DYNAMICS OF

ENTREPRENEURIAL
DEVELOPMENT
AND
MANAGE·MENT

VASANT DESAI
 DYNAMICS OF
ENTREPRENEURIAL
DEVELOPMENT
AND
MANAGEMENT
• E_~trepreneurship
• Proiects Management
•. Finances·
• Programmes, and
• Problems

VASANT DESAI

Hal
GJIimalaya GpublishingGJIouse
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 (v)

ENTREPRENEURIAL
MISSION STATEMENT
• The entrepreneur lives and works in an environment that is fiercely
competitive. It is therefore crucial that the entrepreneur sharpens his/her
cutting edge to stay ahead.
• The entrepreneur as the engine of economic growth, job creation and
prosperity, always served the society. Customer priority and quality 'are'
his mission and passion.
• The entrepreneur shall adopt organisation structures to speed up
communication, decision-making, job creation, income generation and
wealth creation.
• The entrepreneur displays courage to take risk of putting his own money
into an idea; courage to take on the competition and courage to take
a' leap into an unknown future and create new enterprises/businesses.
This creative process is the lifeblood of the strong enterprise that derive
growth and propel nations forward.
• The entrepreneurial activities blossom and thrive under conditions where
citizens participate and compete in the market place under conditions
of equality and are not unduly burdened by regulation.
• The entrepreneur will always strive for a neutral and sustainable
enhancement of entrepreneurial society.
• Entrepreneurism is the lifeblood of any economy; but in India, where first-
generation innovators are still battling the odds to make a mark on the
global economy, enterprise is an idea whose true potential is yet to be
realised. Ironically, Indian entrepreneurism is more about overcoming
barriers - be it finance, bureaucracy, and infrastructure - than about
achieving the fruits of liberalisation. That is not an inspiring image for
a country that dreams of being a critical component of tomorrow's
knowledge economy; of creating vibrant digital valleys; and of having
its own Bill Gates and Michael Dells. Yet the changing Indian economic
arena is always a buzz with the news of mavericks that have discovered
bold new ways of competing. And they have done so in areas that have
been extremely tough to compete in, dominated as they are by mighty
multinationals. -
• Entrepreneurism triggered by Iiberalisation and the advent of the
brainpower industry, demands the systematic development of business
dusters in India, or geographical concentrations of competitiveness
where technology diffusion is rapid and supply chains are short and
efficient. Clusters, where the levels of competitiveness are always high,
are the breeding grounds of entrepreneurism. They need adequate
supportive infrastructure, like educational institutes and research centres,
and a good quality of life, to thrive. A hassle-free environment can
leverage the diverse capabilities of Indian entrepreneurism.
-»,
 DYNAMICS OF ENTREPRENEURIAL DEVELOPMENT &:

,
- MANAGEMENT

Designed to encourage entrepreneurs to seize an unique opportunity and ,

make/a profitable career through self-employment. I

-- This study provides a wealth of information on entrepreneurs, entrepre-

neurship, projects and related issues.
• Divided into Nine comprehensive units, each unit comprising of theory,
illustrations, objectives and inputs.
- • Enrited with schematic diagrams to understand the issues.

• Disc; ss in a lucid style the process of entrepreneurial development and

man gement. _
• Projects, financial appraisal and marketing are discussed extensively.
, • Case studies provide an insight into the process of entrepreneurship.
• Wealth of up-to-date statistics goes a long-way in critical analysis.
• An' ideal for entrepreneurial students, the 'teachers and instructors.

The' ultimate measure of a man

I Is not where he stands
In m~ments of comfort td convenience,
But where he stands
At times of challenge and controversy.

- Martin Luther King

 PREFACE

The concept of 'Entrepreneurial Studies' has appreciably changed in nature and content
over the years. It is no longer considered an assortment of all sorts of arbitrary facts and figures
to choose from. Instead, it is now increasingly becoming more of a systematic, purposeful and
objective study of a wide range of disciplines, cultural variances, value systems and environment
around us. "
Entrepreneurial development and management has come to be recognised globally as
the key to rapid and sustainable economic development as well as the welfare and progress
of mankind.
More so, it is the entrepreneurs who have been largely instrumental in forming a strong
link between agriculture and industry. Indeed, the entrepreneurs with their vision and innovative
qualities lay down a strong foundation for sustainable growth, be it the industry, agriculture,
trade or the service sectors. Moreover, sustainable growth is most conducive for a healthy
society, i.e., an entrepreneurial society. -
I have immense pleasure in presenting to my esteemed readers the Fourth revised edition
of this very popular book. the book consists of new innovative presentations to cope up with
the next millennium challenges and opportunities.
Successful new business ventures and economic development do not Just happen. They
are the result of the combination of right environment, planning; effort, and innovation. And
this right mix can only be achieved by the entrepreneurs. They provide a clear blueprint for
stimulating research, technology, finance to help promote matured enterprises. At the same
time, they enrich the eco-system and give a boost to economic growth. Economic gr0'-0h refers
to an increase in a country's production or income per capita, with economy's total output of
goods and services being measured by Gross National Product (GNP). At the present juncture,
the country needs much more than growth. Economic development, on the other hand, goes
beyond economic growth to include changes in output, distribution and economic structure,
which may affect such things as improvement in material well-being of the poor, technical
breakthrough, increase in economic activities, increase in the educational level and
improvement in health.

Contributing Factor.
The factors contributing to economic development are labour, technology, natural
resources, capital and entrepreneurship. New business formation is the "result of harassing
human skills with the developed technology, added by available capital as well as other
infrastructure to set in a development process. The key factor in this development process is
the entrepreneur. This is the forte of the entrepreneur whose policies and strategies cover such
broad areas as production, marketing, financing, pricing and personnel relations. The growth
of entrepreneurship largely depends upon effective policies and their efficient implementation.
Whose contributions as an innovator and coordinator will go towards the economic
development of the country. Thus entrepreneurship is the coordination of the production
elements. (

Entrepreneurship management is basically concerned with the development, and

coordination of entrepreneurial functions. An effective organisation, sound planning, proper
coordination of business activities and rational decision-making are the important aspects of
entrepreneurship management. The foundation of effective management needs both policy
and strategy to be determined and made known.
 (viii)

-Literature on entrepreneur development and management has been growing in recent

years. Though there have been numerous articles in various journals on entrepreneurial
development, especially in India and quite a 'few edited books containing articles on different
aspects of the subject by different authors, there remains an imbalance in the coverage of topics.
It is; therefore, no exaggeration to say that there has not been a single comprehensive book
on the subject, explaining, analysing and assessing the various aspects of the subject. This book
is intended to help evolve a perspective of development of the vital sectors of the national
economy and furnish the much needed information on this subject.
The purpose of the book is to describe the essential features of an entrepreneur arid
entrepreneurship to provide a sense of direction for planners and policy-makers, on the one
end, and the emerging crop of young entrepreneurs, both men and women, educated,
uneducated, professional and non-professional, to reap immense benefits and decide the future
course of action, on the other. In fact, this book is not a fresh beginning. Nor is it the last word. '
Subsequent studies will elaborate on many of the.issues raised here.
\

The study can be' read by anyone interested in economic revitalisation, rapid
industrialisation, grOIAIthand development of an area, economic planners, big and 'small
entrepreneurs, bankers, industrialists, members of chamber of commerce and industry and
every concerned citizen, who is an entrepreneur at heart. It is hoped that the book will stimulate
entrepreneurs to actively participate in the economic growth of the country. It serves as a tool
kit to all entrepreneurs with a new vision and a new insight.
It makes fin in-depth analysis of various facts of entrepreneurial development, particulars
in establishing innovative enterprises, and creating employment opportunities for millions in
urban and rural areas.
It underscores the fact that the process of management development, research and
consultancy should be entrepreneurially oriented, which would churn out professional
entrepreneurs who will contribute to the country's economic growth.

A .Creatlve Study
. The present study is not only creative, but also cohesive and integrated. And, it will assist
in right policy formulations with an eye on an ideal environment for entrepreneurial
development in India and other developing countries. It will offer entrepreneurs a rich [are
of stimulating ideas, a new vision and challenging insights. People engaged in entrepreneurial
development, entrepreneurial management and the training of professionals in industry,'
agriculture and trade, administrators, planners, economists, consultants, bankers, project
officers, financial institutions - all these will find these three volumes to be quite stimulating
and interesting. The study willassist in accelerating and steering the process of economic growth
in the right direction.

Outline of the Book

The study consists of chapters grouped into Eight units:
Unit 1: introduces the concept, culture, types, traits, motivation, importance and growth of
entrepreneurship.
Unit 2: examines the nature and scope of entrepreneurial development, policies, and
problems associated with the development process.
Unit 3: covers the varied facets of project management.
Unit 4: examines the varied facets of financial analysis of the projects.
Unit' 5: assesses the sources of finance available to entrepreneurs.
 (ix}

Unit 6: describes the _marketing channels and other aIlied issues.

Unit 7: examines the process of setting up a smaIl industry and explores the possibilities of _
growth, and
Unit 8: ,critically examines the problems of entrepreneurship.
I do not make any claim to originality or comprehensiveness. Rather I have sincerely
attempted to bring tOgether the scattered literature on the subject. However, the presentation
of the subject is my own creation.
In the preparation of this book, I have drawn heavily from tne published works in the
sphere of entrepreneurial development and management.
I hope that me students, teachers, the policy makers, entrepreneurs, and others interested
in the subject will find the study useful.
I look forward to receiving suggestions from them for improving the contents and -
presentation of this book.

Acknowledgement
I am grateful to those who have helped-me, in compiling the matter for this book. While
I take this opportunity to thank all of them - they are too numerous to be mentioned in this
brief preface - I would like to acknowledge my deep sense of gratitude to Dr. Narendra Kumar
for his ungrudging help at all stages, and to the many veteran professional entrepreneurs and
consultant economists for their precise guidance. Thanks are also due to Shri B.N. Nilaver, Shri
K.N. Pandey, Phalguni Ravi and M.V. Desai for their suggestions for affecting a number of
stylistic improvements. -
I take this opportunity to-express my sincere appreciation and gratitude to Ms. Pratibha
Choudhary for reading the book carefully and suggesting changes to make it more crisp, lucid
and informative. If the book spontaneously arouses the attention of the students, entrepreneurs,
faculjy members of entrepreneurial studies, policy makers and researchers, the credit naturally
goes to Pratibha for her studied-help in presenting the Third Revised Edition in a new look
and newer format. .
Lastly, no words can adequately express my debt of gratitude to my father, Shri
Ranganath Balwant Mutalik Desai, and my mother, Smt. Laxmidevi, for generating.in me a
perennial interest in higher studies. I will be failing in may duty if I do not mention here the
tremendous co-operation I received from my wife in the completion of this voluminous work,
in particular, whose patience, support, encouragement, understanding and love helped to bring
this-effort to fruition. -

Mumbai VASANT DESAI

 A BEEHIVE OF ENTREPRENEURIAL GROWTH

A rewarding feature of economic development in India has been the impressive

growth of entrepreneurs, particularly in modern small-scale industries. In fact, modem
small sector has emerged as a potential sector enhancing the growth of highly skilled
entrepreneurs who not only make profits, but also contribute to a better quality of
life for the millions who make the profit possible. The small enterprises have by now
established their competence .to manufacture a wide variety of sophisticated goods
in different product-lines requirinq a high degree of skill and precision. They have
made a notable .contribution in realising the principal objectives of expanded
employment opportunities, adoption of modem techniques and dispersal of industries
in small towns and rural areas. This has been possible as a result of the successful
implementation of the programme for assistance to small-scale industries. The
diversified, rapid growth of small-scale industries is a significant feature of India's
economic development in recent years.
The small-scale industry has emerged as the most dynamic sector of Indian
industrial economy, accounting-for over 55-60 per cent of the total value of industrial
production, for over 40 per cent of the country's aggregate export and over 65-70
per cent of exports of manufactured goods in 1998-99. More importantly, it provides
direct employment opportunities to over 168lakh people, accounting for 75 per cent
of employment in the manufacturing sector. Indirectly," this sector provides
employment to over 300 lakh persons. All along, it has shown a growing spirit of
entrepreneurship. Twenty-nine lakh entrepreneurs is just a fraction who give fillip to
entrepreneurship in business and service sector in a big way, especially in the small
sector.
It is estimated that the small-scale sector has opened up new avenues to over
150 lakh entrepreneurs creating employment opportunities to over 550 lakh people.
These entrepreneurs have harnessed the natural resources with little capital and Indian
technology, for the betterment of the society. Small businesses have, potentially, a
crucial role to play in a country's growth and development. They generally employ
workers with limited formal training, who then learn skillson the job. More importantly
small enterprises act as an incubator to breed new entrepreneurs on an ongoing basis.
Cultivating entrepreneurship often involves changing and sustaining a new set of social
values. A big part of cultivating entrepreneurship involves establishing an environment
where business can flourish.
Truly, small-scale sector is a_ beehive of entrepreneurial growth. A brief
panoramic macro-view of the contribution of entrepreneurs to industrial growth inter
alia economic growth, exports and employment is covered in the contents.
 CONTENTS

