence.
2.9 - ENTREPRENEURSHIP AND INDUSTRIALSATION
There has been wide recognition that entrepreneurial development is
essential not only to solve the problem of industrial development, but also to
solve the problems of unemployment, regional imbalances, concentration of
economic power and division of profits from traditional avenues of investment.
52
At the same time it is widely accepted that industrialization holds the key to
rapid economic development. Industrialization cannot be achieved without
developing entrepreneurship; to initiate development and sustain planned and
rapid industrialization, entrepreneurial ability is a necessary precondition.
J.A. Schumpeter was perhaps the first to recognize the importance of
the entrepreneur in economic development. He has visualized and
emphasized a more innovative type of entrepreneurship in the process of
industrialization. But in practice there are other types of entrepreneurs along
with innovative entrepreneurs who have an important role in the process of
industrialization [ Pritham Singh: 2006: 228].
.
In recent times, social scientists like David Mc Clelland, Everret Hagen,
John kunkel, Frank Young, Thomas Cochran emphasized the importance of
achievement motivation as the basis of entrepreneurial personality and a
cause of economic, industrial and social development.
It is impossible to imagine any industrialization process without an
entrepreneurial form, not only in a capitalistic economy but even under the
situation of state capitalism. In less developed countries the industrial
scenario does not have well developed institutions to support it; therefore
entrepreneurship there in is characterized by the conditions associated with
under underdevelopment. Yet, the entrepreneur in this region may not be an
’innovator’ but an ‘imitator’, who would copy the organization, technology and
products of the innovators from developed regions.
The process of industrialization in an area can be visualized with two
different sorts of entrepreneurial activities. The first category can be called
“individualistic entrepreneurship” which is a peculiar form of leadership where
all the functions of management are concentrated in a single hand [Ralph
Pieris: 1969]. The other type of industrial entrepreneurship is based on
“techno-structure” [Galibraith. J.R: 1969:71-2], where the ownership will be
normally in the hands of an organized group of experts. The development of
techno-structure would definitely hasten the process of industrialization. But in
53
less developed countries due to the void of any infrastructural facilities, the
potent force of industrialization appears with individualistic entrepreneurship.
2.10 - CREATIVE ENTREPRENEURSHIP
Creative entrepreneurship [2008] is the practice of setting up a
business – or setting yourself up as self-employed - in one of the creative
industries. The focus of the creative entrepreneur differs from that of the
typical business entrepreneur or, indeed, the social entrepreneur in that s/he
is concerned first and foremost with the creation and exploitation of creative or
intellectual capital. Essentially, creative entrepreneurs are investors in talent –
their own and/or other people’s. The most renowned creative entrepreneurs
have combined creative flair with entrepreneurial ability to build multi-million
dollar business empires. Examples include Rupert Murdoch, Madonna
Ciccone and Richard Branson.
2.10.1 - History of Creative entrepreneurship
Although, technically, creative entrepreneurs predate the industrial
revolution – artisan jewellery making dates back to 7000 BCE and there were
professional poets (scôps) in Pre-Norman Britain – the subject of creative
entrepreneurship is a relatively new area. [Industrial Revolution: 2008]
Since the mid 20th century, it has been observed that we are moving
towards a knowledge economy or information society where the old rules of
manufacturing-based business no longer apply, or at very least need to be
reconsidered [Machlup 1962; Drucker, 1969; Lyotard, 1984]. But the creative
sector, an instrinsic part of the knowledge economy, has received relatively
little attention.
In recent years, due to significant economic growth in the sector, there
has been a surge of interest in the creative industries, and the issue of
54
creative entrepreneurship has been pushed to the fore. In parallel with (and
no doubt partially motivated by) general enthusiasm from policy makers and
support agencies, creative entrepreneurship has grown as an academic
discipline, Creative entrepreneurship courses are becoming widely available,
and seem increasingly popular with students. A new body of work has
emerged with writers such as Richard E Caves, John Howkins, Richard
Florida, and Chris Bilton, all championing the creative industries and
addressing the specific skills needed to succeed in them. In 2001, the Harvard
economist and academic, Richard E Caves, made the following observation:
“The preferences or tastes of creative artists differ in substantial and
systematic (if not universal) ways from their counterparts in the rest of the
economy where creativity plays a lesser (if seldom negligible) role.”
