ENTREPRENEUR AND ENTREPRENEURSHIP

Entrepreneurs play a vital role in the economic development of a country.

Economic development of a country depends primarily on its entrepreneurs. An
entrepreneur is often considered as a person who sets up his own business or
industry. He has initiative, drive, skill and spirit of innovation who aims at high
goals. The entrepreneur is the individual that identifies the opportunity, gathers the
necessary resources and is ultimately responsible for the performance of the
organisation. Entrepreneurs are action oriented, highly motivated individuals who
take risks to achieve goals.
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. Entrepreneurship is
very often associated with adventurism, risk bearing, innovating creativity etc. It is
concerned with making dynamic changes in the process of production, innovation
in production, new usage for materials etc. It is a mental attitude to take calculated
risks with a view to attain certain objectives. It also means doing something in a
new and better manner.

CONCEPT OF ENTREPRENEUR
The story of defining entrepreneur and entrepreneurship will sound like the story
of six blind men describing an. elephant. There is hardly any commonly agreed
upon definition among economic pundits.
The word “entrepreneur” is drived from the French word entreprendre which
means to initiate or undertake. In the early sixteenth century, the Frenchmen who
organised and led military expeditions were referred to as “entrepreneurs”. The
term entrepreneur was applied to business in the early eighteenth century by
French Economist Richard Cantillon. According to him,the entrepreneur buys
factor services at certain prices with a view to sell their products at uncertain prices
in the future. Richard Cantillon conceived of an entrepreneur as a bearer of non-
insurable risk.
Another Frenchman, J.B. Say, expanded Cantillon’s ideas and conceptualised the
entrepreneur as an organiser of a business firm, central to its distributive and
production functions. Beyond stressing the entrepreneur’s importance to the
business, Say did little with his entrepreneurial analysis.

According to J.B. Say, an entrepreneur is the economic agent who unties all means
of production, the labour force of the one and the capital or land of the others and
who finds in the value of the products his results from their employment, the
reconstitution of the entire capital that he utilises and the value of the wages, the
interest and the rent which he pays as well as profit belonging to himself. He
emphasised the functions of co-ordination,organisation and supervision. Further, it
can be said that the entrepreneur is an organiser and speculator of a business
enterprise. The entrepreneur lifts economic resources out of an area of lower into
an area of high productivity and greater yield.

The New Encyclopedia Britannica considers an entrepreneur as an individual who

bears the risk of operating a business in the face of uncertainty about the future
conditions. Leading economists of all schools, including Karl Marx have
emphasised the contribution of the entrepreneurs to the development of economies,
but Joseph A. Schumpeter who argues that the rate of growth in an economy
depends to a great extent on the activities of entrepreneurs, has probably put
greater emphasis on the entrepreneurial function than any other economist.

In the words of Joseph A. Schumpeter, “The entrepreneur in an advanced economy

is an individual who introduces something new in the economy – a method of
production not yet tested by experience in the branch of manufacture concerned, a
product with which consumers are not yet familiar, a new source of raw material or
of new markets and the like”. The function of an entrepreneur according to him is
to “reform or revaluationise the pattern of production by exploiting an invention or
more generally, an untried technological possibility for producing a new
commodity”.

According to Schumpeter, an entrepreneur is an innovator, who introduces

something new in the economy. Innovation maybe:
(a) introduction of a. new product,
(b) introduction of new methods of
production,
(c) developing new markets and finding fresh sources of raw
materials,
and (d) making changes in the organisation and management.

Knight described entrepreneurs to be a specialised group or persons, who bear

uncertainty; and uncertainty is defined as the risk which cannot be calculated. The
entrepreneur, according to Knight, is the economic functionary who undertakes
such responsibility which, by its very nature, cannot be insured or salaried. He also
guarantees specified sums to others in return for assignments made to them.

Peter F. Drucker, in his book “Innovative Entrepreneurs” defines entrepreneurs as

innovators. Entrepreneurs search for change and exploit opportunities. According
to him “Innovation is the specific tool of entrepreneurs, the means by which they
exploit changes as an opportunity for a different business or a different service. It
is capable of being presented as a discipline, capable of being learned, capable of
being practiced. Entrepreneurs need to search purposefully for the sources of
innovation, the changes and their symptoms that indicate opportunities for
successful innovation. And they need to know and to apply the principles of
successful innovation”. He further said that an entrepreneur is one who always
searches for changes, responds to it, and exploits it as an opportunity.

Cunningham and Lischerson in their recent work have described six possible
schools of thought on entrepreneurs. The first school of thought i.e. ‘Great Person
School’ says that an entrepreneur is born with an intuitive ability – a sixth sense
and this sense helps him in start up stage. The second school of thought, i.e.
‘Psychological Characteristics School’ explains that entrepreneurs have unique
values attitudes, and needs which drive them and help them especially in start-up
stage. The third school, i.e. ‘Classical School of Thought’ says that central
characteristic of entrepreneurial behaviour is innovation. This characteristic helps
the entrepreneur much in start-up and early growth. ‘Management School’ is the
fourth school of thought and it says entrepreneurs are organisers of economic
venture and they organise, own, manage and assume its risk. Such functional
orientation helps them in early growth and maturity. The fifth school of thought is
the ‘Leadership School’.According to this school, entrepreneurs are leaders of
people and they have the ability to adopt their style to the needs of people. Such
leadership personality suits them most during early growth and maturity situations.
‘Intrapreneurship School’ is the sixth school of thought. Intrapreneurship is the act
of developing independent units, to create, market and expand services within the
organisation. Intrapreneurship is needed by an entrepreneur during the situation of
maturity and change.