Preface
1. Introduction 1 - 12

I UNIT 1: ENTREPRENEURSHIP

2. Definitions and Structure 15 - 24

3. The Entrepreneurial Culture 25 - 43
4. The Concept of Entrepreneurship 44 - 53
5. Theories of Entrepreneurship 54 - 70
6. Classification and Types of Entrepreneurs 71 - 78
7. Entrepreneurial Traits and ,Motivation 79 - 94
8. Growth of Entrepreneurs ~ 95 - 98
9. Nature and Importance of Entrepreneurs /~'flC;''anS of.g,lsttJ-IO~9 - 106
~trepreneur Vs Professional Managers 107 - 118
11. Development of Women Entreprene 1rS 119 - 134
1
I UNIT 2: ENTREPRENEURIAL DEVELOPMENT I
12. Entrepreneurial Environment 137 - 146
13. The Process of Entrepreneurial Development 147 - 160
14. Entrepreneurial Development Training 161 - 180
15. Institutions in Aid of Entrepreneurs 181 - 197

I UNIT 3: PROJECTS MANAGEMENT I

16. Search for a Business Idea 201 - 211
17. Concept of Projects and Classification 212 - 226
18. Project Identification 227 - 235
19. Project Formulation 236 - 253
20. Project Design and Network Analysis 254 - 265
21. Project Report 266 - 274
21. Project Appraisal 275 - 290
23. Factory Design and Layout 291 - 299

[ UNIT 4: FINANCIAL ANALYSIS

24. Financial Analysis - An Input in Financial Appraisal 303 - 307

25. Ratio Analysis 308 - 319
26. Investment Process 320 - 328
27. Break-Even Analysis 329 - 337
~.8. Profitability Analysis 338 - 347
 {xii)

29. Social Cost-Benefit Analysis 348 - 377

30. Budget and Planning Process 378 - 395
31. Applicability of the Factories.Acts. ,,396,419

1 UNIT 5: SOURCES OF FlN~N~E

32. Sources of Development Finance 423 - 437

33. Project Financing 438 - 451
34. Institutional Financt to Entrepreneurs 452 - 470
35. Financial Institutions 471 ', 504
36. Role of Consultancy Organisation 505 - 518

I UNIT 6: MARKETING CHANNEL

37. Methods of Marketing 521 - 538

38. Marketing Channels 539 - 564
39. Marketing Institutions and Assistance 565 - 584
40. Setting Quality Standards 585 - 607

1 UNIT 7: SETTING UP A SMALL INDUSTRY I

41. Location of an Enterprise 611 - 625
Lft Steps for Starting a Small Industry 626 - 644
43. Selection of Types of Organisation 645 - 662
44. Incentives and Subsidies 663 - 680
45. Exploring Export Possibilities 681 - 692

I ~NIT 8: PROBLEMS I
46. Problems of Entrepreneurship 695 - 706
47. SIckness in Small-scale Industries -
Reasons and Remedies 707 - 721

/ ·1 UNIT 9: CASE STUDIES I

48. Project Work. 725 - 742
 · (xiii)

ENTREPRENEURS-PAST AND PRESENT

(xiv)
 (xv)

ENTREPRENEURISM

Entrepreneurism, entrepreneurship are the lifeblood of any economy, more so

in the developing economy. In India, entrepreneurism is in its cultural ethos.
Entrepreneurship and enterprises are a continuous process and it is growing from
centuries to centuries.
Information and communications technology make it easier for companies to
serve the world from any place they choose. Overnight package delivery-service allow
companies to get parts from nearly anywhere within a day or two; so, they don't
necessarily need supplies to be nearby. Highspeed, low-cost communication systems
link companies to offices anywhere in the world, giving even small or remote
communities opportunities to compete, Therefore, just as the acquisition and
application of knowledge will differentiate winners from losers in busines, the adoption
of a global outlook will mark those communities and individuals who thrive in the
next century. In addition to bringing jobs, any business moving into a community
is also likely to bring new services, technologies, and equipment that can help it grow.
And cosmopolitans who come to a community can help raise the standards of schools,
government, public services, and its businesses.
In 1990, six people threw up their jobs and set out to form a venture which
would provide anything and everything required in the infotech arena. Under the
banner IT&T, the company's activity termed 'facilities management' has grown over
the years to clock a turnover of Rs. 30 crore. The initial phase was quite testing for
the team and three of them ran' out of steam when the future looked bleak.
Perseverance paid rich dividend. Once the three promoters were able to service
reputed companies and deliver results, things automatically started looking up. The
troika of Karan Puri, managing director, Hemant Kohli (CEO) and K. Ganesh
(director), have not only proved the other three friends wrong by achieving results
but also have recently roped in another partner - Rohit Chand - as executive
chairman. The incumbent, who has 30 years of experience, has imparted a cutting
edge to improvisations in facilities management and creating a niche of networking
systems and systems integration. ~T&T's latest venture, the IT&T Global Services Ltd.,
is his first contribution to the company. The first client of the company is Siemens,
which is setting up a power plant in Brazil. '
The focus of the company from now on is going to be high margin business
. particularly smart sourcing and global services. This may reduce our turnover a bit
but will increase our, profits in addition to reducing a lot of unwanted workload. Despite
competitors like IBM Global Services, Wipro, compaq OMS and Microland, IT&T has
constantly thrived by offering innovative services.
The smart sourcing business model deals with contractural acquisition services
for customers' hardware, software and networking requirements to ensure highest
possible quality at the optimal costing of IT infrastructure. The idea is to provide single
window supporting system for companies which can utilise the strength of procuring
the best out of many vendors with each catering to their strength rather than going
 (xvi)

for the easy route of getting everything from a single point. In the first phase, the
company is tapping mature buyers for whom infotech systems are crucial for day-
to-day operation. Ranbaxy, Castrol, Dabur, Reckitt & Coleman, British Council are
some of the big clients.
Offering IT services and support, launch of three new service streams (facilities
management, mail and messaging services and network management services), smart
sourcing services, implementing solutions on these services and the launch of IT&T
Global services are some of the highlights for IT&T this financial year. IT&T has
targeted 1999-2000 as the year for its highest growth in both the domestic and foreign
markets. Last fiscal, the largest portion of the company's sales came from the sales
of Compaq and IBM workstations. IT&T has, since inception, positioned itself as a
key distribution and systems integration company.
The whole idea of smart sourcing came from the clients themselves. Each
company needs to remain focused on its strengths. But the strengths in this business
alter so rapidly that by the time you become near perfect in that particular service,
it becomes obsolete. Technology upgradation and regular R&D in service quality
enhancement remains the buzzword in this segment.
Though IT&T has been performing well over the years despite the entry 'of
formidable rivals, it is lasti: _ the course that matters. Only then would IT&T be an
Indian company that not only stood up to the foreign majors but set itself as an
example to the next generation of software companies. With innovations as the core'.
competency, IT&T has emerged as a leader in sourcing information technology. The
end-target may be dearly visible, but much of the route may be invisible from the
startinq-point.rThe only way you are going to see the path ahead is to start moving.
Thus, strategy must be as much about experimentation as it is about foresight.
The enterprise must pay more attention to the pre-conditions for innovative
strategy-creation. The goal is not to develop perfect strategies, but to develop
strategies that are directionally correct, and then, to progressively refine them through
rapid experimentation and adjustment. This is the real work of the leader.
 (xvii)
~ '4If( ,I \~\\\
THE IDEAL ENTREPRENEUR

Not a workaholic. Sure, you should be prepared to work long - and irregular-
hours, but the freedom to choose and priorities free time is always at hand, if you
cannot sleep at night, as long as there is a single file left unperused, a memo unread,
a number uncrunched, back off right now. Entrepreneurship isn't one-dayer. You.
must have the self-control time play for a long innings instead of burning yourself ~
out. t,

Be warned, therefore: even when you are your own boss, long-term
sustainability demands that you balance your professional and personal life. Only then
can you truly make your own business susta.nable in the long-term.
To Morph into an Entrepreneur
• Managers must be able to translate their career ambitions into. specific
business goals.
• Managers must use their people management skills to motivate and inspire •.
their employees.
• Managers must capitalise on their skills to manage the financial aspects -
personally.
• Managers must turn their aggression in the workplace into a risk-taking ~~
approach.
• Managers must leverage their functional expertise when choosing their line
of business.
• Managers must develop leadership qualities on the job before venturing out
on their own. I
Prepare, therefore, a mental checklist of the other side to the entrepreneur's
job. Sure, your once-in-a-life-time innovative idea will convert customers immedi-
ately, but are you as prudent as a penny-pinching CFO? The diplomacy of the
personnel manager? The doggedness of the door-to-door salesman? You'll need them.
all, in addition to that gem of an idea.
•
The entrepreneurship audit will judge individual's capabilities to be an
entrepreneur or not. Just try it.
 (xviii)

THE ENTREt:RENEIJRSHIP AUDIT

Do you measure upto the tough task of being your own boss? Assess yourself
impartially and objectively your positive and negative points in becoming your own
boss. If need be, negative points might be corrected by training and education. Take
this test to find out:
Yes No
1. Do you en16~aking big, even unwarranted, risks?
D D
2. Do you plan a head on most things you do? D D
3. Do you have a head for numbers and finances? D D
4. Do you make It a point to complete what you start? D D
5. Can you survive a drop in your standard of living? D D
6. Are you able to take decisions without dithering? D D
7. Are you free of major financial commitments? D D
8. Can you get along with different kinds of people? D D
9. Is your career path in your company flattening out? D D
10. Do you enjoy travelling on work? 0 D
11. Are you capable of leading people?
D D
12. Do you have a clear vision about your dreams? D D
13. Do you have innovative ideas about projects and servicesTI D
14. Have you acquired specific skills to run the new venture? D D
15. Do you plan your work methodically? D D
16. Are you adaptable and flexible? D D
17. Do you prefer working alone to teams? D D
18. Do YOH find yourself envying entrepreneurs? D D
19. Can you cope with punishing work schedules? D D
20. Does your spouse support your plans? D D
The Scoring
Give yourself 5 points for every YES and 0 for every NO
TOTAL
The Rating
1 0-35 1 You won't get far with I Inc. be satisfied with that you already have
in hand. I

1 40-60 I The passion as a s~lf-s}arteris weak. You seek the status quo rather
than a crisis.' .'
165-100 I All systems :90. Gree?er, pastures and challenges await you.
 (xix)

THREE' KEY ASSETS

Most leaders accept the premise that organisations (enterprises) must become
more knowledge-intensive and value-enhancing. That is how it should be in the' 21st
century.
Of course, a community that cannot offer the brain-power or skillsVhat
employers demand, and is forced to compete with low-wage labour overseas i\ in
trouble. But communities can develop 3 key assets that win-raise their competitive
standing concepts, competence, and connections. Concept-driven communities
search for new ideas, and have a knowledge-intensive workforce. Competence-driven
communities develop centres of quality for manufacturing or other disciplines, using
a combination of good infrastructure, customised job-training, anti commitment to
world-class standards. Connection-driven communities combine their cultural know-
ledge of the world with a healthy commercial infrastructure to become places where
trade is centred or deals are made. Each of these assets creates the basis for a globally-
linked local economy that attracts jobs, 'capital, and the flow of cus.tomers or visitors.
Apart from purely local services, any ccmpany that competes on the basis of
low labour-costs is, eventually, going to look for lower-cost places to operate. It is
clear, for instance, that we will need fewer people in manufacturing plants. That is
why the competition to attract those jobs is so intense: there are simply fewer of them.
The problem is, people who have had those jobs aren't given the skills to move up
the ladder but have to accept lower wages in their next jobs. The only forward-looking
strategy is to try to move as many people as possible up the skills ladder.