Caves [ 2002: 2-19] listed seven basic economic or “bedrock”
properties that he believes distinguish creative activities from other sectors of
the economy: (1) Demand is uncertain (2) Creative workers care about their
product (3) Some creative products require diverse skills (4) Differentiated
products (5) Vertically differentiated skills (6) Time is of the essence (7)
Durable products and durable rents. The body of Caves’ work makes a
division between “artists” and “gatekeepers” and focuses on the issue of
contracts between the two. In his analysis, it is the “gatekeepers” (art dealers,
agents, managers, publishers) who “decide whether the prospective value of
[an artist’s] creative output warrants the cost of humdrum inputs needed to
place it before final buyers”.
Today, with the onset of Long Tail economics, Caves’ division of labor
is increasingly irrelevant: the artist can take his/her product direct to market
via the Internet and is no longer dependent on a third party to negotiate
access; thus his/her entrepreneurial and business abilities are ever more
crucial.
55
2.10.2 - Definition
The policy consultant and author, John Howkins, observes how the
French economist and journalist, Jean-Baptiste Say, coined the term
‘entrepreneur’ in the late Eighteenth Century to describe a person who
unlocks capital tied up in land and redirects it. Howkins [2006: 129] makes this
observation on the creative entrepreneur: “Entrepreneurs in the creative
economy…operate like Say’s original model entrepreneur but with an
important difference…they use creativity to unlock the wealth that lies within
themselves.
Like true capitalists, they believe that this creative wealth, if managed
right, will engender more wealth.” Howkinds goes on to observe that, despite
lack of recognition from economists and politicians, and traditional lack of
support from society (although this is changing), creative entrepreneurs tend
to be bright and to value their independence above all else. The freedom to
manage their own time and abilities compensates for the unpredictable nature
of their working environment, and irregularity of their income: “These people
instinctively think for themselves, instinctively network, and instinctively keep
several balls in the air at once. They are the shock troops not only for new
ideas about our culture but for new ideas about working in it.”
2.10. 3 - Specific Skills
Creative entrepreneurs need to master specific skills: an understanding
of intellectual property is essential, combined with the ability to manage cash
flow, key talent and the creative process effectively. Howkins [2001: 158] lists
11 rules for successful creative entrepreneurs. Some of these rules include:
invent yourself, priorities ideas over data, be nomadic, learn endlessly and,
most importantly, have fun. [Howkins: 2006: 155-58]
56
2.11 - BUSINESS ENVIRONMENT
Business environment has consisted from several parameters
including: Governments, competitors, markets, procedures, sellers,
consumers etc. In generally business environment has been included internal
environment and external environment. Entrepreneurs should design and
select reasonable strategy to grow and survival in internal and external
environment.
The dynamics of entrepreneurship may be elaborated in terms of
business environment. Business strategies and policies are two aspects,
which come under the business environment. We are starting with business
strategy. [Martin Patric, 2005: 27-30]
2.11.1 - Business strategy
Business strategy constitutes investment, production, and marketing
strategies as follow:
2.11.2 - Investment strategies
Investment strategy is mainly concerned with capacity expansion,
product development and expenses on machinery. The capacity aspect falls
under two heads: capacity expansion within and outside the local area. The
survey data regarding capacity expansion make clear that more than 50
percent of the firms have substantial investment in the local area itself. The
proportion of low-level entrepreneurs in capacity expansion is low and such
entrepreneurs are reluctant to undertake huge expenditure. While medium-
level entrepreneurs have made small investment both within and outside local
area, the high-level entrepreneurs make large investment outside as well
within the local area. It was the medium level entrepreneurs who initiated
investment outside the local area within the State.
Palakkad based entrepreneurs have special leaning towards it. The
proximity to the neighbouring States may persuade them for this because they
57
can avail of all benefits of it without entering there. Another aspect of
investment strategy is the amount spent for product development.
2.11.3 - Production strategy
The most important aspect of an entrepreneur is production and
marketing. Innovation and diversification are the two sub-strategies to be
mentioned in this regard.
2.11.3.1 - Innovation and diversification
Diversification is part and parcel of the business strategy of all
successful firms. As noticed earlier in this section, there is diversification,
which is largely attributed to innovation. It is the right strategy to establish
identity in the market. Diversification and innovation have become easier
through research and development. The success of paint and rubber-based
units rely on diversification, which is due to their thrust on research and
development. As mentioned earlier, low-level entrepreneurs spend meagre
amount for product development.
The medium and high-level entrepreneurs allocate more amounts for
product development. All the exporting units have R&D departments for this
purpose.