Whatever be the definition, across the world entrepreneurs have been considered
instrumental in initiating and sustaining socio-economic development. There are
evidences to believe that countries which have proportionately higher, percentage
of entrepreneurs in their population have developed much faster as compared to
countries which have lesser percentage of them in the society, discover new
sources of supply of materials and markets and they establish new and more
effective forms of organisations. Entrepreneurs perceive new opportunities and
seize them with super normal will power and energy, essential to overcome the
resistance that social environment offers. In sum, the concept of entrepreneurs is
intimately associated with the three elements-risk bearing, organising and
innovating.
FEATURES OF AN ENTREPRENEUR
If we go through the business history of successful entrepreneurs in our
country, we come across the names of Tata, Birla, Gulshan Kumar, Modi,
Kirlosker, Dalmia and others who started their business with small size and
made good fortunes. The scanning of their personal features shows that there
are certain characteristics of entrepreneurs which are found usually prominent
in them. Successful entrepreneurs are action-oriented, they have the ability to
visualise the steps from idea to actualization. They are both thinkers and doers,
planners and workers, get involved-they adopt a hands-on approach, can tolerate
ambiguity-enterprise always consists of action in uncertainty, accept risk but
understand and manage it; overcome rather than avoid mistakes – they don’t
admit they are beaten, see themselves as responsible for their own destiny they
are dedicated, setting self-determined goals and believe in creating markets for
their ideas, not just in responding to existing market demands. An entrepreneur is a
job-giver and not a job-seeker. This means that he is his own boss. The
characteristics which make him his own boss are given below :
(a) Strong achievement orientation.
(b) Unwavering determination and commitment.
(c) Self-reliance and independence.
(d) Hunger for success.
(e) Self-confidence and self-faith.
(f) Sustained enthusiasm.
(g) Single-mindedness.
(h) Strong reality orientation.
(i) Willingness to accept responsibility.
(j) Courage.
(k) Ability to survive defeat.
(l) Become wealthy and stay humble.
An entrepreneur is a highly achievement oriented, enthusiastic and energetic
individual.

ENTREPRENEUR vs. MANAGER

The entrepreneur is a person who is motivated to satisfy a high need
for achievement in innovative and creative activities. His creative behaviour
and innovative spirit which forms a process of an endless chain is termed as
entrepreneurship. It is not enough for the entrepreneur to buildup the process,
but equally important task for him is to manage the business. He performs
entrepreneurial vis-a-vis managerial functions. The entrepreneur enters at a
transitional stage in which what is initially with innovation becomes a routine
for him the transition from an entrepreneurship to management. Also, the emphasis
switches from techniques and analytical methods to insight and to involvement
with people. The entrepreneur perceives and exploits opportunity,
and the subsequent steps necessary for organisation are pertinent, to management.

The entrepreneur differs from the professional manager in that he undertakes a

venture for his personal gratification. As such he cannot live within the framework
of occupational behaviour set by others. He may engage professional manager to
perform some of his functions such as setting of objectives, policies, procedures,
rules, strategies, formal communication network. However, the entrepreneurial
functions of innovation, assumption of business risk and commitment to his vision
cannot be delegated to the professional manager. Failure to the professional
executive may mean a little more than locating a new job perhaps even at a higher
salary, whereas failure of an entrepreneur in his efforts would mean a devastating
loss to his career. The professional manager has to work within the framework of
policy guidelines laid down by the entrepreneur.

This distinction between entrepreneur and the professional (traditional) manager is

presented in Table I.

TABLE-I DISTINCTIVE FEATURES OF TRADITIONAL MANAGERS

AND THE ENTREPRENEUR
TYPES OF ENTREPRENEURS
Schumpeter made the entrepreneur the adventurous innovator who acting on his
own account, introduces changes that others do not dare to experiment with. Other
writers have, however, identified some other categories of entrepreneurs.

Arthur H. Cole distinguishes between empirical, rational and cognitive

entrepreneurs. The empirical entrepreneur hardly introduces anything
revolutionary and follows the principle of rule of thumb. The rational entrepreneur
is well informed about the general economic conditions and introduces changes
that look more revolutionary. The cognitive entrepreneur is well informed, draws
upon the advice and services of experts and introduces changes that reflect
complete break from the existing scheme of things.

In a study of American Agriculture, Clarence Danhof classifies entrepreneurs into

four types-innovative, imitative, fabian and drone. The innovating entrepreneur is
one who assembles and synthesises information and introduces novel combinations
of factors. He is an aggressive figure and an industrial leader. The imitative
entrepreneur is also known as the adoptive entrepreneur. He simply adopts
successful innovations introduced by other innovators. The fabian entrepreneurs is
timid and cautious. He will imitate other innovations only if he is certain that
failure to do so may damage his business. Finally there is the drone entrepreneur.
His entrepreneurial activity may be restricted to just one or two innovations. He
refuses to adopt changes in production even at the risk of reduced returns.

This classification of Danhof brings into focus two important aspects:

(a) It shows that an economy which is making a lot of technical advancement has
in its ranks a large number of innovating and adoptive entrepreneurs and less
number of fabians and drones.
(b) Technological advancement may not take place even if innovators are
present, if the actual control and ownership of production is in the hands
of fabians or drones.

Another classification of entrepreneurs is between private and public

entrepreneurs. Private entrepreneur is motivated by profit and as such would not
enter those sectors of the economy in which prospects of monetary rewards are not
bright. In general, infrastructure industries fall under this category. For example
electricity generation and distribution is Government owned. This forces the
Government to take the initiative to start enterprises in these sectors. Thus, we
have the category of public entrepreneurs. In the less developed countries the
entrepreneurial functions of the Government has greatly widened due to the lack of
sufficient private entrepreneurs.

Another classification based on the scale of enterprise is between small scale and
large scale enterprises. This classification is specially relevant in the less
developed countries. Private enterprise is usually found in households, small scale
and medium scale industries. The small entrepreneur does not possess the
necessary talents and resources to initiate large scale production and introduce
revolutionary technological changes. In the developed countries most
entrepreneurs deal with large scale enterprises. They possess the financial
wherewithal and the necessary expertise to initiate large scale enterprises and
introduce novel technical changes. The result is the developed countries are able to
sustain and develop a high level of technical progress. It is this classification which
has led to the wide technological gap between the developed and the less
developed countries.

In the initial stages of economic development, entrepreneurs tend to have less

initiative and drive. As development proceeds, they become more innovating and
enthusiastic. Similarly, when entrepreneurs are shy and humble the environment is
underdeveloped. Business environment becomes healthy and developed when
entrepreneurs are innovating.

1. Innovating entrepreneurs : Innovative entrepreneurship is

characterised by aggressive assemblage of information and the analysis of
results derived from sound combination of factors. Persons of this type are
generally aggressive in experimentation and cleverly put attractive possibilities
into practice. An innovating entrepreneur sees the opportunity for introducing
a new technique or a new product or a new market. He or she may raise money
to launch an enterprise, assemble the various factors, choose top executives
and set the organisation going. Schumpeter’s entrepreneur was of this type.
Such an entrepreneur introduces new products and new methods of production,
opens new markets and re-organises the enterprise.