THE CORPORATE GOVERNANCEiAUDlT f,

Is your company's board really equipped and empowered to govern?, Use
this diagnostic to determine the eHicacy 01 your company's directors:
1. Does your board include ...
A. One external director for each internal director? 2
B. Two external directors for each internal director? s
C. Three or more external directors for each internal director? 10
2. Does your board comprise ... I'

-A. Directors who have experience ~nly in your industry? 2

B. Directors with experience i~ other related industries ~oo? '5
C.' Direct,ors with experience in related as well as unrelated industries? 10
-3,. Is the agenda for your board ...
A. Set' by the CEq with inputs from internal directors? 2
, 8. Set by CEO .with: li~p';ltsfrom all directors? 5
c!.Flexible ~md set' i~' keeping with emerging requirements? 10
I'
 (xx)
" " '1'"
4. Are the agenda and reading materials for your board circulated ...
A. Two weeks prior to the meeting? 2
B. Three weeks prior to the meeting? 5
C. At least a month in advance? 10
5. Is the typical board meeting ...
A. Structured so as to offer only token discussions of each issue? 2
B. Structured so as to ensure enough time for discussions? 5
C. Structured so , as to always ensure time for free-wheeling exchanges?10
6. Is the nomination of a new board member handled ...
A. By the CEO after getting inputs from all directors? 2
B. By a nominations committee with strong inputs from the CEO? 5
C. By a nominations committee with inputs from all directors? 10
7. Board members are replaced ...
A. When a director wishes to step down. 2
B. When one, or more, directors do not attend meetings. 5
C. On the basis of a formal evaluation of directors. 10
8. Is the audit committee of the board ...
A. Involved in selecting the audit firm from a short-list? 2
B. Asked to recommend to the board which audit firm to use? 5
C. Asked to make its recommendations and to approve the choice? 10
9. Does the audit committee establish its agenda ...
A. On the basis of the internal auditors' suggestions? 2
B. With complete freedom to choose its areas of investigation? 5
C. After setting priorities for systematic study of high-exposure areas? 10
10. Does the compensation committee base its re~ommendations
A. Using inputs from the human resource department? 2
B. On the basis of historical trends and ind~stry practices? 5
C. On pre-established standards and a formula-based reward system? 10
I

The Rating
20-33 " is probably
Out of control. Your board a liability.
35-70 Barely in control. And things could get worse.
72-100 In control. Your board, is, an asset for your company.
Adapted from The Case For AnOf~~~alance-She~t Controller, by RF. Lusch & M.G.
Harvey, Sloan Management Review, Winter, 1994.
" \'~'II'; :. .
 (xxi)

THE VALUE CHAIN PATTERNS

Value moves in mysterious ways. Some strategies work.

Sometimes. Others don't. All the time. The ability to cut
through cross-sections of industry - and company -
profitability, and see the patterns that function as the
invisible forces that add and destroy value is invaluable.
For, the capacity to decipher profit-patterns is the
ultimate strategy machine.
Value
Value is everything. Enterprises that can create value, win. Those that cannot,
lose. Yet, the quest for attaining value is but one-half of what makes corporation
successful. For, once captured, value has to be sustained. And that is a dynamic
process, which requires a entreprenur's business strategy to be geared for the
continuous creation of value. Thus, every entrepreneur most constantly strive to keep
the market valuation of his company - one of the best measures of the value is
creating - higher than the competition's. Or else it may not face a future.
The key lies in spotting, and benefitting from the factors that drive profitability.
If the trend in an industry shows that customer preferences are changing, the
successful company will be one that anticipates them - and immediately alters its
strategy. For corporate India, which is in the throes of an upheaval - with
smokestacks fast yielding way to silicon chips - recognising trends even before they
emerge is vital. For entrepreneurs in quest of value, orthodox business sense will not
help in these difficult times; what used to be sure-shot remedies yesterday will spell
sure-fire disasters tomorrow. Clearly, in a constantly changing business environment,
the rules for creating and sustaining value are also continually changing.
Over time, changing strategic market conditions create a migration from one
set of customer priorities to another. Existing business designs become obsolete, and
new business designs must be invented to deliver new value to customers. Some
executives understand this. Experienced players can detect similarities between
movements of value at different times and in different industries; they can detect
patterns.
Industry value chains used to be incredibly stable. Today, those value chains
have been compressed, broken up, and put together again. At the same time, profits
and power have started to move along the chains more frequently and more rapidly.
Nor is the dynamism limited to the industry value chain itself. Previously distinct value
chains are now overlapping, competing, and merging. Some value chains are
disappearing entirely.
Customers are the ultimate arbiters of value. The patterns of customer-driven
profit shifts are just beginning to be understood clearly. Across a valiety of industries,
the behaviour of the customer-base is changing in similar, repeatable ways. These
changes have triggered numerous patterns, and willcontinue to transform the strategic
landscape. in nearly every business. Customers hold more power in the supplier-
customer equation, and they possess the information as to what will be valuable
tomorrow.
 (xxii)

As power and influence shifted downstream, closer to customers, distribution

channel players became more important. They had direct contact with buyers, and
they could access current information on how customer's preferences were changing.
But it wasn't all upside for the intermediaries. In many industries, traditional channels
. underwent compression (fewer steps in the- distribution process), and ultimately,
disintermediation.
Prior to the mid-1980s, the product was the manufacturer's source of
competitive power and profit. In recent times, however, profit and value have begun
to migrate away from the product along sevral dimensions via many different patterns.
The common denominator across these patterns is that the value that had existed
in the product itself has moved next door, economically speaking, to new scarce assets
such as brands, blockbusters, and solutions. The laws that govern these new scarce
assets have little in common. Each pattern has a different success logic - and needs
to be understood on its own terms.
Knowledge is a form of energy. It is quiet, clean, and effective. It can be
disorganised, dissipated, and squandered. Or it can be organised and profited from,
by both supplier and customer. A great deal depends on how we think about it.
Knowledge patterns will proliferate in the next few years as the focus of the economy
shifts from the manufacture of goods to the application of useful ideas.
The organisational system can have a huge impact on the company's profit.
It can add value to, or subtract value from the company's product franchise and
business design. The outcome depends on how well the organisation system creates
an alignment behind the company's strategy, and an energy level that is sufficient
to enable the brilliant execution of that strategy.
Value patterns are not rigid. Each has variants. Thus, the concept of value
pattern is an invaluable tool for the entrepreneurs. All along, you knew that profits
- and, hence, value - ebbed and flowed within an industry and across industries.
The ability to recognise the patterns that drive profitability and value remove much
of the mystry that surrounds the process of creating and implementing the right
business strategy. For, at the end of the day, the best strategy is one that leads to
an increase in value. Clearly, there is methods to the madness of the New Millennium
markets. And it has everything to do with decoding their patterns.
The Notional Top Twenty-five Enterprises in India
(1998-99)

Rank Company (BT-5()(}/PSU Rank) Market Value Sales (Revenues)

1 Hindustan Lever (1) 34,210.15 10,448

2 ONGC (1) 27,157.80 15,005
3 ITC (2) 17,998.15 7,739
4 Indian Oil Corp. (2) 17,077.37 61,086
5 Reliance Industries (3) 13,002.87 15,174
6 MTNL (3) 12,353.24 4,768
 (xxiii)

7 Wipro (4) 9,724.13 1,853

8 State Bank of India (4) 9,328.88 18,698
9 Gas Authority cfIndla (5) 7,268.27 6,398
10 Bajaj Auto (5) 6,898.75 3,845
11 Hindustran Petroleum Corp. (6) 6,658.20 20,851
12 Bharat Heavy Electricals (7) 6,606.98 6,841
13 Videsh Sanchar Nigam (8) 6,176.31 6,452

14 Infosys Technologies (6) 4,862.79 513

15 TELCO (7) 4,303.05 6,635
16 Nestle India (8) 4,294.11 1,613
17 NUT (9) 4,268.98 469
18 Larsen & Toubro (10) 4,239.54 7,483
19 TISCO (11) 4,222.91 6,982
20 Bharat Petroleum Corp. (9) 4,184.42 20,998
21 Hindalco Industries (12) 4,140.79 2,145
22 Castrol India (13) 4,095.12 1,101
23 lOBI (10) 3,623.69 7,537
24 Ranbaxy Laboratories (14) 3,511.77," 1,588
25 Reliance Petroleum (15) 3,180.85

Total 2,18,626 2,34,727

Public sector 10 1,18,191 1,68,634

Private sector 15 1,00,435 66,093

The Global JTop Ten Corporations

Rank Rank Revenues Rs. crore
in US $ Billion

1 1 GENERAL MOTORS US 161.31 7,02,505

2 17 OAIMLERCHRYSLER Germanhy 154.61 6,73,326
3 2 FORD MOTOR US 144.42 6,28,949
4 8 WAL-MART STORES. US 139.21 6,06,260
5 3 MITSUI Japan 109.37 4,76,306
6 6 ITOCHU Japan 108.75 4,73,606
7 4 MITSUBISHI Japan 107.18 4,66,769
8 7 EXXON US 100.70 4,38,549
9 12 GENERAL ELECTRIC US 100.47 4,37,547
10 11 TOYOTA MOTOR Japan 99.74 4,34,368
 (xxiv)

Exchange Rate
$1 = Rs. 43:55
Compared to the global ten corporations, the top ten India Corporations are
tiny in terms of revenue (sales) with an exception of IOC. .
Is is therefore evident that India must target a much higher rate of growth. Such
an ambitious growth agenda in a fast globalising environment can only be realised
through an accelerated reform process that makes the Indian economy globally
competitive and thereby attract commensurate investment.
As the order changes', there is a pithy point that the entrepreneurs must 'perform
- or perish. If, per chance, their business happens to be one where profits are under
serious long-term threat, they simply cannot expect to create market value. For, value
cannot accrue without performance, or profits. Those who discern this message from
the stockmarkets correctly will, therefore, take a hard-nosed look at their businesses,
and restructure, re-organise, or re-focus the way they run them. They may even have
to re-invent themselves completely since the stockmarket is, without doubt, the
greatest leveller. For India Inc. it is time now, like never before, to introspect.
 i ."

Ulndustrlallsatlon Is an ongoing process which accelerates economic

growth and induces social change." ,

CHAPTER 1

INTRODUCTION

In Perspective
I
The success of India's economic progress is closely linked to its capabilities to
manufacture and export quality products in a highly competitive global market. In
fact, the changing business scenario in India is influenced by three driving forces -
customer, competition and change. The objective of the economic reforms that were
initiated in India was to move the economy into a higher growth plane by relying more
on market-oriented process.
8,
7.2
7
6.3
6'

z- 5
16
,0

!. 4

:§.
3

2'

o ~1ol.!Io.lL....Ll~L-J,~~~
1991-92 92-93 93-9494-95 99-2000
ESTIMATE
Growth in Real GDP

Fig. 1.1

Theprocess of socio-economic change is an intrinsic part of human civilization.

Man has been striving ceaselessly to discover the secrets of nature' and thereby benefit
immensely in creating a peaceful, rich life for himself and his fellow-beings. Man has
2 Dynamics of Entrepreneurial Developmeat

benefited by agricultural, industrial and information activities. -Accordlng to J. K

Galbraith, there are three types of economic development that are currently in vogue.
These are symbolic modemisation, maximised economic growth and selective growth.
Economic growth is the sine qua non of change and better living standards. Over the
years, a middle-of-the road social democratic thinking is becoming consolidated.
Economic Reforms
The economic reforms initiated in 1991 have had an invigorating effect on various
sectors of the economy which is now poised for accelerated growth in the years to
come. Industrial production has picked to an impressive rate and in fact is a major
contributor to the high growth rates of GDP. Progress' have to be made slowly and
steadily, but we must continue to move towards transparency, quality awareness and
Total Quality Managment. If Indian industry is to be gfobally competitive, then the
liberalisation process has to be sustained over the next decade.
Sustained Economic Growth
The primary objective of developing countries like India is to achieve rapid,
balanced and sustained rate of economic growth. Hence, efforts are directed towards
the creation of conditions in which a fast development of productive resources can
take place. This inevitable necessitates the transformation of social and economic
structures which will not restrain the potential productive forces and inhibit the devel-
opment of resources. The state has, therefore, to devise efficient and effective political,
economic, social, technological and cultural strategies so as to ensure a desirable co-
ordination of all sectors of the economy and assure deliberate and requisite interest
and involvement of the people. With this approach social change can be achieved.
This is largely secured by adopting politically the technique of planninq and,
economically, the tool of management. Country after country in the underdeveloped
world is progressively and intensively resorting to liberalised privitised globalised and
market-oriented economy and to a restructured and neo-cultured society.
Economic Development /
Economic development, if conceived without appropriate social changes, soon
becomes stultified and stagnated. Comprehensive national planning is increasingly
becoming an instrument of socio-economic transformation in developing countries.
Planning delineates strategies. It also determines policies consistent with the political
philosophy of the party in power. There seems, however, nothing like universal precepts
of planning, though concepts of planning are emerging with experience gained all over
the world. One does not naturally observe a uniform approach to planning. There is
bound to be as much diversity in national planning, as multiplicity of political philosophies
and dissimilarity inthe sate of economies.
Objectives of Planning
There would, however, be no two opinions on the basic objective of planning.
Planning must impart dynamism to the process of development. In different developing
countries, diverse economic systems exist. Despite the apparent similarities between the
different economies; they are at various stages of development. Furthermore, different
regions and sub-regions in the same country are also not at the same levels, economically, .
Introduction 3