2.11.3.2 - Outsourcing strategy
As a part of business strategy, some medium and a limited number of
high-levels entrepreneurs successfully adopt outsourcing as a production
strategy. A high-level entrepreneur overcame labour problems and reduced
cost of production through outsourcing.
58
2.11.3 3- Marketing strategy
All successful entrepreneurs have depended on the new market and
marketing strategy. Under marketing strategy, selling strategy is important.
Low-level entrepreneurs normally follow a direct selling strategy whereas
medium type club direct selling together with some agency and publicity
works.
Apart from these strategies, high-level group adopts advertisement
strategy so as to boost their sales. An entrepreneur, shifting from IFS to FS,
has to practice all these selling strategies. That is, direct selling is the
“mantra” of success in the initial phase and advertisement becomes the key
strategy after attaining matured growth. Many successful entrepreneurs
capitalise good relations with their clients and utilising it for the benefit of the
firm. The success of the paint manufacturers is related to the focus given to
the retailers in the interior region (rural). It is found that some unsuccessful
entrepreneurs adopted untimely advertisement as a strategy for selling the
product.
Right pricing strategy is another determinant for the success of a firm.
Generally a competitive pricing is helpful for the success of the firm.
Sometimes a going rate will be the right step, price skimming may be
appropriate on other occasions. A new product with great potential market, as
for instance the product for cleaning the seafood, should follow price
skimming as the right strategy. Whenever there are a lot of competitors, like
painting products, a competitive pricing may be appropriate. Table 5.4 shows
the distribution of entrepreneurs over different pricing techniques.
2.12 - ENTREPRENEURSHIP AND RISK TAKING
Starting a new enterprise always involves risk and trying for doing
something new and different is risky. The reason is not difficult to seek. The
59
enterprise may earn profits or incur losses because of various factors like
increasing competition, changes in customer preferences, and shortage of
raw material and so on. An entrepreneur, therefore, needs to be bold enough
to assume the risk involved in the enterprise. In fact he needs to be a risk-
taker, not risk avoider. His risk-bearing ability enables him even if he fails in
one time or one venture to persist on and on which ultimately helps him
succeed. Entrepreneurs are competitive, dynamic, and capable of adjusting to
changes in a more flexible way than larger firms [Shilylle Helliburnn, 2007:
12]. Entrepreneur is an opportunity seeker. For establishing a new business
unit he/she constantly undertakes the scanning of the environment.
2.12.1. - Definitions and concept of risk
Entrepreneurs are the persons who take risk, but they never gamble
with the results. They choose moderate risk rather than play wild gamble.
They, therefore, undertake calculated risk which is high enough to be exciting,
but with a fairly reasonable chance to win [Mohaihy.S.K, 2006]. F.B.Hawley
[1882] contemplated risk taking as the prime characteristic feature of the
entrepreneur which was comparable to the elementary agents of production
like land, labour and capital.
In engineering, the quantitative engineering definition of risk is:
Risk = (Probability of an accident) × (Losses per accident) [In engineering:
2008].
In statistics, risk is often mapped to the probability of some event
which is seen as undesirable. Usually, the probability of that event and some
assessment of its expected harm must be combined into a believable an
outcome, which combines the set of risk, regret and reward probabilities into
and for that outcome. Thus, in statistical decision theory, the risk function of
an estimator δ(x) for a parameter θ, calculated from some observables x, is
60
defined as the expectation value of the loss function L, R (θ ,δ(x) ) = ƒL(θ,δ(x))
× f(x/ θ)dx [Probability: 2008].
In information security, a risk is defined as a function of three
variables:
1- The probability that there is a threat
2- The potential impact.
3- The probability that there are vulnerabilities [Information
security: 2005].
If any of these variables approaches zero, the overall risk approaches zero.
2.12.2. - Economic risk
The central insight in the methodology for incorporating economic risks
arise from the realization of the fact that however manifold and diverse might
be the causes, or factors, of risks around a specific project or business, all of
these are ultimately manifested under only two guises.
According to CCF Conception the economic risk consists in that: Actual
positive conventional cash flows (income, inflows) turn out to be less than
expected AND / OR Actual negative conventional cash flows (expenditures,
outflows) turn out to be larger than expected ones[Economic risk: 2008].