Among the different types of entrepreneurs, the innovating entrepreneur

is the most vigorous type of entrepreneur. Innovating entrepreneurs are very
commonly found in developed countries. There is dearth of such entrepreneurs in
underdeveloped countries. A country with little or no industrial tradition can hardly
produce innovating entrepreneurs. Such entrepreneurs can emerge and work only
when a certain level of development is already achieved and people look forward
to change and progress. Innovating entrepreneurs played the key role in the rise of
modern capitalism through their enterprising spirit, hope of money making, ability
to recognize and exploit opportunities, etc.
2. Adoptive or imitative entrepreneurs: This kind of entrepreneurs are
characterised by readiness to adopt successful innovations created by innovative
entrepreneurs. These type of entrepreneur are revolutionary entrepreneurs with the
different that instead of innovating the changes themselves, they just imitate the
technology and techniques innovated by others. These entrepreneurs are most
suitable for developing countries because such countries prefer to imitate the
technology, knowledge and skill already available in more advanced countries. The
Cochin Shipyard is a good example of the result of imitative entrepreneurship. The
Shipyard has been constructed using the innovative technology provided by the
Mitsubishi Heavy Industries Ltd. of Japan. Imitative entrepreneurs are most
suitable for the underdeveloped nations because in these nations people prefer to
imitate the technology, knowledge and skill already available in more advanced
countries. In highly backward countries there is shortage of imitative entrepreneurs
also. People who can imitate the technologies and products to the particular
conditions prevailing in these countries are needed.

Sometimes, there, is a need to adjust and adopt the new technologies to their
special conditions. Imitative entrepreneurs help to transform the system with the
limited resources available. However, these entrepreneurs face lesser risks and
uncertainty than innovative entrepreneurs. While innovative entrepreneurs are
creative, imitative entrepreneurs are adoptive.

Imitative entrepreneurs are also revolutionary and important. The importance of

these humbler entrepreneurs who exploit possibilities as they present themselves
and mostly on a small scale must not be under-estimated. In, the first place, such
adaptation requires no mean ability. It often involves what has aptly been called
subjective innovation that is the ability to do things which have not been done
before by the particular industrialist, even though, unknown to him, the problem
may have been solved in the same way by others. By western standards, an
imitative entrepreneur may be a pedestrian figure, an adopter and imitator rather
then a true innovator. He is more an organiser of factors of production than a
creator. But in a poor country attempting to industrialise, he is nevertheless a
potent change producing figure. He can set in motion the chain reaction’ which
leads to cumulative progress. This humbler type of entrepreneur is important in
under developed countries for another reason. These countries are placing great
emphasis in their economic planning on small scale industries and decentralised
industrial structure.
3. Fabian entrepreneurs : Entrepreneurs of this type are very cautious and
skeptical while practicing any change. They have neither the will to introduce new
changes nor the desire to adopt new methods innovated by the most enterprising
entrepreneurs. Such entrepreneurs are shy and lazy. Their dealings are determined
by custom, religion, tradition and past practices. They are not much interested in
taking risk and they try to follow the footsteps of their predecessors.
4. Drone entrepreneurs : Drone entrepreneurship is characterised by a refusal to
adopt and use opportunities to make changes in production methods. Such
entrepreneurs may even suffer losses but they do not make changes in production
methods. They are laggards as they continue to operate in their traditional way and
resist changes. When their product loses marketability and their operations become
uneconomical they are pushed out of the market. They are conventional in the
sense that they stick to conventional products and ideas. The traditional industries
of Kerala are characterised by drone entrepreneurs. The coir and bamboo industries
are still in the hands of laggards who refuse to innovate.

THE CONCEPT OF ENTREPRENEURSHIP

Like other economic concepts, entrepreneurship has long been debated and
discussed. It has been used in various ways and in various senses, while some call
entrepreneurship as ‘risk-bearing’ others view it innovating and yet others consider
it ‘thrill-seeking’.

According to Higgins, “Entrepreneurship is meant the function of seeking

investment and production opportunity, organising an enterprise to undertake a
new production process, raising capital hiring labour, arranging the supply of raw
materials, finding site, introducing a new technique and commodities, discovering
new sources of raw materials and selecting top managers of dayto- day operations
of the enterprise”. In this definition entrepreneurship is described as the function of
handling economic activity, undertaking risk, creating something new and
organising and coordinating resources.

At a conference on entrepreneurship in the United States, entrepreneurship was

defined as an 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 mobilize human, financial, and material
resources necessary to bring a project to fruition. This definition recognizes that
entrepreneurship is both an art as well as a science which involves the fusion of
capital, technology and human talent and is a dynamic and risky process.
However, it is a young or immature science. In order to build the body of
knowledge that underlies the art of entrepreneurship we must create academic
models that can successfully be applied in industry. The art and science of
entrepreneurship are complementary to each other and, therefore, require
simultaneous advances in both theory as well as practice.

According to Diamond, “Entrepreneurship is equivalent to enterprise which

involves the willingness to assume risks in undertaking an economic activity
particularly a new one ____. It may involve an innovation but not necessarily so. It
always involves risk-taking and decision-making, although neither risk nor
decision-making may be great significance”. In this definition, entrepreneurship is
used to refer to the qualities required to innovate, start a new enterprise, accept the
challenge and bear the risk. Few individuals have these qualities and, therefore,
entrepreneurs are found in limited numbers in any society.

According to 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”.

Jaffrey A. Timmons defined entrepreneurship as “the ability to create and build

something from practically nothing. Fundamentally, a human creative activity, it is
finding personal energy by initiating, building and achieving an enterprise or
organisation rather than by just watching, analyzing or describing one. It requires
the ability to take calculated risk and to reduce the chance of failure. It is the ability
to build a founding team to complement the entrepreneur’s skills and talents. It is
the knack for sensing an opportunity where others see chaos, contradiction and
confusion. It is the know-how to find, Marshall, and control resources and to make
sure the venture does not run out of money when it is needed most”.

According to Peter F. Drucker, “Entrepreneurship is neither a science nor an art. It

has a knowledge base. Knowledge in entrepreneurship is a means to an end.
Indeed, what contributes knowledge in practice is largely defined by the ends, that
is, by the practice”. In Drucker’s view, entrepreneurship is considered less risky, if
the entrepreneur is methodical and does not violate elementary and well known
rules.

In all above definitions, 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.
In all above definitions, 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. Innovation and risk bearing are
regarded as the two basic elements involved in entrepreneurship. Though the term
entrepreneur is often used interchangeably with entrepreneurs, yet they are
conceptually different.
The relationship between the two is just like the two sides of the same coin as
depicted in the following table.