socially, technologically and culturally. Dissimilarities are wide. The process o! planning
in one and the same country, therefore, tends to be very complex and, at times, beset
with forrpidable problems obstructing the process of rapid, balanced and sustained
economic development. It is, thus, becoming patently evident that planning to become
a potent tool and an. effective technique of economic development must descend from
the olympian altitudes of the national level to the low lands of the regions. Formulation
of development plans can be, all-inclusive and well-integrated only at the regional and
the sub-regional level. Every region and sub-region, due to its distinctive character,
demands a special treatment. It is relatively easy and simple to accelerate production,
stimulate consumption and motivate transformation of economic and social structure at
the regional and sub-reqional Ievelparticularly in a vast and diverse country like India.
Some of our states and regions are as big as nations. If.the creation of conditions facilitating
rapid growth of physical and human productive resources is the aim of planning, the
peculiarities of the region and sub-regions have to be taken into account - perhaps
more than the points of similarity. Rapid and balanced economic development pre-
supposes 'co-originated and deliberate activity in all sectors of the country.
Public Response
, In a country like India, economic development must be consistent with the principles
of democracy, ensuring thatthe economic tasks will be in full accord with the interests of
humanity, ground for ages in chronic and abysmal poverty. Poverty has killed interest,
initiative and enterprise. The greatest social tragedy in a poor country is the loss of will.
There isan-urqent need to overcome economic backwardness and cultural weakness
and to promote their social and intellectual advance. The challenge to developmental
planning in countries like India lies in laying down firm material foundations for a more
equitable, equal and egalitarian society. This is possible when backwardness of regions
and sub-regions is clinically examined and correctly diagnosed. Prescriptions need be
written on the basis of social psychology and economic pathology of the regions and
sub-regions and medication, nursing as well as nourishment be provided to gain economic
strength and infuse 'development will.' The success of planning is closely linked with the
readiness with which the people respond to the demand of economic progress. Rapid
economic development is largely dependent on the degree of popular response, and the
intensity of this response indicates the extent of development which will be generated in
the community or the region concerned. The first task, therefore, is to stimulate and
arouse the people to action aimed at improving their lot by undertaking productive,
economic activity. Such an awakeninq will facilitate numerous changes in the social and
economic fabric of the region concerned and will also catalyse structural transformation.
The process of regional and sub-regional development is triggered off by combining all
aspects of economic development into meaningful policies, quantified targets and viable
programmes. It must be appreciated that planning goes beyond purely economic factors .
.Htws of Dynamics of Economic Development
(i)· 'Economic development is organically related to the impulse of change, reDecting
the developmental urge of the society for self-reliance and willingness to observe rigorous
~~~Me: -
 · DYnamics of Entrepreneurial Development

This is a social law. This explains why there is no economic development in a

particular society - regional, national or continental. The impulse to change must lead
to action aimed at becoming self-reliant as quickly as possible. Self-reliance demands
observance of a rigorous discipline. An urge for development, efforts towards self-reliance
and a sense of discipline are the three important elements in the social law of dynamics
of economic development.
(ii) Economic Development is quickened with the deqree of appropriate and intimate
relationship established between and/or among competing claims, of various apparently
conflicting objectives.
This is a political law. With the growing consciousness, undeveloped and under-
developed sectors c1amour for and claim priority in development plans. Fixing of sectoral
priorities and deciding the rate of progress at a given time are political decisions. The
conflicting claims are to be resolved by the political leadership of the country by weaving
them into supplementary and complementary relationships so as to minimise, if not
entirely neutralise, heir dissipating influence. The economic statesmanship of a national
political leadership is displayed in harmonising the conflicting claims for economic
development sectorwise, section-wise and region-wise.
(iii) Economic development depends upon the ability to restructure the economy
with the identification of and the insistence on the economies of scale and the operational
choices of technologies, resolving to the highest degree possible, tlie seeming or real
conflict of capital versus labour.
This is a technological law. Economy must be restructured, if it is to be balanced
and self-sustained. There are economies of scale. It is the economies of scale which
should determine the scale of economy. The relationship between large and small-
scale industry sectors should progressively settle down on this teleological basis.
Technologies change constantly in modern scientific age and consequently, even the
economies of scale undergo corresponding changes. This re-adjustment in the large
and small-scale industries should be painlessly brought about. So also, the capital-
intensive and labour-intensive operations ought to be carefully sorted out, categorised
and communicated to the entrepreneurs and managers for compliance. For instance,
capital-intensive techniques should give way to labour-intensive techniques in economies
where labour is abundant; but this may not apply rigidly to all spheres of the economy.
(iv} Economic development takes place in proportion to the administrative calibre
and motivation and in the direction of the comprehensive infrastructural facilities -
social, educational, fiscal, tinenciel, technical, distributional, medical, logistical and
others.
This is an administrative law. Developmental plans founder due to administrative
inadequacies and procedures. Demands of development planning outstrip the
administrative capabilities - not so much in terms of talent but of skills. For economic
development, the administration needs to know and be in tune with developmental
processes, techniques and will. The administration must be fully involved and committed
to development. It must be motivated so as to feel that it has the highest stake in the
participation and execution of the programmes of development. Furthermore, the
Introduction 5

ad inistration should not forget that economic development is something like a livi9§
bei g. It tends to move in the direction "Ofand. relishes to thrive in the location, wJ:{ere
comprehensive infrastructure exists or is shortly expected to exist. Again, economic
infrastructure and fiscal/financial benefits are not enough. Man brings about
development. Economic developmental facilities, without doubt, need be provided.
Ur, many more amenities expected by the modem man are also required to be
t reated. This naturally leads to identification of the growth centres, which when furnished
with a comprehensive infrastructure, would initiate industrial and productive activities
in ever-widening circles round the potential epicentre.
(v) Economic development originates and fosters in relation to the strength and
health of the local entrepreneurship and depends on the rate of its generation and
equally to the intensity of its sense of social responsibility, its innovation quotient and
its index of managemental capabilities.
This is an entrepreneurial law. It is the entrepreneur who powers the process of
economic development. The strength of an economy is in one way the strength of the
entrepreneur class in the society. Mere mercantile entrepreneurship has different
attributes and thrives in an entirely different atmosphere. It has to be cultured
systematically ill the under-developed regions and sub-regions. The higher the' rate of
genuine industrial and innovative entrepreneurship, faster will be the rate of economic
growth. Entrepreneurship must also acquire new managemental skills. Entrepreneurial
density, innovative propensity and managemental capability in the society in a particular
period determine the character and future of economic development.
(vi) Economic development is decisively dependent on the state of the balance .
of trade.
This is a commercial law. Adverse balance of trade position restricts the
development process, particularly in underdeveloped countries importing machinery,
raw materials, know-how and even experts. Favourable balance of trade provides
considerable latitude in the choice of imports and in the source of imports. International
trade brings economic strength and techno-economic self-reliance. Again, mere exports
outgrowing imports is not necessarily a sign of commercial strength. Composition of
imports and exports is of great importance in this context. Commodities and unprocessed
minerals may earn a fairly good amount of foreign exchange for the country; but the
share of manufactured goods in the total exports of the country will indicate the degree
of industrial progr-essand strength achieved by that country. While attempting to balance
exports with imports, effort should be made to constantly expand the contribution of
the manufacturing sector to national exports.
(vii) Economic development is directly related to the rate of national savings and
of national investment in conformity with national priorities and real needs, based on
socialjustice, economic stability and national security.
This is a financial law. vile countries and communities in which the rate of savings
is high and where savings are it1stifutionalisedand. thus made available for investment
in productive activities accordirlg to the national priorities, are without doubt advancing
faster. ',', \
 6 Dynamics of Eiitrepl'eneUJi~1D~lopment
~. ," -

Eca'nomic stability leadsto increased savings. Stability cannot be ensuredwifhout

growth. In fact, growth and stability can be said to be synonymous terms. National
investment must also ensure national security. This is possible if ample investable'
funds would be available at reasonable rates of interest for desirable productive purposes.
It is, therefore, necessary to ensure an adequate rate of savings and institutional
investment for productive activities. Mobilisation of public savings is possible when
, adequate incentives are provided.
The techniques of planning may have to be based on these laws of dynamics of
economic development. Their ignorance or non-compliance is likely to retard and
restrict the process and pace of economic development, which all the developing
communities and countries cherish. Development is essentially a matter of social and
economic management. In India the emphasis was and still is largely on the economic
aspect rather than on the social. If the social motivation is taken care of, economic
development will begin to take care of itself. Perhaps our planners need this advice.
But will they heed?
Trends in Economic Development
There are twelve major trends affecting the direction of economic development:
1. Technology as a res~urce
2. Competition in domestic' and international markets
3. The role of invention
4. Government as stimulator
5. Entrepreneurial and Intrapreneurial development
6. Innovative capital formation
7. Active financial sector
8. Innovative entrepreneurship
9. Progressive management
10. Quality as a goal
11. Supremacy of the customer.
12. Collaborative relationships
Technology is more than a thing, stratagem or even a process. Itis a self-generating
resources that is not consumed in the process of use. Consequently, it is an important
form of economic wealth.
Competition is forcing a reassessment of our individual and collective responses
to the marketplace. Fierce domestic and international Competition for scientific,
technological, and economic pre-eminence', forcing communities and regions toIeverage
all their resources - human, technological and financial - to compete effeC&vefyfor
vibrant and diversified economies.
\ \. ,

The countries are experiencing an unprecedented burst of invention. Myriad

technological advances are occurring with incredible speed and frequency. The ability
to commercialize these inventions will have direct and immediate economic
consequences.
 Introduction 7
, »
, The governments are trying to find positive non-interventionist approaches to
encouraging entre,!'reneurship and technological diversification. They seek to create
jobs, provide benefits to the small business sector, and forward technology. The creation
of an environment that promotes entrepreneurial activity has become a more important
focal point in the government's policy on development.
People with raw energy and a proclivity for risk-taking built and sustained the
countries. They are continuing to build ittoday - in new ways and with new approaches,
These entrepreneurs and intrapreneurs are breaking tradition and providing a dynamic
source of creative and innovative enterprises.
Innovative capital formation is providing the catalyst for the entrepreneurial
process. Mechanisms for providing seed capital and venture capital as well as an
expanding venture capital industry are helping to build new ventures. If the
entrepreneurial process Is to succeed, it is essential to continue to support and expand
the formation of capital and its innovative utilisation in new business development.
Finally, creative collaborative relationships being formed between business,
government, and academic are forging opening new opportunities for commercialisation
and thus accelerating the technology transfer process.
Man - A Crucial Factor in Development
The absence of universal precepts of planning should not worry any planner
unduly, because it is still possible to enunciate the basic laws that motivate economic
development, drawing on the experiences of planning under different political systems.
These should hold good in all economies and for all countries at any time. There is
something which can be described as the laws of dynamics of economic development.
Ifthey are respected while planning and complied with while implementing, the process
of economic development may not prove to be unfruitful and wasteful. Like the laws
of nature, these laws of dynamics of economic development are inexorable and the
degree of alienation with them will render planning unsuccessful. These laws embrace
various aspects of the process of planning. As has been emphasised above, economic
development is a multi-lateral and multi-directional movement. In fact, economic
developmental potential remains a dormant asset due to the undeveloped or under-
developed economic man. Man is much more crucial to development than other
economic factors. As such, when man plans to initiate change, economic development
rolls on. Other factors are ancillary, though quite necessary. Sufficiency of other
., resources, without the necessary human "development will" does not lead us anywhere.
Resources to be developed may exist in plenty but ifdevelopment-linked human minds
are absent, hardly any economic development will take place. So, the creation of the
development will is the key factor which engines the economic progress. Once such a
willemerges, it is necessary to see that the laws are corrected and co-ordinated action
is planned, and whatever is planned is well executed. A humble attempt has been
made below to present the seven laws of dynamics of economic development, as they
are quite relevant to th~ regional a~d.sub~r~gional planning contemplated in India at
present. .
 8 Dyriamlcs of Entrep~De'9ialr Developmat "
(~ .1 •• 't\'f, I

Human Resources
While the availability of industrial resources is an important advantage for
development through industrialisation, responsive human resources are the major
conduit for the development and upgrading of technology. After all, the human factor
is the greatest factor in the process of its own development. ,
Among the inputs that go into industrial development, such as Capital"industrial
- resources, scientific research and human resources, social scientists emphasize the
last-Darned factor as the most significant for achieving rapid industrialisation, The
human factor consists broadly of individuals with a reasonable level of general,education
and skills in specific areas. While human skills include manufacturing, technical,
supervisory, managerial; administrative and entrepreneurial competence, it is the
entrepreneurial quality which is a key ingredient. It often sets the limit to th~ degree of
industrial development and the speed with which it can be achieved in a particular
country or region.
Lack of Entrepreneurship
Lack of entrepreneurship inhibits the process of industrialisation in the newly-
developed countries. Although there is not such thing as a zero Ievel of entrepreneur-
ship, it is well recognised that entrepreneurs can be developed through appropriately-
designed Entrepreneurship Development Programmes (EDP). These programmes
broadly consist gf three distinct stages: firstly,that of developing ac~ie'-lement motivation,
and sharpening entrepreneurial trait and behaviour; second, that of project planning
and development; and at the third stage, guidance is provided on industrial opportunities,
ince~tives and facilities, rules and regulations and the development of managerial and
operational capabilities. With the growth of technical manpower, it is necessary to
or~an!se entrepreneurship development programmes on a wider canvas to attract
potential entrepreneurs to small business. While doing so, the characteristics of an
entrepreneur have to be kept in the view.
Broadly, they are as follows:
Development in any walk of life has always depended on individual qualities
of entrepreneurship. A study of human history shows ample evidence of the
role of individuals in the process of development.
Industrial development in almost all countries has always started with
individual enterprises.
Even huge multinational and national corporations have mostly received
their inspiration from one or a few individuals.
In the case of small industries, the project is usually centred around al single I