Such lucid and unambiguous conceptual treatment of such a complex
and multi-faceted notion as the economic risk emphasizes the very core of the
question. The economic risk is not an abstract ‘uncertainty’ or ‘possibility of
failure’ or changeableness (variability) of the outcome… The economic risk –
is a monetary amount which might be under-collected and/or over-paid.
61
2.12.3. - In business
Means of assessing risk vary widely between professions. Indeed, they
may define these professions; for example, a doctor manages medical risk,
while a civil engineer manages risk of structural failure. A professional code of
ethics is usually focused on risk assessment and mitigation (by the
professional on behalf of client, public, society or life in general). In the
workplace, incidental and inherent risks exist. Incidental risks are those which
occur naturally in the business but are not part of the core of the business.
Inherent risks have a negative effect on the operating profit of the business.
2.12.4. - Risk-sensitive industries
Some industries manage risk in a highly quantified and different way.
These include the nuclear power and aircraft industries, where the possible
failure of a complex series of engineered systems could result in highly
undesirable outcomes. The usual measure of risk for a class of events is then,
where P is probability and C is consequence: R = P (of the Event) × C
[Nuclear power: 2008].
The total risk is then the sum of the individual class-risks. In the nuclear
industry, consequence is often measured in terms of off-site radiological
release, and this is often banded into five or six decade-wide bands.
The risks are evaluated using fault tree/event tree techniques. Where these
risks are low, they are normally considered to be "Broadly Acceptable". A
higher level of risk (typically up to 10 to 100 times what is considered Broadly
Acceptable) has to be justified against the costs of reducing it further and the
possible benefits that make it tolerable—these risks are described as
"Tolerable if ALARP" (ALARP stands for As Low As Reasonably Practicable).
Risks beyond this level are classified as "Intolerable.
The level of risk deemed Broadly Acceptable has been considered by
regulatory bodies in various countries - an early attempt by UK government
62
regulator and academic F. R. Farmer [2007] used the example of hill-walking
and similar activities which have definable risks that people appear to find
acceptable. This resulted in the so-called Farmer Curve of acceptable
probability of an event versus its consequence. The technique as a whole is
usually referred to as Probabilistic Risk Assessment (PRA) (or Probabilistic
Safety Assessment, PSA).
2.12.5. - Financial risk
In finance, risk is the probability that an investment's actual return will
be different than expected. This includes the possibility of losing some or all of
the original investment. It is usually measured by calculating the standard
deviation of the historical returns or average returns of a specific investment.
Ron Dembo [2007] has defined quite general methods to assess risk as an
expected after-the-fact level of regret. Such methods have been uniquely
successful in limiting interest rate risk in financial markets.
Financial markets are considered to be a proving ground for general
methods of risk assessment. In financial markets, one may need to measure
credit risk, information timing and source risk, probability model risk, and legal
risk if there are regulatory or civil actions taken as a result of some "investor's
regret".
"A fundamental idea in finance is the relationship between risk and
return. The greater the amount of risk that an investor is willing to take on, the
greater the potential return. The reason for this is that investors need to be
compensated for taking on additional risk."
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2.12.6. - Risk vs. uncertainty
Frank Knight [1921] established the distinction between risk and
uncertainty as follows: " Uncertainty must be taken in a sense radically distinct
from the familiar notion of Risk, from which it has never been properly
separated. The term "risk," as loosely used in everyday speech and in
economic discussion, really covers two things which, functionally at least, in
their causal relations to the phenomena of economic organization, are
categorically different. The essential fact is that "risk" means in some cases a
quantity susceptible of measurement, while at other times it is something
distinctly not of this character; and there are far-reaching and crucial
differences in the bearings of the phenomenon depending on which of the two
is really present and operating. It will appear that a measurable uncertainty, or
"risk" proper, as we shall use the term, is so far different from an
immeasurable one that it is not in effect an uncertainty at all. We accordingly
restrict the term "uncertainty" to cases of the non-quantities type".
2.12.7. - Risk- bearing
Entrepreneurship has long fascinated economists. The way we
understand it affects our thinking about the processes generating growth and
development, policies for influencing productivity and mitigating
unemployment, even mechanisms underlying business cycles. One influential
and intuitively appealing theory of the sources of and motivations for
entrepreneurship can be traced back to Cantillon [1755] and Knight [1921]
and was formalized more recently by Kanbur [1979] and Kihlstrom and Laffont
[1979: 719-48]. In this theory, entrepreneurs- through the institution of the
fixed wage contract- are viewed essentially as providers of insurance.