Thus, entrepreneurship is concerned with the performance and coordination of the

entrepreneurial functions. This also means that entrepreneur precedes
entrepreneurship.
What entrepreneurship involves?
Entrepreneurship involves the following :
– Confidence in an idea and a willingness to accept the hard work necessary for
turning the creativity of dreams into reality.
– Seeing the opportunity presented by change that others have not had the courage
to act on.
– Taking controllable risks rather than gambling or relying on sheer luck.
– Costs other than money; time, energy, reputation, emotional drains.
– Reality testing : recognizing realistic limits imposed by the economy or physical
resources available.
– Knowing and understanding customers and their needs.
– A basic understanding of business and products or services.
– Keeping and interpreting business records.
– Careful planning to reduce risks.
– Knowing the actions, strengths and weaknesses of competitors.
– Having right location, and also right size and right price :or lease rate for that
location.
– Building a team of people with complementary skills and talents.
– Sensing opportunities, while others see chaos, contradiction, and confusion.
– Finding and controlling resource (often owned by others) to pursue the
opportunity.
– Having a vision and than having the passion, commitment, and motivation to
transmit this.
– Vision to others (employees, partners, suppliers and customers).
– A willingness to take responsibility and ability to put mind to task and see it
through from inception to completion.
Nature and Characteristics of Entrepreneurship :
Entrepreneurship is a multi-dimensional concept and it is unnecessary to consider
many factors and perspectives. The distinctive features of entrepreneurship are as
follows :
1. Innovation : The process of commercialising an invention is innovation. For
example, steam as an alternative source of energy was invented as early
as AD 100. Later, in 1712, when it was used to run engines then the process
was called innovative. In simple words, in business activity, novelty may take
any one or a combination of the following :
a) new products ;
b) new methods of production ;
c) new markets ;
d) new sources of raw material ; or
e) new forms of organisation.
Innovation is a critical aspect of entrepreneurship. Entrepreneurs always try to
create new and different values and get satisfaction in doing so. They try to convert
a material into a resource or, combine the existing resources in a new and more
productive manner. The act of innovation thus provides resources with a new
capacity to create wealth.
2. Motivation : Motivation comes from the word ‘motive’ (or goal). It means the
urge in an individual to achieve a particular goal. In other words, it is the need to
achieve that motivates a person. You may find many people with sufficient
financial resources and. family support who are interested in independent ventures.
Yet, very few actually start their business. Why is it so? Because they are
comfortable in doing routine jobs and have no higher goals in life. They lack
‘motivation’. Entrepreneurs generally are highly active. They struggle constantly to
achieve something better than what-they already have. They like to be different
from others and are ready to work hard to reach their goal.

Persons experiencing constant need to achieve always try to understand their

strengths and weaknesses. This enables them to seek external help whenever
needed.
Let us take a look at the ‘Vadilal’ group which is household name today in Gujarat.
‘Vadialal Ice Cream’ is a premier brand in the consumer market. You may. be
surprised to know that Ramachandra Gandhi and Laxman Gandhi, the two brothers
who founded the Vadilal empire, could not even complete their school education.
They started in a small way by selling homemade ice cream in the city of
Ahmedabad. Now, Vadilal is the largest ice cream company in the country.

How did they do it? They did not stop thinking big. They had the courage to do
what they wanted to. Entrepreneurial persons seek rewards or returns earned
through their own efforts and do not depend upon ‘luck’. They do not like to be
idle.
3. Risk Taking : Risk-taking implies taking decisions under conditions where the
reward on a certain action is known, but the occurrence of the event is uncertain.
While doing so, an entrepreneur becomes responsible for the result of the decision.
This responsibility however cannot be insured against failure.

Imagine that you are a qualified pharmacist and that you have got a large sum of
money from your parents. Which of the following options would you choose?
a) Invest in a bank deposit with 8 per cent annual interest;
b) Invest in a company with a possible return of 15 per cent;
c) Start a medical shop in your locality (because people there have to travel
a long distance to get medicines) with a fairly good chance of marking an
immediate return of around 10 percent. (You are also aware that the business
is sustainable and can bring in more returns say 20,30 or 50% in future if you
put in your time and effort);
d) Try your hick in the share market.
Clearly, option ‘c’ calls for an entrepreneurial quality. Remember that successful
entrepreneurs usually choose the moderate or middle path. They are not gamblers.
At the same time, they are hot afraid of taking a decision if there is a reasonable
chance of success.
You must be aware that businessmen spend considerable amount of time in
planning their enterprises. They study the market technology, examine and re-
examine the demand, the prices, machinery and processes involved, make detailed
enquiries about sources of finance and think about other business lines. Why do
you think they do through all these processes? In order to minimize the risks
involved and avoid difficulties that may arise in the future, as far as possible :
4. Organisation Building : According to Harbison entrepreneurship implies the
skill to build an organisation. Organisation building ability is the most critical skill
required for industrial development. This skill means the ability to ‘multiply
oneself by effectively delegating responsibility to others. Unlike Schumpeter,
Harbison’s entrepreneur is not an innovator but an organisation builder who
harnesses the new ideas of different innovators to the rest of the organization.
Entrepreneurs need not necessarily be the men with ideas or men who try new
combinations of resources but they may simply be good leaders and excellent
administrators.
5. Managerial-Skills and Leadership : According to Hoselitz, managerial skills
and leadership are the most important facets of entrepreneurship. Financial skills
are only of secondary importance. He maintains that a person who is to become an
industrial entrepreneur must have more that he drive to earn profits and amass
wealth. He must have the ability to lead and manage. He identifies three types of
business leadership, namely merchant money lenders, managers and entrepreneurs.
The function of the first group is market oriented, that of the second is authority-
oriented while the third group has a addition to these a production-orientation.

The commodity with which a money lender deals is acceptable to everyone

but an industrial entrepreneur creates his own commodity and its acceptability
is uncertain. Therefore, the entrepreneur assumes more risk than a trader or
a money lender. Only a strong desire to make profit is not enough to succeed
in entrepreneurship. Entrepreneurship can develop in a society where its culture
permits a variety of choices and where social processes are not rigid. The
social conditions should encourage the development of enterprise. There are
innumerable cases, in entrepreneurial history, of firms, which failed because
their founders could not function as managers or feared to enlist the services
of managers when required.
ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT
The entrepreneurship has been identified by many economists as a vital force in the
process of industrialisation in particular and economic development in general.
Economic development essentially means a change. But, at the same time, it is
very difficult to define precisely the pharse economic development’. One should
realise that the term economic development does not convey the idea of total
development of the society. It only focuses itself on one aspect and one dimension
of general development. Economic development can be defined as a move towards
even more efficient and differentiated methods of supplying people with the
requirements for survival and improvement.