~~~ ' '

Small enterprises are mostly initiated, managed and developed by.one or a I

few individuals.
Qualities of entrepreneurship -constitute one of the major resources in the
" I

promotion of an enterprise. '

\'fntrC?d'j'dlon 9

»"'"'~Ari\~'htrepreneur
is someone who ventures out; prefers chariqeas a means of
growth; and is prepared to take calculated risks.
.While taking a risk, the entrepreneur is aware ofthe possibilities of success as
well as the consequences of failure.
He analyses the pros and cons carefully before making decisions.
He is involved in the planning activities, both before and after the decision to
start the enterprise.
He is motivated by an urge to make a success of the project.
He proceeds to accept the situation as a challenge.
He equips himself with all the necessary tools.
He is persistent and is full of perseverance for making a success of himself.
Entrepreneurship is a product of interaction among a number of factors.
Some of the these factors are in the individual (psychological) and the rest
are in the social, cultural and economic milieu.
In brief the ingredients for a successful entrepreneur are:
He is confident in facing challenges and is eager to achieve.
He identifies the product.
He plans for a venture.
He selects the technology commensurate with the means available and tuned
to the social and economic environment.
He is eager to improve quality.
He is able to manage men and material.
He finds markets.
He is innovative.
He is progressive.
He always srives to climb up.
He always imbibes new technology for improvement.
He always strives for modernisation, diversification.
He is well-informed.
He strives to meet the changing needs of the customer or hold customer as
king.
In India, a large number of institutions and organisations are engaged in the
development of entrepreneurship, resulting in the speedy growth of industrial ventures.
The example of India is fascinating. During its First Five Year Plan, .technical
education was given importance. Industrial training institutes for low-level semi-skilled
workers,polytechnics and prototype dev~'qpmentand training centres fpr skilledworkers
and supervisors, engineering colleges for maria~erS'a,?d institutes of technology for the
p\~rer managerial grOtlP~WWr~stabijf~~d\:ali'ov¢r try.~country. This resulted in India
becoming the third largest!.t¢,ChnkaipoJ~r'. I I .• : \ .' .

I I" I,' I. " • :~.~ ; .. ,. ' . I '

 10 Dynamics of Entreprentlurill Development
, Ii
Sustaining Momentum of Change '"
The dynamics of change have wider implications. It is a continuous process.
And, changes inside and outside the enterprise/organisation can move the goal posts.
Transforming an enterprise is not a science: there are no formulae for success. The
enterprises studied were not following some masterplan; indeed, much of what the
entrepreneur did was intuitive, almost an art form. Examining their experience yields
valuable insights into'creating it strategy that willrealise the promise of transformation. By
viewing an enterprise from three perspectives - how performance needs to change and
how fast; a leader's aspirations and preference; and the sources of energy available to
drive the change - we can gain insight into what strategy will work. .
A successful strategy demands effective execution. Choose initiatives that link
the sources of energy to the right performance levers. Grouping initiatives into four
basic types - executive de-bottlenecking decisions, direction-setting or redesiqntask
teams, mobilising and communicating and coaching - helps simplifythe choice. Then,
be sure to exploit the interdependent dynamics of the initiatives to keep the change
moving ahead.
CHANGE STRATEGY: CHARACTERISTICS
Evolutionary Jail &: FoIow The MuItI-&ont Synthetic UnIt·l.eveI
InItItutIon IWfoaII Laader DIrect Redesign MobUls1ng

•
Bulldlng

o FocUaon
contDtual,
IrodlrIICt
o VaIuII
chanQe
+
o Top-down
initiation

e Imtfoala
oJ.
f
o Vcy tap.down

aspiration. &:
ct.1gn
•+
o Top-down

o Foaaon
' dlrect ___ ;
oSlml.
t
o TQP:down

neous direct
•
o Initiated by
top: Improve-
mentl from
bottom
o 'SInIc:tuN
CJPerformanaa
on conl8xtual
and Indirect
pnrferenc:a
dominate emphasis on
and Indirect
levers.
t
o Foaa on
measures

•••
change
CJ Power at the
IIIam and top
+
CJEmp/iasls on
direct change
ftnanclal
Impact• CJDesigned in
advance
direct unlt·based

CJLong-term
performance IeveII with decisive de- CJEvolving to :::tUisation
CJ BI.IsI.-- unit botde-necklng 01 indirect and not design

,
Impact CJRapt
1IIuc:twe. indirect barriers contextual performanca
+
•
O~ Strategy levcs 1ater Impl'O\letnellt CJ~
emphasis on CJVertical CJRapId performance
enabling performanaa CJ~ CJDrIven by ImP'1m<mt
moves to Improvement repId change agents;
shape o Delayed, performanaa huge resources CJDriVen by
behaviour and then acceIer· CJonvet by Improwment tempOtary
future aI8d, leader with power structwa
perfclnnenca performanca agents CJom!by
than on short·
term~
Improvement
CJoinby
••
CJlJItimately
sustained or
change agents;
hugO resources
CJMore
'"
complex indirect
levers follow
CJo.-i.-by
new leadership stalled by leader
line « Cld8rnaI
agents

Conclusion
I Industrialisation is one of the important means to usher in economic and social
\' transformation in the developing countries. More so when agriculture cannot sustain
. \the burden of the population grpwth, it is the industry and service sectors which have
shoulder \the responsibility to sustain as well as, accelerate the pace of. growth. So
industrialisation is indispensable for survival and growth.
 "dr~uctlorr ' '.. . 11
pl.''''; ,It·. " b

Indus&rhlisation results from the interaction of technological change, innovation, ~

entrepreneurial growth, specialisation and trade. Good transportation and efficient:
communication system and an educated labour force help promote the rapid .
development of industries. Well-defined rules reduce the costs of transactions, ~s .
specialisation increases and economies become more complex.
INDEX OF INDUSTRIAL PRODUCTION
(Percentage growth rates)
1990-91 1991-92 1992-93 1993-94 1994-95 1995-% 1997-98
Total Industry 8,20 0.60 2.30 6.00 9.30 12.40 6.40
Basic Goods 3.80 6.30 2.60 9.40 5.30 9.00 7.80
Capital Goods 17.40 -12.80 -0.10 -4.10 24.90 20.40 2.00
Intermediates 6.10 -0.70 5.36 11.70 3.70 10.30 7.70
Consumer Goods 10.40 -1.80 1.90 4.00 8.70 12.90 5.71
Durables 14.80 -12.50 -0.70 16.10 10.20 38.00 7.80
Non-Durables 9.40 1.20 2.50 1.30 8.40 6,60 3,60

Source: India Development Report, 1998.

INDEX OF INDUSTRIAL PRODUCTION

(Base: 1993-94)

Weight Apr. Mar, June July . Aug. Se Oct. Nov. ~.

(%) 1998 1998 1998 1998 1998 1998 1998 1998 1998

Mining 10.47 113.3 119.0 117.0 119.0 115.0 108.0 117.0 120.0 127.0
Manufacturing 79.36 141.3 140.1 139.9 140.4 140,6 142.2 138,2 146.5 154.0
Electricity 10.17 137.5 141.5 135.0 137.2 13.5 128.2 '129,3 133.2 142.4
Basicgoods 35.51 128.3 135.3 130.7 133.1 132.3 125.4 128.8 130.9 137.9
Capital goods 9.69 131.1 _l~4.8 134,1 128.3 134.1 149.4 135.4 135.8 139.3
. Intermediated goods 26.44 1486 149.2 152.2 155.3 154.6 152.7 149.1 156.8 1586
I'_c,:,nsumergoods 28.36 142.7 135,6 131.7 130.8 129.6 133.2 129,7 145.5 160.7
Consumer durables 5,12 153.4 158.2 156.2 155.2 160.7 173.2 171.0 165,7 173.5
Consumer
non-diJrables 23.25 140.3 130.6 126.3 125.4 122.7 124.4 120.6 141.0 157.9 -
General 100.00 138.0 138.0 137.0 137.8 137.6 137,2 135.1 142.4 150.0
I

Source: CMIE,February, 1999 \'

Large industrial units and business houses also play an important role in developing'
and sustaining new entrepreneurship. For, it should be noted that while the growth of
entrepreneurship in India in the last 25-30 years have been remarkable, entrepreneur-
ship is stilla comparatively scarce factor in India, as indeed in all developing countries.'
In spite of our fairly good economic progress, India is one of the poorest countries in
the world. On the other hand, our natural and human resources are such that we.can
be a fairlyprosperous country. So, what We require is more entrepreneurship on the
.part of the government and the private sector. " "
, , 1 1 .,',:

Entrepreneurship is a fore sector which can be-developed in a big way. What

~ithJso many technoloqical end JrJ.f/;'~B.ef?-entir,stitutes in !ndia, it should not be diffjcult
.' ":' . 't' I, •
12 ~+CII of~Entreprenel,lrlal DevelopnlCl

to develop thousands of entrepreneurs every year. In this connection, economic polick

of the government an leave an important impact on the growth of entrepreneurshf
Sometimes, the government gives the impression that the private sector will only t
tolerated. This impression should be removed and there must be a formal recoqnitic
of the fact that in a country like India, we require entrepreneurship at various leve
and of various sizes - Central Government, State Government, large, medium ar
small private sector units and also foreign entrepreneurship.
The entrepreneurship development movement in India had received significa
attention; this is borne out by the fact that the small manufacturing enterprises hai
made phenomenal progress during the last three decades and today occupy an importa
position in the industrial economy of India .

• •
 J UNI! 1 I
I ENTREPRENEURSHIP I
Entrepreneurship
The words entrepreneur, intrapreneur and entrepreneurship have acquired special
significance in the context of economic growth in a rapidly changing socio-economic and
socio-cultural climates, particularly in industry, both in developed and developing
countries. The experience in the industrialised countries like the United States of America,
Germany, Japan and the United Kingdom are authoritatively cited in support of this claim.
An in-depth study of the subject thus becomes not only relevant but also necessary.
Entrepreneurial development is a complex phenomenon. Productive activity
undertaken by him and constant endeavour to sustain and improve it are the outward
expression of this process of development of his personality. Such process is crystallisation
of social milieu from which he comes, family imbibes, make-up of his mind, personal
attitudes, caste system, educational level, parental occupation, and so on.
An entrepreneur is one of the important segments of economic growth. Basically
he is a person responsible for setting up a business or an enterprise. In fact, he is one
who has the initiative, skill for innoyation and who looks for high achievements. He is
a catalytic agent of change and works for the good of people. He puts up new green-
field projects that create wealth, operr up many employment opportunities and leads to
the growth of other sectors.
Who Is an Entrepreneur?
The entrepreneur as a person brings in overall change through innovation for the
maximum social good. Human values remain sacred and inspire him to serve society.
He has firm belief in social betterment and he ci'rries out this responsibility with conviction.
In this process, he accelerates personal, economic as well as human development. The
entrepreneur is a visionary and an integrated man with outstanding leadership qualities.
With a desire to excel, he gives top priority to Research and Development. He always
works for the well-being of the society. More importantly, entrepreneurial activities
encompass all fields / sectors and fosters a spirit of enterprise for the welfare of mankind.
Urges of an Entrepreneur
.An urge to exercise power over things and objects persists arnongall human beings.
The urge may vary in degree from person to person. This urge' is an intrinsic quality of
an entrepreneur. Sociologists consider him as a sensitive energiser- in the modemisation
16 Dynamics of Entrepreneurial Development

