Entrepreneurship

Entrepreneurship refers to the functions performed by an entrepreneur in establishing an enterprise. Just as management is regarded as what managers do, entrepreneurship may be regarded as what entrepreneurs do. In other words, entrepreneurship is the act of being an entrepreneur. Entrepreneurship is a process involving various actions to be undertaken to establish an enterprise. It is , thus, process of giving birth to a new enterprise.

CONCEPT OF ENTREPRENEURSHIP

“Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilise human, financial and material resources necessary to bring a project to fruition”.

Definition of Entrepreneurship

A.H. Cole,

“Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or aggrandize profit by production or distribution of economic goods and services”.

Innovation A function of high achievement Organization Building function A function of Managerial Skills and

leadership

Characteristics of Entrepreneurship

Innovation Risk- Bearing

Two elements of Entrepreneurship

InnovationInnovation, i.e., doing something new or something different is a necessary condition to be called a person as an entrepreneur. The entrepreneurs are constantly on the look out to do something different and unique to meet the changing requirements of the customers. They may or may not be inventors of new products or new methods of production, but they possess the ability to foresee the possibility of making use of the inventions for their enterprises

Starting a new enterprise always involves risk and trying for doing something new and different is also risky. The enterprise may earn profits or incur losses because of various factors like increasing competition, changes in customer preferences, shortage of raw material and so on. 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.

The Japanese proverb applies to him :“Fall seven times, stand up eight.”

Risk-Bearing

Conceptual Model of Entrepreneurship

Entrepreneurship

The person

The task

The organization

The Environment

1. The Person: Personality, Skills, Experience, Motives, and psyclogical preferences.

2. The task: Perceiving opportunities, marshalling resources,

providing leadership.3. The Environment: Availability of resources,

infrastructure, competitive pressures, social values, rules and regulations, state of technology etc.

4. The organization: Structures, rules, policies, culture, human resources systems, communication systems.

The Analytical Framework of Entrepreneurship

Entrepreneur Entrepreneurship

Person Process

Organizer Organization

Innovator Innovation

Risk Bearer Risk-Bearing

Motivator Motivation

Creator Creation

Visualiser Vision

Relationship between entrepreneur and entrepreneurship

The role of entrepreneurship in economic development varies from economy to economy depending upon its material resources, industrial climate and the responsiveness of the political system to the entrepreneurial function. The entrepreneurs contribute more in favourable opportunity conditions than in the economies with relatively less favourable opportunity conditions.

The role of entrepreneurship in economic development

The important role that entrepreneurship plays in the

economic development of an economy can now be

put in a more systematic and orderly manner as

follows:

1. Entrepreneurship promotes capital formation by

mobilizing the idle saving of the public.

2. It provides immediate large-scale employment. Thus,

it helps reduce the unemployment problem in the

country, i.e., the root of all socio-economic

problems.

3. It promotes balanced regional development.

4. It helps reduce the concentration of economic power.

5. It stimulates the equitable redistribution of wealth, income and

even political power in the interest of the country.

6. It encourages effective resource mobilization of capital and

skill which might otherwise remain unutilized and idle.

7. It also induces backward and forward linkages which stimulate

the process of economic development in the country.

8. It also promotes country’s export trade i.e., an important

ingredient to economic development.

Thus, it is clear that entrepreneurship serves as a

catalyst of economic development. On the whole, the role or

entrepreneurship in economic development of a country can

best be put as “an economy is the effect for which

entrepreneurship is the cause”.

Theories of entrepreneurship

Innovation theory

Need for achievement theory

Theory of social behaviour

Theory of Leadership

Theory of Model personality

Theories of Entrepreneurship

This theory was introduced by ‘J.A. Schumpeter’. According to him, entrepreneur is basically an innovator and innovator is one who introduces new combinations. New combinations theory covers five cases which are:

1. The introduction of a new product in the market.2. The instituting of a new production technology which is

not tested by experience in the branch of manufacture concerned.

3. The opening of a new market into which the specific product has not previously entered.

4. The discovery of new source of supply of raw material.5. The carrying out of the new form of organization of any

industry by creating of a monopoly position or the breaking up of it.

Innovation Theory

This theory was developed by ‘David C. McClelland’. He tries to find the internal factors that is human values and motives that lead man to exploit opportunities, to take advantage of favourable trade conditions. The entrepreneur is concerned with need for achievement (n-achievement).

The n-achievement is called as a desire to do well, not so much for the sake of social recognition or prestige, but for the sake of an inner feeling of personal accomplishment.