Many a times economic development is interpreted as synonymous with

industrialisation because it is viewed by the poor regions as a superior way of life.
But economic development cannot be equated with industrialisation. When
economic development is anlaysed with the yard stick of extent of
industrialisation, it implicitly undermines the importance of primary sector like
agriculture. The high dependency ratio of people on the primary sector is not the
cause of underdevelopment but the consequence of it. These two sectors are
complementary to each other in the development process. Moreover, economic
development is much more than industrialisation, it is an upward movement of the’
entire social system. Economic development includes increase in productivity,
social and economic equalization, improved institutions, and attitudes, and a
rationally coordinated system of policy measures, and removal of undesirable
conditions and systems that perpetuated a state of underdevelopment.

It appears that economic development involves something more than economic

growth and it includes both growth and change. Moreover, economic development
is not only a quantitative phenomenon but has qualitative dimensions too.

The criterion of per capita income can be considered as a good indicator of

regional variations in economic development. As the economic development is
essentially a process the increase in per capita income should not appear as a
temporary or short sustained phenomenon. Of course, the increase in per capita
income can be considered as the primary criterion for measuring the extent of
development in an area. There are other sub-criteria which have tobe considered
along with the primary criterion. The nature of distribution of income in the society
is an integral part of the development. The secondary objectives like level of
consumption, level of employment, diversification against concentration of the
economy are also important.

Economic development is not to be considered as an end in itself, but is a means to

an end. Economic development is concerned, ultimately, with the achievement of
better nourishment, better education, better health, better living conditions and an
expanded range of opportunities in work and leisure for the people. Therefore, a
rise in real per capita income is a relevant criterion to judge the extent of
development in a region as it is a means for the attainment of desired standards in
nourishment, education, health, and living conditions.
The entrepreneur is the key to the creation of new enterprises that energise the
economy and rejuvenate the established enterprises that make up the economic
structure. Entrepreneurs initiate and sustain the process of economic development
in the following ways :
1. Capital formation : Entrepreneurs mobilise the idle savings of the public
through the issues of industrial securities. Investment of public savings in industry
results in productive utilisation of national resources. Rate of capital formation
increases which is essential for rapid economic growth. Thus, an entrepreneur is
the creator of wealth.
2. Improvement in per capita income : Entrepreneurs locate and exploit
opportunities. They convert the talent and idle resources like land, labour and
capital into national income and wealth in the form of goods and services. They
help to increase net national product and per capita income in the country, which
are important yardsticks for measuring economic growth.
3. Improvement in living standards : Entrepreneurs set up industries which
remove scarcity of essential commodities and introduce new products. Production
of goods on mass scale and manufacture of handicrafts, etc., in the small scale
sector help to improve the standard of life of a common man. These offer goods at
lower costs and increase variety in consumption.
4. Economic independence : Entrepreneurship is essential for national self-
reliance. Industrialists help to manufacture indigenous substitutes of hitherto
imported products thereby reducing dependence on foreign countries. Businessmen
also export goods and services on a large scale and thereby earn the scarce foreign
exchange for the country. Such import substitution and export promotion help to
ensure the economic independence of the country without which political
independence has little meaning.
5. Backward and forward linkages: An entrepreneur initiates change which has
a chain reaction. Setting up of an enterprise has several backward and forward
linkages. For example, the establishment of a steel plant generates several ancillary
units and expands the demand for iron ore, coal, etc. These are backward linkages.
By increasing the supply of steel, the plant facilitates the growth of machine
building, tube making, utensil manufacturing and such other units. Entrepreneurs
create an atmosphere of enthusiasm and convey a sense of purpose. They give an
organisation its momentum. Entrepreneurial behaviour is critical to the long term
vitality of every economy. The practice of entrepreneurship is an important to
established firms as it is to new ones.
6. Generation of Employment : At the beginning of seventh five year plan the
backlog of unemployment was estimated to be around 44 million
persons. At present, the number of unemployed in the country is far greater than
what it was during 1985. Emphasis on modernisation which usually results in
automation, use of high technology, and technology up gradation initiated during
1980s and structural changes introduced by the Government during 1990’s are
likely to give much rise to capital-intensive rather than labour intensive industry. It
is feared that there will be very little additional job opportunities within the fold of
organised public and private sectors. Most of the job opportunities in future are
likely to be emerging from informal and unorganized sectors of economy.
Entrepreneurship development training which helps in strengthening informal and
unorganised sector is expected to motivate enterprising people to opt for self
employment and entrepreneurial career. It will therefore, help in solving the
problem of increasing unemployment to some extent.
7. Harnessing Locally Available Resources and Entrepreneurship :
India is considered to be very rich in natural resources. In spite of about five
decades of planned development a large number of states have remained
economically backward. A few large scale industries started by entrepreneurs from
outside the state in an economically backward areas may help as model of
pioneering efforts, but ultimately the real strength of industrialisation in backward
areas depend upon the involvement of local entrepreneurship in such
activities : Increased activities of local entrepreneurs will also result in making.
use of abundantly available local resources.
8. Balanced Regional Growth : Medium and large scale industries can
only be started with huge investment which is either available with well
established industrial houses or need to be drawn from public exchequer. Also,
promotion of such industries does not help in reducing disparities of income
and wealth. On the other hand, an important advantage of small scale enterprises is
that they can be started with meager financial ‘resources and little or no previous
experience or entrepreneurial background.
9. Reducing Unrest and Social Tension Amongst Youth : Many problems
associated with youth unrest and social tension are rightly considered to be due to
youth not being engaged in productive work. In the changing environment where
we are faced with the problem of recession in wage employment opportunities,
alternative to wage career is the only viable option. The country is required to
divert the youth with latent entrepreneurial traits from wage career to self-
employment career. Such alternate path through entrepreneurship could help the
country in defusing social tension and unrest amongst youth.
10. Innovations in Enterprises : Business enterprises need to be innovative for
their survival and better performance. It is believed that smaller firms have
relatively higher necessity and capability to innovate. The smaller firms do not face
the constraints imposed by large investment in existing technology. Thus they are
both free and compelled to innovate: The National Science Foundation, an
organisation in USA found that small companies produce four time more
innovations per research dollar than do bigger companies. Entrepreneurship
development programmes are aimed at accelerating the pace of small firms growth
in India. Increased number of small firms is expected to result in more innovations
and make the Indian industry compete in international market.