ORGANISATION

MANAGEMENT

Fig. 2.1 Basics of an Entrepreneur

The term "entrepreneur" was applied to business initially by the French'

economist, Cantillon, in the 18th century, to designate a dealer who purchases the
means of production for combining them into marketable products. Another Frechman,
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 higher
productivity and greater yield.
The New Encyclopeedie 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
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.
As Professor Jan Tinbergen points out: "The best entrepreneur in any developing
country is not necessarily the man who uses much capital, but rather the man who
knows how to organise the employment and training of his employees. Whoever
concentrates on this is rendering a much more important service to his country than
the man who uses huge capital."
Schumpter's Definition of Entrepreneur
Joseph A. Schumpeter thus writes: "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
Definitions and Structure 17

product with which consumers are not yet familiar, a new source of raw material or
of new markets and the like." He further states the entrepreneur's function is to "reform
or revolutionise the pattern of production by exploiting an invention or more generally,
an untried technological possibility for producing a new commodity ...."
Briefly, an entrepreneur is one who innovates, raises money, assembles inputs,
chooses managers and sets the organisation going with his ability to identify them.
Innovation occurs through (1) the introduction of a new quality in a product, (2) a new
product, (3) a discovery of a fresh demand and a fresh source of supply and (4) by
changes in the organisation and management.
In the case of a developing economy like India, the concept is being understood
differently. An entrepreneur in a developing economy is one who starts an industry-
(old or new), undertakes risk, bears uncertainties and also performs the managerial
functions of decision-making and co-ordination. He also puts the new process based
on technological research into operation. Even if he imitates any technique of
production from a developed economy, he is called an entrepreneur. In point of fact,
entrepreneurship in developing economies is one form of labour that tells the rest of
labour what to do and sees to it that it gets things done. Unlike in the developed
industrial world, emphasis is not put (nor is there any need for it) only on
"Schumpeterian innovations" in the case of developing countries.
Schumpter's entrepreneur only exists if the factors of production are combined
forthe first time. To him, maintenance of a combination is not entrepreneurial activity.
Assuch, he differs from the theory of Rent enunciated by Ricardo. Ricardo included
the term "entrepreneurial ability" as an independent factor of production. To Ricardo,
profit is the reward for entrepreneurial ability.
Drucker's Views on Entrepreneur
Peter Drucker has aptly observed that, "Innovation is the specific tool of
entrepreneurs, the means by which they exploit changes as an opportunity for a
differentbusiness or a different service. It is capable of being presented as a discipline,
capable of being learned and practised. 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
successfulinnovation."
Systematic innovation, according to him, consists in the purposeful and organised
search for changes and in the systematic analysis of the opportunities such changes
might offer scope for economic and social innovation.
According to Drucker, three conditions have to be fulfilled.
1. Innovation at work. It requires knowledge and ingenuity. It makes great
demands on diligence, persistence and commitment.
2. To succeed, innovation must build on their strengths.
3. Innovation always has to be close to the market focused on the market,
indeed market-driven.
Specially, systematic innovation means monitoring six sources for innovative
opportunity.
18 Dynaml.c8 of Entrepreneurial Developmeltt

The first three sources lie within the-enterprise, whether it be a business or a public
service institution or within an industry or service sector. They are therefore, visible
primarily to people within that industry or service sector. They are basically symptoms.
But they are highly reliable indicators of changes that have already occurred or can
be made to occur with little effort. These four source areas are:
1. The unexpected - the unexpected success, the unexpected failure, the
unexpected outside event.
2. The incongruity - between reality as it actually is and reality as it is assumed
to be or as it "ought to be."
3. Innovation in industry structure or market structure that catches everyone
unawares.
4. The second set of sources for innovative opportunity, a set of three; involves
changes outside the enterprise or industry:
* Demographics (population changes).
* Changes in perception, moed and meaning.
* New knowledge, both scientific and non-scientific.
Walker's Views on Entrepreneur
According to Francis A. Walker, the true entrepreneur is one who is endowed
with mote than average capacities in the task of organising and coordinating the various
other factors of production. He should be a pioneer, a captain of industry. The supply
of such entrepreneurship is however quite limited and enterprise in general consists
of several grades of organisational skilland capability. The more efficient entrepreneurs
receive a surplus reward over and above the managerial wages and this sum constitutes
true profit ascribable to superior talent.
New Concept of Entrepreneur
The term "entrepreneur" has been defined as one who detects and evaluates a
new situation in his environment and directs the making of such adjustments in the
economic systems as he deems necessary. He conceives of an industrial enterprise for
the purpose, displays considerable initiative, grit and determination in bringing his
project to fruition, and in this process, performs one or more of the following:
(i) perceives opportunities for profitable investments;
(ii) explores the prospects of starting such a manufacturing enterprise;
(iii) obtains necessary industrial licences;
(iv) arranges initial capital;
(v) provides personal guarantees to the financial institutions;
(vi) promises to meet the shortfalls in the capital; and
(vii) supplies technical know-how.
Some Observations
The term "entrepreneur" has now been attributed to all small-industrialists, small
business, traders and industrialists. All people who are gainfully engaged in work -
 . -----
Definitions and Structure 19

manufacturing, distribution or service and other sectors are called entrepreneurs. Again,
even the founder creator and risk-taker are called entrepreneurs. Each of these terms
focus on some 'aspect of entrepreneurs. They have some attributes, but they are not
entreprenears in the strict sense. Many successful people have been good at copying
and/or imitating others. For example, the first commercial manufacture of two-wheelers
is to be called an entrepreneur, who has visualised the importance of two wheelers
in modem times for the benefit of the maximum users and all subsequent scores of
people engaged in are just imitators. Likewise, a brothel-keeper or a call-girl business
organiser cannot be an entrepreneur, though he takes risks, creates a market and gets
a reward more than visualised. So also a bootlegger, drug peddler, black-marketer etc.
These occupations are not for the social good. They violate business ethics. The term
"entrepreneur" is to be understood in its totality and not in a fabricated manner. The
term "entrepreneur" can only be understood with a bearing on economic, psychologi-
cal, sociological, and cultural bearings. The social responsibility is essentially a part of
entrepreneurial outlook on life.
Entrepreneurship may be defined in various V'~ys, but the four key elements
involved in it are: (i) Innovation (Ii) Risk-taking, (iii) VIsion and (iv) Organising skill.
All the four elements are inter-related and form a continuous process in business.
Entrepreneurial vision encompasses the relentless pursuit for operational excellence,
innovative technology and being responsive to the needs of the market place.

RISK-TAKING ----I.~INNOVATION

~ OPERATIONAL
. .,./' EXCELLENCE

CHARACTER ~
VISION ..••••~------.~ ORGANISlNG SKILL

Fig. 2.·2 Key Elements of Entrepreneur

A Classic Example
Since the dawn of civilisation, there have appeared at periodic intervals men who
have fed mankind shaping the future out of the lessons of the past and the experiences
of the present. Visionaries, builders, thinkers, scientists were those who saw ahead of
their times and whose presence benefited not only the country, but all mankind. In
this illustrious company of uncommon people a special place is occupied by an Indian
who was born 155 years ago - Jamesetji Nusserwanji Tata. His inspired vision of
modem industrialised India was to sustain economic growth to support freedom.
'To breathe life into his dream, he set about to create steel, electric power and
scientific-cum-technical education as the vital ingredients of economic growth. Today,
the Tata organisation covers a bright landscape in Indian economy. To this day,
Jamsetji Tata's industrial philosophy, including his firm belief in the principle of
trusteeship, his insistence on absolute standards of integrity and the realisation that to
survive and prosper, free enterprise must serve the needs of society, were all remarkably
 20 Dynamics of Entrepreneurial Development

in tune with modern thinking and the ethical and social standards of the most advanced
societies of today.
Jamsetji Tata, Jamnalal Bajaj, Laxmanrao Kirloskar, Ghanshyamdas Birla are
some of the entrepreneurs in their truest sense.
A Way of Vast Business
Family Businesses
In India, family businesses account for about 70 per cent of the total sales and
net profits of the biggest 250 private sector companies. Big families have carved up
the big industries. In vehicles, for example, the Tatas make lorries, the Birlas make
Ambassador cars, the Bajaj family makes two whelers and the Mahindras make jeeps.
They diversified into any business where they could get a permit to operate. Borrowing,
mainly from public sector institutions, was easy, and company law make it simple to
control subsidiaries through very small shareholdings. The Tata empire, for example,
embraces some 70 companies, making everything from tea to watches, in which the
parent company's average stake is rarely above 15 per cent.
Entrepreneurship is not just a way to
o
' '"
20 40 60 80 100
increase the level of innovation and pro-
i::: I t~ duttivity of organisations, although it will
Reliance I'====::::::~.I do that. More importantly, it is a way of
Ambani
ITC I I initiating vast business so that work be-
Hindustan Lever
,,"-,
1-======;-I comes a joyful expression of one's contri-
SiMa Aditya I I bution to society. The Indian entrepreneur,
intrapreneur and/or manager of the 90s
late Aditya SiMa
Thaparj
Thapar '
I have to be moulded in psycho-philosophy
[I rooted in the Indian context and values.
RPGREpnt~rg~~~~

Sajaj
SiMaSKr---J
c::::J "The crisis in business is spiritual,"
S.K. SiMa L..---J says Prof. Sitangshu Kumar Chakraborty,
TVSr--!
Sundaram Iyengar L--..I "All management ideas till now have been
Larsen & Toubro [=:=J
SiMa CK r---l
external-directed paradigms, developing
behaviour and skills, not character and
C.K. SiMa L..--I
Chidambaran MA
M.A. Chidambaram
0 Source: values. But meaning and richness must flow
from mind to work, not the other way. We
Mahindra & Mahindra
Mahindra
D Centre for Monitoring
Indian Economy
need a fundamental shift from the current
KiroskarD
reductionist, fragmentist, materialistic para-
Fig. 2.3 Family ties digm to one which recognises relationships,
Leading Indian companies, by sales.
Family links shown in italics consciousness and spirit as the right ap-
proach."
The concept of entrepreneur and entrepreneurship incorporates basic qualities
of leadership, innovation, enterprise, hard work, vision and maximisation of profits.
All his socio-economic, organisational and managerial qualities are always directed
towards the well-being of the society and the community. He is committed to progress.
He is a catalytic agent of development and change. Personal satisfaction and monetary
rewards are blended with social betterment and welfare of mankind.
Definitions and Structure 21

Box 2.1
THE ENIREPRENEUR: OTHER DEFINITIONS
Quesnay recognised a rich farmer as an entrepreneur who manages and makes
his business profitable by his intelligence and wealth.
Adam Smith described entrepreneur as a person who only provides capital without
taking active part in the leading role in enterprise.
Marx regarded entrepreneur as a social parasite.
Joseph A. Schumpeter recognised person who introduces innovation changes an
entrepreneur. He treated entrepreneur as an integral part of economic growth. The
fundamental source of equilibrium was the entrepreneur.
Frank Young describes entrepreneur as a change agent.
Noah Webster thinks entrepreneur is one who assumes the responsibility of the risk
and management of business. -
Francis A. Walter observes that the true entrepreneur is one who is endowed with
more than average capacities in the risk of organising and coordinating the various other
factors of production.
Peter F Drucker defines an entrepreneur as one who always searches for change,
respond to it and exploits it as an opportunity. Innovation is the specific tool of
entrepreneurs, the means by which they exploit change as an opportunity for a different
business or service.
Arthur Dewing conceptualised the function of the entrepreneur as one that
promotes ideas into business.
Clarence H Danirofconsiders entrepreneur as a person who makes decision under
alternative courses of action.
Entrepreneur has become the focal point in economic activities. He is viewed as
an initiator of action, a stimulant of socio-economic change and development.
Robert D. Hisrich says, "The person who is going to establish a successful new
business venture must also be a visionary leader - a person who dreams great dreams.
Although there are many definitions of leadership, the one that best describes the needed
intrapreneurial leadership is: A leader is like a gardener. When you want a tomato, you
take a seed, put it in fertile soil, and carefully water under tender care. Your don't
manufacture tomatoes, you grow them."
Martin Luther King said, "I have a dream, and thousands followed in spite of
overwhelming obstacles. In order to establish a successful new business venture the
intrapreneurial leader must have a dream and work against all obstacles to achieve it."
Entrepreneur is one who distinguishes as a person who undertakes to organise,
manage and assume the risk of running a factory and/or a business or an enterprise.
Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge
base. Knowledge in entrepreneurship is a mean to an end. Indeed, what constitutes
knowledge in practice is largely defined by the ends, that is by practice.
According to E.E. Haggen, an entrepreneur is an economic man who tries to
maximise his profits by innovationsl Innovations involve problem-solving and the
entrepreneur gets satisfaction from using his capabilities in attacking problems.
22 Dynamics of Entrepreneurial Development

FACT FILE OF ENTREPRENEURS

NO KIDSTUFF
Names: Anupam Joshi
Age: 32 years
Education: BA Kumano Univ., UP., 1985
Work Experience: Marketing Executive, Blowplast, 1985-86; assistant manager (produc-
tion), Stallion Industries, 1986-88; manager (marketing), Indus Craft Export House, 1988-
89; manager (export marketing), Inertia Industries, 1989-92; set up Premier Clothing in
August 1992
No. of Employees: 350 direct, 400 on contract
Initial Investment: Rs. 25,000 + Rs 5-lakh loan
Track Record: Turnover has grown from Rs 26 lakh in 1992-93 to Rs 10 crore in-1994-
95
Management Philosophy: Always strive for total quality
Wori<Style: Hands-off, but always in the know
Hobbies: Photography; playing golf, billiards

In August 1992, with their combined savings of Rs. 25,000, Alka and Anupam
Joshi Launched Premier clothing as an export-oriented unit.
The premier clothing has been licensed to market, for the first time, the Disney
Babies range of products in India.
Having several international mail-order companies, not to mention store chains,
in the bag isn't enough for Joshi. Now, he's planning a move into the booming
ready made shirts business. As always, Joshi plans to hedge his bets: he's talking to
some foreign companies about starting off by producing shirts for them. That's clearly
part of his philosophy of manufacturing for a ready-made market. And, as in the case
of the Disney Babies line, to a ready-mad~ mindset, either ways, it's a premier strategy.