People with high n- achievement behave in an

entrepreneurial way. So it is better to develop n-achievement among individuals to ensure high scale of economic development.

Need for Achievement Theory

‘Kunkel’ presents a behavioral model of entrepreneurship. Behavioral model of concerned with the clearly expressed activities of individuals and their relations to the previous and present surroundings, social structure and physical conditions.. According to him, individuals perform various activities of which some are accepted by the society while others are not. The accepted are awarded. The rewarded act as supporting stimulus increasing the probability of repeating that behaviour pattern. This pattern of social behaviour is entrepreneurial behaviour.

Theory of social behaviour

This theory was developed by ‘Hoselitz’. According to him, entrepreneurship is a function of managerial skills and

leadership. A person who is to become an industrial entrepreneur must have more than the drive to earn profit . In this process, he has to show his ability to lead and manage. In business, there are three types of leadership:

1. Merchant money lender2. Manager3. EntrepreneurMoney lenders are market oriented who deals in

goods/services which is generally acceptable to everyone. Mangers are authority oriented but an entrepreneur have in addition to these a production orientation. An entrepreneur creates his own commodity and its acceptability is uncertain. So the entrepreneur assumes more risk as compared to a money lender.

Theory of Leadership

‘Cocharn’ given this theory. He emphasis cultural values, role expectations and social sanction as the key elements that determine the supply of entrepreneurs. According to him, an entrepreneur neither a super normal individual nor a deviant person but represents a society model personality. His personality is influenced by three factors:

His own attitude towards his occupation The role expectations held by sanctioning groups The operational requirements of the job

Theory of Model personality

Even if the entrepreneurs are endowed with innovativeness, creativity and potential for hard work, we should not forget that they are ‘masters of their own fate’. They have to manage risk and sustain themselves and their enterprise because they are ‘self-employed’. It is the aspect of entrepreneurship that creates barrier. These can be studied under two heads:

1. Environmental a) Social b) Economical c) Cultural d) Political2. Personal a) Motivational b) Perceptional

Barriers of Entrepreneurship

In the entrepreneurial process the environment plays a vital role because all the opportunities exist in the environment & the entrepreneur is the part of it.

1. Social environment: People are to a great extent bound by the norms and practices of the society in which they live. The society influences the thought pattern and mind set of its members. If the social norms expect the people to value discipline and conformity over adventure, creativity, and independence, it is likely to spoil entrepreneurial spirit. In some societies it can be seen even now that business people do not command a high social status. Business is considered a profession of lower hierarchy They are considered inferior to office-goers, engineers, doctors etc. Such a social response to entrepreneurs can be a big hurdle in developing entrepreneurs.

Environmental barriers

Capital, labour, raw materials and market are important basics for any enterprise. An environment where all these factors are available to the entrepreneurs will naturally support and promote entrepreneurship. On the other hand, if any of these or all of these factors are either not available or are of inadequate quality and quantity, they can become barriers to entrepreneurship.

For example, if a prospective entrepreneur does not have access to capital for setting up his/ her new enterprise, he/she will feel discouraged to proceed further.

Economic environment

Every society has developed its own cultural values. We have already seen under social environment how the social values influence entrepreneurial activities. Similarly if the culture of a society is favorable for creativity, Risk-taking and adventurous spirit, in such a cultural environment entrepreneurship will flourish. If the cultural values are bound by conventionalism, they may restrain entrepreneurial spirit.

For example, In the past, some societies in India discourage people from going abroad believing that crossing the sea was a cultural taboo.

Cultural Environment

The main impact of the political situation for the entrepreneur is the degree of stability it brings to the country. Political policies can help or delay the growth of entrepreneurial ventures in a country. Excessive interference in the form of controls, delay etc. from the government can discourage prospective entrepreneurs.

Political Environment

Personal Barriers

All successful entrepreneurs are highly motivated and their drive to achieve become their engine of accomplishment. Some personality characteristics distinguish entrepreneurs from others. Even if the entrepreneur have most of these feature, it is often seen that certain shortcomings in the motivational aspect act as barriers to entrepreneurship.

Motivational barrier

There are certain perception barriers that can hamper the progress of an entrepreneur. Lack of a clear vision and misunderstanding a situation can result in faulty perception. As any entrepreneurial venture involves some amount of risk taking, perception of the risk and the strategy to manage it can become critical for an entrepreneur. If the entrepreneur demands everything to be clear and well-defined in order to develop a perception, it will lead to disappoint.

Perceptional Theory