Entrepreneurs – through the institution of the fixed wage contract – are
viewed essentially as providers of insurance. Individuals choose between the
safety of wages and the hazards of entrepreneurship according to their
attitudes toward risk. More risk averse people (and with decreasing risk
64
aversion the poor) receive sure wages and work for the less risk averse (rich),
who are the residual claimants. An attractive feature of this theory, if we
accept decreasing risk aversion, is that it easily explains one of the oldest
stylized facts in economics, namely the tendency for entrepreneurs to be
richer than workers.
Granting the basic presumption that being an entrepreneur is riskier
than being a worker, the theory is nevertheless incomplete, for it does not
account for why the risks are exogenous, or more precisely that the choice of
occupation is the only institutional arrangement available for risk sharing.
After all there are alternatives, most prominent among them the market
for insurance contracts. Thus the first question we need to answer is why
entrepreneurs should be bearing risk at all. One response is that the relevant
risks are aggregate, and therefore cannot be insured away. Another is that
even if risks are idiosyncratic, some information problem prevents full
diversification. Either way, one is led to ask whether the Knightian theory still
make plausible predictions if we take proper account of reasons for the
inability of the market to provide perfect insurance [ Henry Higgins: 1959].
2.12.8. - Entrepreneur as a Risk-bearer
Richard Cantillon [1971] was the first who introduced the term
'entrepreneur' and his unique risk - bearing function in economics in the 18th
century. He defined entrepreneur as an agent who buys factors of production
at certain prices in order to combine them into a product with a view to selling
it at uncertain prices in future.
Knight [1965] also described entrepreneur to be a specialized group of
persons who bear uncertainty. Uncertainty is defined as a risk which cannot
insured against and is incalculable. He thus draws a distinction between
ordinary risk and uncertainty. A risk can be reduced through the insurance
65
principle, where the distribution of the outcome in a group of instances is
known. On the contrary, uncertainty is the risk which cannot be calculated.
2.13- ENTREPRENEURSHIP AND OPPORTUNITY
Small and medium size enterprises (SMEs) are of growing importance
for local, national and international economies. These enterprises provide
high percentage of employment and are engines of economic development.
They are competitive, dynamic, and capable of adjusting to changes in a more
flexible way than larger firms [Silylle Heilbrunn: 2007].
Entrepreneur is an opportunity seeker. For establishing a new business
unit he/she constantly undertakes the scanning of the environment. He/she
goes on scanning the environment until the he/she finds the best of
opportunities, out of several such opportunities for preparation of his/her
business plan.
2.13.1- What is an opportunity?
An entrepreneur is an opportunity seeker. For establishing a new
business unit, he constantly undertakes the scanning of the environment. He
even goes scanning the environment until the he finds the best of
opportunities, out of several such opportunities for preparation of his business
plan. The process by which an opportunity is identified is described as
opportunities taking into account his own strengths, weaknesses,
opportunities and threats, which, in management philosophy, are known as
'SWOT' analysis [Sangram.K.M, 2006: 5]. An opportunity can be described
as: The chance to do something -A gap in the market which presents the
possibility of new value being created.
Opportunities are a 'good thing' provided that: (1) you can recognize
those, (2) you know how to exploit those. Responding to new economic,
technological, and social conditions, millions of workers and companies are
66
instead making alternative arrangements and are seeking different
opportunities. These arrangements assume a variety of forms including lex
time, telecommuting, independent contracting, working as a temp or on an on-
call basis, home-based businesses, and starting a small business full time [ U
S Chamber of Commerce, 2006: 6] .
2.13.2- Opportunity Recognition
The ability to find, recognize and exploit new opportunities is a vital skill
of business success. All businesses are started with the idea that there is an
opportunity to make money, but it is a characteristic of entrepreneurs that the
pursuit of opportunities continues beyond the early stages of their businesses
and becomes the 'engine' for growth and success.
2.13.3.- Why is opportunity important?
The exploitation of opportunities is fundamental to business success.
The ability to recognize and exploit business opportunities is essential for
innovation. Entrepreneurs are particularly tuned into new opportunities and
many academics argue that entrepreneurial behaviour consists of a
passionate, obsession, sometimes irrational, pursuit of opportunities. The
problem is that, for smaller businesses, opportunities often involve risk,
hassle, and dilution of effort. Yet, these very same businesses cannot afford
not to look for them.