FACTORS AFFECTING ENTREPRENEURSHIP GROWTH :

ECONOMIC, SOCIAL, PSYCHOLOGICALAND POLITICAL FACTORS
Is the entrepreneur who we have been acquainted with, in the first lesson, a
machine that calculates the probabilities of profits? Not at all. He, like everyone of
us is very much a part of the society. Therefore, the motivation, the modes of
conduct, and the effectiveness of entrepreneurs need to be understood with
reference to the general environment in which we live. What does the term
‘environment’ mean? In any society, the environment includes the economic,
social, psychological and political aspect of life. In other words, it is true that an
economic activity expansion depends on certain environmental forces that promote
or retard the entrepreneurial thinking, behaviour and efforts. In this lesson, we are
going to look at such factors that tend to influence entrepreneurship.

The countries of the world are experiencing an unprecedented burst of inventions.

Even the underdeveloped countries are making conscious efforts in encouraging
research and development. While the developed countries have the record of
commercialising the inventions to their fullest advantage, the less developed ones
find their innovations either lying idle or flowing out to the more prosperous
nations. The proverbial “brain-drain” that is affecting countries, like India is due to
absence of the necessary infrastructure to capitalise on the numerous inventions
that are taking place. The secret of the success of most developed countries is the
presence of a large member of dynamic entrepreneurs who provide the fillip for
newer and better inventions. The less developed countries, on the other hand, are
confronted by a situation where the entrepreneurs just do not seem to come and the
existing tend to leave their countries in search of better opportunities. The
economically backward nations are characterised by the scarcity of
entrepreneurship. Several inimical factors are affecting the growth of this
important factor of production.

Some societies – notably in the United States, South Korea and many South East
Asian Counties like Thailand and Singapore- are bound with entrepreneurs. Others
like China and India have fewer entrepreneurs, although these countries recently
changed their laws to encourage entrepreneurship. Countries like England, where
many companies such as airlines and automobile manufactures used to be operated
by the Government, have in recent times turned these firms to the private sector,
encouraging entrepreneurship through, new opportunities in private ownership.
Other nations, such as Japan, though are bound by strong traditions, have in recent
times started favouring entrepreneurship. From above, it can be said that economic
and non-economic factors can affect the level of entrepreneurship within any
society.
The emergence and development of entrepreneurship is not a spontaneous one but
a dependent phenomenon of economic, social, political, psychological factors often
nomenclatured as supporting conditions to entrepreneurship development. These
conditions may have both positive and negative influences on the emergence of
entrepreneurship. Positive influences constitute facilitative and conducive
conditions for the emergence of entrepreneurship, whereas negative influences
create inhibiting milieu to the emergence of entrepreneurship.

Various researchers worldover have identified the factors that contribute to the
development of entrepreneurship as are summaried below :
Researcher Factors
1. Schumpeter : Suitable environment, Institution in grasping
the essential facts.
3. Levine : Status mobility system where status is attained
through outstanding performance, initiative
industriousness, and foresight through self
reliance and achievement training.
4. Hagen : Creative personality. High need achievement
need order and need autonomy. Fairly
widespread, creative problem solving ability and
a tendency to use it. Positive attitudes towards
manual and technical labour and the physical
world.
5. Cochran : Attitude towards occupation, the role
 expectations held by sanctioning groups and
the operational requirements of the job.
6. McClelland : Need for achievement through self-study, goal
setting and inter-personal support. Keen
interest in situations involving moderate risk,
desire for taking personal responsibility,
concentrate measures of task performance,
anticipation of future possibilities,
organisational skills, energetic and/or novel
instrumental activity.
7. Kilby : Perception of market opportunities, gaining
command over scarce resources, and marketing
of products. Dealing with public, bureaucratic
concessions, licenses, taxes, management of
human relations within the firm and with
customers and suppliers. Financial and
production management technical knowledge

8. Christopher : High demand for product and experience in the

lines of business/industry.
9. Kunkel : Values, attitudes and personality are
meaningless variables leading to blind alleys
of theory and action.
10. Nafziger : Perceived challenge to status, migrants, new
religious sects and reformed groups.
11. Staley & Morse : Quality of services in industrial advice,
managerial training and industrial research.
12. Fox, Mines : Economic opportunities and political
& Papanek conditions
13. Nandy : Supportive community, self-image which gives
meanIng, value and status to an entrepreneurial
career.
14. Singer : Traditional system of occupational culture
which facilitates the process of modernisation,
special opportunities, motivation, experience,
training or knowledge. Traditional belief and
value system which are flexible to allow for
reinterpretation with changing conditions.
Economists agree that the lack of entrepreneurs is not caused by economic
conditions alone as was the earlier feeling. It is also due to the whole set of socio-
cultural and institutional environment prevailing in the less developed countries.
Various environmental factors influencing the entrepreneurship are as follows :