KENT CARS
Name: Chandan Sumaya
Age:' 34 years
Education: B. Com., H.R. College, Bombay, 1981
Work Experience: Helped his uncle operate a carrental service
Initial Investment: Rs 30,000
Track Record: Turnover has grown from zero in 1985 to Rs 4.50 crore in
1994-95
No. of Employees: 252
Work Style: Hands-on
Management Philosophy: Never say no to a client
Hobbies: Working out, swimming, watching Amitabh Bachchan movies
Definition. and Structure 23

Chandan Sumaya look plunge in 1985 armed with only "a passion for car's,"
borrowing Rs 30,000 from his mother to float Kent - a name he chose because it
rhymed with rent and had an international ring-Cars. Apparently, he fell in love with
the business while helping his uncle run one. Working out of his home on Bombay's
Napean Sea Road, Sumaya installed a desk and a telephone in the front half of his
garage; the car took up the rest. Only by the end of the second year could he afford
'to invest in two more Ambassadors.
He has invested in a fleet of 136 cars and concentrates on the corporate sector,
where they are market leaders.
Kent Cars is now poised to drive into the national market-place through the
frenchisingroute. Whether or not he does as well in these cities as he has in Mumbai,
Chandan Sumaya has driven a long way from the home garage he started from. And
that's tfie spirit of Kent. .
Entrepreneurial Process
Entrepreneurial Process is a leadership function which centres round the
dynamics of entrepreneurial growth and change. It is a process comprising several
distinctstages.
The 6rst stage in the entrepreneurial process is some change in the socio-
economic environment leading to changes in the every aspect of life in the country.
Interalia, the change creates needs for new goods and services.
The second stage is by starting a new venture.
The third process is inrapreneurship. It is the process of extending the enterprises
domain of copetence by exploiting new opportunities through new combinations of
its available resources.
The fourth process is to coordinating the varied activities to achieve the
entrepreneurial goal.
Entrepreneurial Structure
Structure represents the formal, official task relationships of people in entrepre-
neurial activities. In other words, structure is the logical culmination of authority and
responsibilityat different levels. It implies a system.
In entrepreneurial activity, policies, programmes, practices and measurement
makepossible for innovation and growth. They create the proper attitudes and provide
the proper tools. .

rig. 2.4 Entrepreneurial Structural Relationship

Basic Source: Davis & Newstrom, Human Behaviour at Work: Organisation Behaviour, 7th Eds. p. 5.
24 Dynamics of Entrepreneurial Development

Entrepreneurial activity confines to the tasks of planning, directing, conrolling,

marketing, leading, motivating and channelising the activities of individuals and the
groups towards entrepreneurial goal. The structure and relationships should be such.
that they allow people to be entrepreneurial.
The main requirements of.such a structure are as follows:
1. The new enterprise should be organised separately from the existing.
2. There should be a special law for the new venture.
3. The new enterprise should be the specific responsibility of entrepreneur/
intrapreneur in top management.
4. The new innovative project requires different policies, rules and evaluation
criteria.
5. The entrapreneur is accountable for the success or failure of the enterprise.
6. The returns on innovation are distinctively different from existing business.
7. An entrepreneurial project requires right relationship, right rewards and right
working culture.
A business that wants to be able to innovate wants to have a chance to succeed
and prosper in a time frame of rapid change, has to build entrepreneurial management
into its own system. It has to adopt policies, principles and practices that create through
the entire organisation the desire to innovate and the habits of entrepreneurship and
innovation. To be a successful entrepreneur, the existing business, large or small has
to be managed as an entrepreneurial business. Entrepreneurial structure is thus the
corner stone of success in business, whether it is in production or marketing or service.
The empirical studies have shown that the -solid structure determines the growth
potential of entrepreneurial activities.
Conclusion
A number of entrepreneurial managers have attempted to identify the true nature
of entrepreneur, intrapreneur entrepreneurship in the post industrial revolution. The
definition as well as entrepreneurial process and structure have, therefore, undergone
changes with the changes in the socio-economic environment and will continue to
undergo changes with the changing times. However, some basic concepts of
innovation, risk-taking, vision and organising skill continue to be the four pillars on
which the edifice of entrepreneurial concept has to be perceived from time to time.

+ • -+
 "Entrepreneursare individuals motivated by a will for power; their
special characteristic being an inherent capacity to select correct
answers, energy, will and mind to overcome fixed talents of though~,
and a capacity to withstand social opposition.... "

CHAPTER 3

THE ENTREPRENEURIAL CULTURE

Introduction
The key to growth is to foster entrepreneurial culture and playa pivotal role in
I
deepening in the enterprise/organisation, so that, it will contribute to the success of the
enterprise.
Indian entrepreneurs willhave, therefore, to draw up their futuristic vision by way
of redefining their purpose and mission and resetting their attainable objectives, and
developing long-term strategy against the background of emerqinq opportunities and
impending threats inherent in domestic and global environments on the one hand and
competencies and weaknesses, on the other.
While charting out its future course of action the Indian entrepreneur will have
to remember that to get a competitive edge over its rivals on a sustainable basis five
things are essential - increased productivity, improved quality, innovation in the
market, a deep understanding of customer needs and delivery of world class service
and only one factor that could provide aUthese capabilities is 'knowledge' and human
beings are the drivers of the knowledge juggernaut. As such, primary focus of the
strategic management approach of any organisation has to be on effective and
efficaciousutilisation of human resources. It will, therefore, be imperative to set new
paradigms for managing an enterprise and its people so that the human resource
function forms an integral part of enterprise policy and strategy and the entrepreneur
plays a pivotal role in management of men and in progressive integration of conceptual
values with operational values.
Aspects of Entrepreneurship
;' I As a, FatalYticagent the entrepreneur has to change the mindset of the workers
so ~h~t:th.~'.I~tteraccepts !r~~i~l, ~hanges in.system structure and ~roces'~ which the
organlsptton is contemplafirig ~qintroduce In order to compete WIth the nvals. What ~
is most ilTIPoija,ntis to change: the key value, beliefs and norms established and-
accepted by w~rs.' ." .
26 Dynamics of Entrepre~rurwl,'Development

There is a strong need' for basic cu(tural change in fheor;ni~ation that stresses
productivity, quality, speed, innovation, customer orientation and empowerment. This
,calls for impressing certain fundamental changes at the top level. These include helping
the latter in envisioning and defining its philosophy, values and beliefs.
As a developer, entrepreneur has to playa pivotal role in developing among the
employees requisite knowledge, skills and suitable attitudes and improve their
performance.
By imparting need based training and assigning jobs to the individuals best suited
for them, using motivational techniques, creating manpower, configurations to boost
I the operational ability of individuals and by designing individual careers, the
entrepreneur can ensure fuller utilisation of human resource potentials of the
organisation.
As a facilitator, role of entrepreneur will be' to foster an invigorating climate of
mutual trust and confidence between the organisation/enterprise and the workers
through a high degree of empowerment and recognition, openness, authenticity,
internal and external equity and collaboration and team work This will obviously lead
to behavioural changes in the right direction.
Entrepreneurship, it is commonly believed, is enormously risky. And, indeed, in
such highly visible areas of innovation as high-tech microcomputers for instance, or
biogenetics - the casualty rate is high and the chances of success or even of survival
seem to be quite low.
But why should this be so? Entrepreneurs, by definition, shift resources from areas
of low productivity and yield to areas of higher productivity and yield. Of course, there
is a risk they may not succeed. But if they are even moderately successful, the returns
should be more than adequate to offset whatever risk there might be. One should thus
expect entrepreneurship to be considerably less risky than optimisation. Indeed, nothing
could be as risky as optimising resources in areas where the proper and profitable course
is innovation, that is, where the opportunities for-innovation already exist. Theoretically,
entrepreneurship should be the least risky rather than the most risky course.
There are also enough individual entrepreneurs around whose batting average
in starting new ventures is so high as to disprove the popular belief of the high risk
of entrepreneurship.
Entrepreneurship is "risky" mainly because so few of the so-called entrepreneurs
know what they are doing. They!lack the methodology. They violate elementary and
well-known rules. This is particllarly true of high-tech entrepreneurs. To be sure (as
will be discussed in Chapter; 9), /high-tech entrepreneurship and innovation are
intrinsically more difficult and more risky than innovation based on economics and
market structure, on demographies, or even on something as seemingly nebulous and
intangible as Weltanschanuul)g:- perceptions and moods. '
Thus, apart frOrh 'ec~nomic, social, psychological, cultural factors affect and
influence entrepreneuffhip. Entrepreneurial culture ~spqth moulded by all cultures in
the society in a disti'l¢t\'manner. As a leader, 'it givesdirection and leads to the right
path to success. . ,
 " ..
The Entrepre~eurlal Culture 27
r ·.e'
i
Environment 'for Entrepreneurship
,I

The entrepreneurs do not emerge spontaneously of their own. While the other
factors of production are at least, in principle, hirable but enterprise is not. They have
to come from different vocations. Even the educational system in most of the
developing countries is designed in such a way so as to develop more of job-creators.
In many countries, to sum up, entrepreneurs appear to have been motivated by a
combination and interaction of the following factors of environment:
1. Socio-economic environment;
! 2. Family background;
3. Standard of education and technical knowledge;
4. Financial stability;
5. Political stability and government's policy;
6. Caste and' religious affiliation;
7. Availability of supporting facilities;
;01
8. Achievement motivation; and
9. Personality and personal skill.
The environmental factors may be summarised as follows:
1. Entrepreneurship is not influenced by a single factor but is the outcome of
the interaction and combination of various env.ironmental factors.
2. By changmg the environment, society and be recreated. "
3. It is the "desire to make money" that drives one to start an industry rather
than the amount of money one owns.
4. Encouraging government policy and social recognition influence a person to .
become an entrepreneur. As an educationist, we can think of modifying the
educational system so as to produce more job-creators rather than job-
seekers.
Entrepreneurship has developed with civilisation. Man discovered the skills and
tools. of entrepreneurship, In advanced countries (civilisations) entrepreneurship
became a fine art. In recent years, entrepreneurship has also evolved as a science of
management and a catalytic tool of economic growth and development. The-
entrepreneurial culture is built upon the pursuit of self interest and towards this end
everything must be engineered to perfection.
Definition of ~ulture
There are very varying definitions of. culture. "Culture, in its broadest definition,
refersto that part of the total repertoire of human action (and its product) which is
socially,as opposed to genetically, transmitted." A very popular definition is that of
Edward Burnett Tylor: "Culture' of civilization'js that complex whole which includes
knowledge, b~lief, art, morals, law.,ICPlstw:r.;anclother c~pabilities and habits acquired
by mea as a member of s~ciety." dY~~I',l<lu#bhn'h~' defined culture very simply
,
J
as "the total life-way, of people."." .
""I ,', . \ ' -
 28 Dynamics of Entrepr,.,eurlalDevelopm It

The concept of culture is used to distinguish human socie~~s frolTlanimal groups.

The customs, ideas, and attitudes shared by a group, which make up its culture, are
I transmitted from generation to generation by learning processes rather than biological
inheritance. Adherence to these customs and attitudes' is regulated by systems of'
rewards and punishments peculiar to each c;ulture.Language and other symbolic media
are the chjef agents of culture transmission, but many behaviour patterns are acquired
through experience alone. A pattern of cultural universals is found in all societies. It
includes such human institutions as social organisation, and material culture (tools,
weapons, clothing). Societies are differentiated according to the degree of complexity
of cultural organisation. Basically, each human group has its own distinctive culture,
but a complex society may contain subcultures determined by national origin, religion,
or social status. The spread of culture traits through direct or indirect contact among
groups is called diffusion. A culture area is the territory within which a 'certain
configuration of culture traits is to be found. The two theories of culture that have
dominated anthropoligical thought in the 20th century are the structural-functional
theory derived from Bronislaw Malinowski and the pattern-process theory derived from
Franz Boas. Structural-functional theory focuses on social structure, while pattern-
process theory emphasizes cultural patterns. Each theory attempts to explain-all aspects
of culture, and each is applied to all cultures. All anthropologists, however, recognise
certain broad evolutionary sequences in the cultural history of mankind, particularly
in the technological and economic spheres.
On the basis of the various definitions of culture, Francis Me-rillformulate." the
concept of culture as follows. Culture, he says,
(a) is the characteristically human product of social interaction;
• (b) provides socially acceptable patterns for meeting biological and social needs;
(c) is cumulative, for it is handed down from generation to generation in a given
society;
(d) is meaningful to human beings because of its symbolic quality;
(e) is learned by each person in the course of his development in a particular
society;
(I) is, therefore, a basic determinant of personality; and
(g) depends for its existence upon the continued functioning of society but is
independent of any individual or group.
Culture consists ofbo1hmaterialculture and non-materia/culture. Material culture
involves man-made things (e.g.; automobile, television, telephone, etc.) and man-made
alterations in the environment. Non~~aterial cultur~ includes such factors as language,
\ '
ideals,
.
beliefs, values" music, etc,
I .