2.13.4– Types of different opportunity:
There are three different levels of opportunity:
Generic opportunities that may be available to any
business, and include:
-Technological advances, such as the internet.
- Economic changes, such as low interest rates.
67
- Market opportunities.
- Changes in social behaviour, such as holidaying
abroad.
Specific opportunities. This is where the generic
opportunities are applied to a specific context. Using the
generic examples given in the first category, the specific
opportunity would be:
-To develop internet web-sites for promoting holidays in
such countries as China, with low interest personal loans
being offered to fund them.
Real opportunities. This is where the opportunity
becomes feasible. For this one has to be able to resource
the specific opportunity and turn it into a business reality
[[Sangram.K.M, 2006: 5].
2.13.5 How can opportunities be spotted?
According to Timmons [1989], entrepreneurship is about sensing an
opportunity where others see chaos, contradiction and confusion. It is clear
that at the heart of the entrepreneurial process is the issue of opportunity
recognition. This is a very important subject for any business, and is worth a
section in its own right. The early phases of spotting and evaluating an
opportunity are characterized by a willingness to be open to new ideas, and
thinking a little more creatively.
2.13.6- What do we need to do to spot opportunities?
For different businesses, opportunities will occur in different ways.
However, it is clear that the 'discovery' of all business opportunities always
involves varying degrees of: 1-Being alert. 2- Knowledge 3- Analysis, and 4-
Creativity
68
Where do opportunities come from? For any particular business or
industry, new opportunities may come from a range of sources. The most
common sources are as follows:
-New markets.
-New products.
-New services.
-Improved product or services.
-New means of production.
-New operating practices.
-New ways of delivering the product/service to customers.
-New ways of informing the customer about products/ services.
-New ways of managing relationships within/between organizations
-Multiple innovations (combining them in new ways).
There are some alternative sources that Peter Drucker [1985] suggests:
The unexpected success/failure or external event,
The incongruity between reality as it actually is and reality as it
is perceived,
Innovation based process needs,
Changes in industry structure or market structure that catch
everyone’s unawareness,
Changes in demographics (age, social, working patterns, etc.),
Changes in perception, mood or meaning, and
The dissemination of new knowledge.
2.13.7- Achievement Motivation
The need for achievement plays an important role in making an
entrepreneur as successful. It is an inner spirit that activates an entrepreneur
to strive for success. In simple terms, need for achievement is the desire to do
well. The empirical evidences support the hypotheses that need for
achievement contributes to entrepreneurial success [Durand: 1975: 75-90].
69
Hence, there is the need for developing achievement motivation for
developing entrepreneurship in an economy.
How to develop achievement motivation? David C. McClelland, A well-
known behavioural scientist of USA holds the view that achievement
motivation can be developed through training and experience. For this,
McClelland conducted his experiments with groups of businessmen in three
countries, i.e., Malawi, India and Equador. He carried out a separate full-
fledged training program in India to instill achievement motivation in the minds
of entrepreneurs.
In 1964 David McClelland has researched in Kakinada of India which
has been famous as Kakinada Experiment. The main objective of the
experiment was to break the barrier of limited aspirations by inducing
achievement motivation.
Fifty two persons were selected from business and industrial community of
the town. They were given program at Small Scale Industry Extension
Training Institute, Hyderabad. The training program was designed in such a
way that it could help the trainees improve imagination and enable them
introspect their motivation.
2.14- SUMMARY AND CONCLUSION
Some subjects which have been reviewed in this chapter include:
entrepreneurship, a brief history of entrepreneurial thought, entrepreneurship:
an interdisciplinary concept, importance of entrepreneurship,
entrepreneurship and Government, entrepreneurship policy, economic
growth, entrepreneurship and incubators, industrialization, creative, business
environment, risk taking, opportunity.
As it was observed, the concept of entrepreneurship appeared during
16 century. The industrial revolution of the 1800’s brought changes into the
market economic. Entrepreneurship operating is creating, opportunity
searching and risk taking. Peter Drucker has defined entrepreneurship as
70
always searching for change, responding to it and exploiting it as an
opportunity. Entrepreneurship has been become one of the most important
subject branch of economics and management science.
According to opinion of most authors in above there is a direct and
significant relationship between entrepreneurship and economic growth.
There were several revivals of small business and self employment in the
world economies. Governments with selecting and designing suitable strategy
can play main role to encourage and direct people toward entrepreneurship in
business environment. Finally creative, risk taking and opportunity searching
are important of entrepreneurs’ characteristics.