I. ECONOMIC FACTORS
Economic environment exercises the most direct and immediate influence on
entrepreneurship. The economic factors that affect the growth of entrepreneurship
are the following :
1. Capital : Capital is one of the most important perquisites to establish an
enterprise. Availability of capital facilitates for the entrepreneur to bring together
the land of one, machine of another and raw material of yet another to combine
them to produce goods. Capital is therefore, regarded as lubricant to the process of
production. Our accumulated experience suggests that with an increase in capital
investment, capital-output ratio also tends to increase. This results in increase in
profit which ultimately goes to capital formation. This suggests that as capital
supply increases, entrepreneurship also increases. France and Russia exemplify
how the lack of capital for industrial pursuits impeded the process of
entrepreneurship and an adequate supply of capital promoted it.
2. Labour : The quality rather quantity of labour is another factor which
influences the emergence of entrepreneurship. Most less developed countries are
labour rich nations owing to a dense and even increasing population. But
entrepreneurship is encouraged if there is a mobile and flexible labour force. And,
the potential advantages of low-cost labour are regulated by the deleterious effects
of labour immobility. The considerations of economic and emotional security
inhibit labour mobility. Entrepreneurs, therefore, often find difficulty to secure
sufficient labour. They are forced to make elaborate and costly, arrangements to
recruit the necessary labour. The problem of low-cost immobile labour can be
circumvented by plunging ahead with capital-intensive technologies, as Germany
did. It can be dealt by utilizing labour-intensive methods like Japan. By contrast,
the disadvantage of high cost labour can be modified by introduction of labour-
saving innovations as was done in US. Thus, it appears that labour problems can be
solved more easily than capital can be created.
3. Raw Materials : The necessity of raw materials hardly needs any emphasis for
establishing any industrial activity and its influence in the emergence of
entrepreneurship. In the absence of raw materials, neither any enterprise can be
established nor an entrepreneur can be emerged. Of course, in some cases,
technological innovations can compensate for raw material inadequacies. The
Japanese case, for example, witnesses that lack of raw material clearly does not
prevent entrepreneurship from emerging but influenced the direction of
entrepreneurship. In fact, the supply of raw materials is not influenced by
themselves but becomes influential depending upon other opportunity conditions.
The more favourable these conditions are, the more likely is the raw material to
have its influence of entrepreneurial emergence.
4. Market : The fact remains that the potential of the market constitutes the major
determinant of probable rewards from entrepreneurial function. Frankly speaking,
if the proof of pudding lies in eating, the proof of all production lies in
consumption, i.e., marketing. The size and composition of market both influence
entrepreneurship in their own ways. Practically, monopoly in a particular product
in a market becomes more influential for entrepreneurship than a competitive
market. However, the disadvantage of a competitive market can be cancelled to
some extent by improvement in transportation system facilitating the movement of
raw material and finished goods, and increasing the demand for producer goods.
D.S. Landes holds the opinion that improvement in transportation are more
beneficial to heavy industry than to light industry because of their effects on the
movement of raw materials. Paul H. Wilken claims that instances of sudden rather
than gradual improvement in market potential provide the clearest evidence of the
influence of this factor. He refers to Germany and Japan as the prime examples
where ‘rapid improvement in- market was followed by rapid entrepreneurial
appearance. Thus, it appears that whether or not the market is expanding and the
rate at which it is expanding are the most significant characteristics of the
marketfor entrepreneurial emergence.
5. Infrastructure : Expansion of entrepreneurship presupposes properly developed
communication and transportation facilities. It not only helps to enlarge the market,
but expand the horizons of business too. Take for instance, the establishment of
post and telegraph system and construction of roads and highways in India. It
helped considerable entrepreneurial activities which took place in the 1850s. Apart
from the above factors, institutions like trade/ business associations, business
schools, libraries, etc. also make valuable contribution towards promoting and
sustaining entrepreneurship’ in the economy. You can gather all the information
you want from these bodies. They also act as a forum for communication and joint
action. Of late, the importance of business and industry associations have increased
tremendously. In the fast changing world of business, entrepreneurs have to move-
collectively in order to be more effective and more efficient. They need to
constantly check and influence the Government’s thinking and decision-making.
II. SOCIAL FACTORS
Social factors can go a long way in encouraging entrepreneurship. In fact it was the
highly helpful society that made the industrial revolution a glorious success in
Europe. The main components of social environment are as follows:
1. Caste Factor : There are certain cultural practices and values in every society
which influence the’ actions of individuals. These practices and value have
evolved over hundred of years. For instance, consider the caste system (the varna
system) among the Hindus in India. It has divided the population on the basis of
caste into four division. The Brahmana (priest), the Kshatriya (warrior), the
Vaishya (trade) and the Shudra (artisan): It has also defined limits to the social
mobility of individuals. By social mobility’ we mean the freedom to move from
one caste to another. The caste system does not permit an individual who is born a
Shridra to move to a higher caste. Thus, commercial activities were the monopoly
of the Vaishyas. Members of the three other Hindu Varnas did not become
interested in trade and commence, even when India had extensive commercial
inter-relations with many foreign countries. Dominance of certain ethnical groups
in entrepreneurship is a global phenomenon. The protestant ethics in the west, the
Sammurai in Japan, the trading classes in US and the family business’ concerns of
France have distinguished themselves as entrepreneurs.
2. Family background : This factor includes size of family, type of family and
economic status of family. In a study by Hadimani, it has been revealed that
Zamindar family helped to gain access to political power and exhibit higher level
of entrepreneurship. Background of a family in manufacturing provided a source of
industrial entrepreneurship. Occupational and social status of the family influenced
mobility. There are certain circumstances where very few people would have to be
venturesome. For example in a society where the joint family system is in vogue,
those members of joint family who gain wealth by their hard work denied the
opportunity to enjoy the fruits of their labour because they have to share their
wealth with the other members of the family.
3. Education : Education enables one to understand the outside world and equips
him with the basic knowledge and skills to deal with day-to-day problems. In any
society, the system of education has a significant role to play in inculcating
entrepreneurial values.

In India, the system of education prior to the 20th century was based on religion. In
this rigid system, critical and questioning attitudes towards society were
discouraged. The caste system and the resultant occupational structure were
reinforced by such education. It promoted the idea that business is not a
respectable occupation. Later, when the British came to our country, they
introduced an education system, just to produce clerks and accountants for the East
India Company, The base of such a system, as you can well see, is very anti
entrepreneurial. The unfortunate result of it is that young men and women in our
country have developed a taste only for service. Their talents and capabilities have
not been made much use of. Rather it has been wasted in performing routine
conventional jobs. Our educational methods have not changed much even today.
The emphasis is till on preparing students for standard jobs, rather than marking
them capable enough to stand on their feet.
4. Attitude of the Society : A related aspect to these is the attitude of the society
towards entrepreneurship. Certain societies encourage innovations and novelties,
and thus approve entrepreneurs’ actions and rewards like profits. Certain others do
not tolerate changes and in such circumstances, entrepreneurship cannot take root
and grow. Similarly, some societies have an inherent dislike for any money-
making activity. It is said, that in Russia, in the nineteenth century, the upper
classes did not like entrepreneurs. For them, cultivating the land meant a good life.
They believed that rand belongs to God and the produce of the land was nothing
but god’s blessing. Russian folk-tales, proverbs and songs during this period
carried the message that making wealth through business was not right.
5. Cultural Value : Motives impel men to action. Entrepreneurial growth requires
proper motives like profit-making, acquisition of prestige and attainment of social
status. Ambitious and talented men would take risks and innovate if these motives
are strong. The strength of these motives depends upon the culture of the society. If
the culture is economically or monetarily oriented, entrepreneurship would be
applauded and praised; wealth accumulation as a way of life would be appreciated.
In the less developed countries, people are not economically motivated. Monetary
incentives have relatively less attraction. People have ample opportunities of
attaining social distinction by non-economic pursuits. Men with organisational
abilities are, therefore, not c dragged into business. They use their talents for non-
economic ends. The absence of proper economic motives is a general characteristic
of agrarian societies in which people do not attach great value to business talents,
industrial leadership etc.
III. PSYCHOLOGICAL FACTORS
Many entrepreneurial theorists have propounded theories of entrepreneurship that
concentrate specially upon psychological factors. These are as follows :
1. Need Achievement: The most important psychological theories of
entrepreneurship was put forward in the early) 960s by David McClelland.
According to McClelland ‘need achievement’ is social motive to excel that tends to
characterise successful entrepreneurs, especially when reinforced by cultural
factors. He found that certain kinds of people, especially those who became
entrepreneurs, had this characteristic. Moreover, some societies tend to reproduce a
larger percentage of people with high ‘need achievement’ than other societies.
McClelland attributed this to sociological factors. Differences among societies and
individuals accounted for ‘need achievement’ being greater in some societies and
less in certain others. Analysing this phenomenon, Paul Wilken has said,
“entrepreneurship becomes the link between need achievement and economic
growth”, the latter being a specifically social factor. The theory states that people
with high need-achievement are distinctive in several ways. They like to take risks
and these risks stimulate them to greater effort. The theory identifies the factors
that produce such people. Initially McClelland attributed the role of parents,
specially the mother, in mustering her son or daughter to be masterful and self-
reliant. Later he put less emphasis on the parent-child relationship and gave more
importance to social and cultural factors. He concluded that the ‘need
achievement’ is conditioned more by social and cultural reinforcement rather than
by parental influence and such related factors.
2. Withdrawal of Status Respect: There are several other researchers who have
tried to understand the psychological roots of entrepreneurship. One such
individual is Everett Hagen who stresses the-psychological consequences of social
change. Hagen says, at some point many social groups experience a radical loss of
status. Hagen attributed the withdrawal of status respect of a group to the genesis
of entrepreneurship. Giving a brief sketch of history of Japan, he concludes that it
developed sooner than any non-western society except Russia due to two historical
differences. First, Japan had been free from colonial disruption and secondly, the
repeated long continued withdrawal of expected status from important groups
(smaurai) in its society drove them to retreatism which caused them to emerge
alienated from traditional values with increased creativity. This very fact led them
to the technological progress through entrepreneurial roles.
Hage believs that the initial condition leading to eventual entrepreneurial
behaviour is the loss of status by a group. He postulates that four types of events
can produce status withdrawal:
(a) The group may be displaced by force;
(b) It may have its valued symbols denigrated;
(c) It may drift into a situation of status inconsistency; and
(d) It may not be accepted the expected status on migration in a new society.
He further postulates that withdrawal of status respect would give rise to four
possible reactions and create four difference personality types :
(a) Retreatist : He who continues to work in a society but remains different to his
work and position;
(b) Ritualist : He who adopts a kind of defensive behaviour and acts in the way
accepted and approved in his society but no hopes of improving his position;
(c) Reformist : He is a person who foments a rebellion and attempts to establish a
new society; and
(d) Innovator : He is a creative individual and is likely to be an entrepreneur.

