33

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

34

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

35

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.

36

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

37

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:

38

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

39

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

40

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

41

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].

42

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

43

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

44

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

45

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].

46

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.

47

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.

48

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

49

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

50

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

51

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]

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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.