Hagen maintains that once status withdrawal has occurred, the sequences of
change in personality formation is set in motion. He refers that status withdrawal
takes a long period of time - as much as five or more generations - to result in the
emergence of entrepreneurship.
3. Motives : Other psychological theories of entrepreneurship stress the motives or
goals of the entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs
seek power, prestige, security and service to society. Stepanek points particularly
to non-monetary aspects such as independence, persons’ self-esteem, power and
regard of the society.
On the same subject, Evans distinguishes motive by three kinds of entrepreneurs :
(a) Managing entrepreneurs whose chief motive is security.
(b) Innovating entrepreneurs, who are interested only in excitement.
(c) Controlling entrepreneurs, who above all otter motives, wantpower and
authority.
Finally, Rostow has examined intergradational changes in the families of
entrepreneurs. He believes that the first generation seeks wealth, the second
prestige and the third art and beauty.
4. Others : Thomas Begley and David P. Boyd studied in detail the psychological
roots of entrepreneurship in the mid 1980s. They came to the conclusion that
entrepreneurial attitudes based on psychological considerations have five
dimensions:
(i) First came ‘need-achievement’ as described by McClelland. In all studies of
successful entrepreneurs a high achievement orientation is invariably present.
(ii) The second dimension that Begley and Boyd call ‘locus of control’ This means
that the entrepreneur follows the idea that he can control his own life and is not
influenced by factors like luck, fate and so on. Need-achievement logically implies
that people can control their own lives and are not influenced by external
forces.
(iii) The third dimension is the willingness to take risks. These two researchers
have come to the conclusion that entrepreneurs who take moderate risks earn
higher returns on their assets than those who take no risks at all or who take
extravagant risks.
(iv) Tolerance is the next dimension of this study. Very few decisions are made
with complete information. So all business executives must, have a certain amount
of tolerance for ambiguity.
(v) Finally, here is what psychologists call ‘Type A’ behaviour. This is nothing but
“a chronic, incessant struggle to achieve more and more in less and less of time”
Entrepreneurs are characterize by the presence of ‘Type A’ behaviour in all their
endeavours.
IV. POLITICAL FACTORS
A football player might possess exceptional talent. But, his contribution to the
nation and the world of sports would remain negligible, if his performance is
restricted to the courtyard of his own house. He needs a football ground to practice
on and resources to buy the accessories. He also requires encouragement and
support from those in authority so that he could freely play with others and prove
his talent. In the same way, an entrepreneur, however creative he/she may be,
cannot function without the supportive actions of the Government. It is for the
government/society to ensure the availability of required resources for the
entrepreneurs and also the accessibility to them. This is because the successful
entrepreneur contributes to the well being of the society. Policies relating to
various-economic aspects like prices, availability of capital, labour and other
inputs, demand structure, taxation, income distribution, etc. affect growth of
entrepreneurship to a large extent. Promotive government activities such as
incentives and subsidies contribute substantially to entrepreneurial performance. At
the same time, Government policies like licenses, regulations, favouritism,
government monopolies, etc. are undesirable for the growth of business
enterprises. Above all, a Government that is politically stable and united can effect
entrepreneurial activities in a significant manner. Is there a business entrepreneur
in your neighbourhood? Try to gather information on his/her views on various
government policies, for example, on taxation, finance, labour etc. Also ask
him/her about the opportunities and growth prospects of a business unit.

India, all the above mentioned environmental forces have turned in favour of
enterprising men and women. There is a visible change for the better in the highly
inactive entrepreneurial field in the country. The tight grip of religious and
traditional, ideas and practices have begun to loosen. Dogmas (settled opinions)
and superstitions have lost the hold they earlier had. It is encouraging the ‘non-
commercial’ classes to consider economic opportunities more sympathetically. As
a result, occupational division based on caste system has undergone tremendous
traditional activities, social approval etc. have become less important. More
important now, are the economic factors such as access to capital and possession of
entrepreneurial attitudes and business I knowledge. Development of infrastructure,
changes in government policies in favour of business and industry and of course,
rise in demand for products manufactured are some of the other factors that have
led the Indian entrepreneurs to look for new business opportunities.