Elements of CultUre
Culture, the su~' to~al of social behaviour, i~cludes at least three elements,
namely, knowledge and beliefs, ideals and preferences.
. '.
 The Entrepr:neurial Culture 29

Organ~t1ationof Culture
The term organisation 0 c culture refers to the social structure and the integration
of traits, complexes a ••d patterns that make up the cultural system. I

That cultures are organised or integrated "does not mean that every single item
of each culture is heatly and precisely integrated with everything else. It means rather
that it is normal for the parts to be somewhat organised, and that culture traits receive
their significance and meaning out of their relation to the rest of the culture.'
The social structure - "the web of organised relationships among individuals and
groups that defines their mutual rights and liabilities" - together with traits, complexes
and patterns, reflects the organisation of a culture.
a
The organisation of culture.is determined to a large extent by major social
institutions. According to Maclver and Page, institutions are established forms or
conditions of procedure characteristic of group activity. The group which performs these
standardised actions has been termed by them an association. According to Biesanz
and Biesanz, "institutions are clusters of norms organised and established for the pursuit
of some need or activity of a social group, supported by the group's knowledge, beliefs,
and values, as well as by-the meaningful aspects of material culture." The important
common institutions of modern cultures ar>:
The economic system; the political administrative system; the educational system;
religion, family, expressionistic; aesthetic and recreational institutions, etc. Such
institutions have been established to meet society's common needs of a biological,
sociological, psychological, economic, and political nature - the type and nature of
institutions reflect the common goals, aspirations and the ways of achieving them,
definition and reguiation of roles, positions, inter-relationships, etc. of the individuals
and sub-groups and groups and the overall organisation of the culture.
Culture traits; complexes and patter-is also help us to understand the organisation
of a culture. A trait is a unit of observation.
Cultural Conformity
Individuals in a-culture tend either to conform to the cultural norms or to deviate
from them, If the culture endures as it is, most people would conform to the norms.
As Inkeles observes, "the social order depends on the regular and adequate fulfilment
, of the r~le obligations incurred by the incumbents of the major status-positions in a
. social system. It follows that the most important process in society is that which insures
that people do indeed meet their role obligations."
Business Culture and Culture of a Society
It is interesting to note that business culture has similar characteristics as the
culture of a society:.
(i) Firstly, a culture that is alive and vibrant is one that is constantly evolving and
changing whether it is in business or in society. It is not rigid or stagnant. A progressive
culture readily evaluates and responds to stimuli which emanate either internally or

---
externally. It does not fear or resist stimuli without evaluation.
 '.'\

30 Dynamics of ,Entrepreneurial Development'

(iifSecondly, it is when cultures adapt and change that great progress occurs in
a civilisation or in a company.
(iii) As in the case of religious or political groups, among business firms also there
are fundamentalist cultures - that is cultures that assiduously try to preserve what is
considered to be the true original set of beliefs. The fundamentalists try-to perpetrate
their hold on the organisation by upholding ancient traditions amd invoking the name
of God or Gandhiji or the founder of the Company as may suit the occasion. They
feel secure with what is familiar and feel threatened by any change. These
fundamentalist beliefs often include - irrational pride in the traditions of the firm
although changed circumstan~s have made such traditions irrelevant if not counter-
productive; promotional policies based on old boy network rather than merit; tolerance
of mediocre levels of competence; belief in the relative infallibility of people at the top,
etc.
(iv) Large social migrations like that of the Aryans into the Indo-Gang,tic plains
have created hybrid cultures. In a similar way during the last few decades we have
seen the emergence of hybrid cultures created by multinational companies. They
combine the strong cultural characteristics of a parent company with those of the local
market. Like all hybrids, most of them have grown up to be stronger than their original
mono-cultural organisatidns or their narrowly national competitors. Over the next few
4ecades we can hopefully see the emergence of Indian multinationals which could
combine the innate shrewdness and hardworking ethics of the Indian culture with the
sophistication and stmteQic vision that characterise the Western business culture. In
some ways Indian b~nesses, because of our inherent multiethnic~ty and greater facility
with the use of English la!!9U~..are in a better position than the Japanese or Brazilians
or Koreans to create strOng hybrid multinational business cultures. Now that the
shackles have been removed from Indian industry this possibility is real.
(v) Changes in culture of a firm as of societies occur when a leader provides
stimulation with ideas that challenge tradition.
In almost all successful business firms there have been leaders who revived and
changed the culture and course of those firms. In most cases such changes are based
on retaining and developing what is good in an existing' culture and adding to it new
elements that will stimulate progress. A total rejection of all that is existing can be
devastating. Therefore the skill in reforming the culture of a Company is,to identify
,and retain the pride and honour in w-hatis good while recognising what is to be,rejected
or modified. At the same time the management of the firm should seek, generate and
embrace new ideas and practices that can energise the firm and propel it forward with
a new vigour.
Meaning of Entrepreneurial Culture
Culture consists of tangible man-made objects, such as automobiles, clothing,
furniture, buildings, and tools and intangible concepts such as laws, morals, and
knowledge. In addition, culture includes the values, character, qualities, skills
acceptable within the particular society.
The Entrepreneurial Culture 31

Culture in a society is learned and is passed on from one generation to the next.
Culture is nurtured, fostered and promoted.
A culture is usually divided into sub-cultures based upon geography or such
human characteristics as age or ethnic background.
What accounts for the rise in civilization is not the external resources such as
markets; minerals or factories but the entrepreneurial spirit which exploits the resources
- a spirit found most often among businessmen entrepreneurs.
Entrepreneurial culture thus implies vision, values, norms and traits that are
conducive for th, development of the economy.
An entrepreneur has been described as a person who organises, manages and .
assumes resistibility for a business or an enterprise. The entrepreneur could therefore
mean to be an individual who perceives the profitability in production of goods or'
service, and organises accordingly. In' effect he is a vital contributor to the bottomline
of the venture. Can there be entrepreneurs without owner-worker status or amongst
the organisational workforce who are compensated by fixed emoluments unrelated to
the productivity and profitability? Certainly yes, in the light of the fact that the growth
and prosperity of individuals is inextricably interwoven with the success and sustenance
of the organisation.
, .
The emerging market environment and globalisation is challenging every
organisation and every person in the organisation to consider, evaluate and bring about
changes in thinking, vision and action. And the changes that need to be brought about
should facilitate organisations in becoming competitive, profitable and sustainable.
The world is on the threshold of economic history and it is no. longer adequate
if the_organisation just makes profit or generates surplus - the output has to be
maximum from the grassroots level onwards so that the entire organisation shows a
healthy growth. Each individual has to become a unit of production in himself and has
to assume full responsibility of the assigned task with the philosophy of producing
positiveresults and contributing, not only in fullmeasure, but substantially to the overall
good and growth of the organisation. The new setting commandeers transformation
to ensure optimum utilisation of the resources - men, money and materials - provide
a distinctive contribution to the organisation's prosperity and keep evolving strategies
for a sustained competitive edge. And as an entrepreneur one has to 'review, evaluate
and assess one's performance and take decisions.
Instilling such transformation even amongst the most articulate person with a
contemporary outlook is not an easy task. Human beings by nature, habit and practice
are used to a way of working and any change that is envisaged ushers in a sense of
insecurity simultaneously with the change process. This can possibly be overcome by
accepting that in today's dynamic society, changes are inevitable, frequent and the
rapidity and profundity of changes can even be overwhelming.
'Sub-Cultures of Entrepreneurship
Culture of a Business
Culture represents the manner in which members of a group (whether it is society
or a business group) regulate their behaviour in order to be in harmony with each other
32 Dynamics of Entrepreneurial DewI •••• t
. ?
and with other groups in that society. It manifests itself in their pattefn of behaviour,
forms or art and music, language, customs and practices and in the beliefs that are
shared. Most great nations of the world have their distinct cultures based on such factors.
Like nations, business firms,also have thei. distinctive cultures. It is a sum total
of the norms, beliefs and values that regulate the behaviour of individuals and groups
within any given corporation. Mal: I firms are not even aware of their culture or sensitive
to its distinct 'characteristics. They become aware of it when they have to induct
managers from other firms with different cultures or even more acutely when mergers
and acquisitions take place and a great deal of cultural adjustment is thrust on them.
In some cases adversity persuades companies to look at ~~Ieirculture.
Business Ethics
Ethics is that branch of philosophy which is concer-sd with rightness or
wrongness, goodness or badness of human conduct. In the case of a business
organisation, the definition of human would extent to all activities carried out by people
in the course of business.
Ethics are supposed to provide the basis for deciding whether a particular course
of a(.~;onis morally correct or bad. Unfortunately, any such definition would necessarily
imply that there exists a Qivenset of criteria by which to judge the correctness ar.d merits
of a given course of action. These criteria are moral and social rules of conduct which
society accepts, as correct at any given point of time.
The problem which arises is that society is not homogeneous and is in fact, terribly
heterogeneous. Consequently, what may be acceptable in one segment of society may
be totally unacceptable in another. In a country like India, where we accept that society
is made up of multifarious people and religions, this problem of defining what is socially
acceptable gets mQ~nified.
Whilst ethics are something which need to be followed by all members of a
business so+ety, the public exposure to marketing activities is higher than any other
business activity resulting in a Marketing Manager having to be extremely conscious
of the ethical realities in the markets being serviced.
Productivity Culture
Productivity improvement is not just doing things better; more importantly, it is
doing the right things better. All productivity improvement stems from people
productivity as people constitute the motive power for all resources. like machines
which stand idle, human potential diminishes if not properly utilised. This sub-optimal
manpower utilisation is the major reason for brain drain in many developing countries.
Thus, there is no point in improving skills unit! the organisation can use them.
A key to productivity is the attitude of employees who work together. Attitudes
reflect the interplay of many long-term and short-term factors including motivation,
culture, management, systems, nature of work and personal value system. Organisations
must periodically conduct attitude/opinion surveys to feel the pulse of employees, get
fedback and initiate timely corrective measures. Besides the well known tools for
improving people productivity like motivation, communication etc., what is needed is
an inegrated, multipronged approach.
The Entrepreneurial Culture 33

Total Quality Culture

TQC is the way of marking an integration of all efforts in the organisation between
'Hard Ss' nd 'Soft Ss' (i.e., organisation and employees, task and employees,
employees and employees) in achieving total quality and customer care. The process
of TQC helps in improvement of quality of worklife and employees satisfaction and
customer satisfaction. It is a sum total of the norms, beliefs and values that regulate
the' behaviour of individuals and groups within an organisation. Culture of an
organisation is influenced by the culture of the country as well as the nature of its
business. Indian organisations, at this juncture, will realise it increasingly necessary to
combine their peculiarly Indian ways of doing business with the global practices of
business they are involved in.
O~il1lisation's Culture
Culture and share values (ideology and shared culture): Webster says that culture
is the integral pattern of human behaviour that includes thought, speech and action
and depends on man's capacity for learning and transmitting knowledge to succeeding
generations. Most elements of a culture take a long time in their evolution and .equally
as long to change. An organisation has a mission when its culture fits with its strategy.
Culture enables organisation to function as a collective unit. The cultural glue consists
of strong norms and values that heavily influence the way people behave, how they
worktogether and how they pursue the goals of the organisation. Values are the beliefs
and, moral principles that lie behind the company's culture. Values give meaning to
the norms and behaviour standards in the company.
To strengthen an organisation's culture, a set of values, behaviour characteristics,
procedural rituals, and role models for the professionals working in an organisation,
should be identified. Structure reflects the organisation of work into roles. The roles
may be in professionals working in an organisation, should be identified. Structure
reflectsthe organisation of work into roles. The roles may be in production, finance,
marketing, personnel etc. The structure of the organisation embodies the fundamental
divisionof labour, describes the nature and duties of the jobs to be done, and aggregates
them into groups, or business.
Cultural Change - Key to Mastering of Change
The mastering of change in the business world does call for a change in the climate
based on the shifts in the perceptions and feelings of the people. However, climate is
relatively temporal and given the possibilities of contaminations and pollution by
politicalforces, national organisational climates may undergo changes. Change can be
mastered by the leaders and their people only as they develop cultures which are
relatively more stable and enduring in terms of their values. The values of openness,
trust, autonomy, proactivity and experimentation will have to be made the way of life
in organisations if the process of change is to be harnessed for individual and collective
good.
Theoptions for the leaders in business are getting more limited as the world moves
on to a new plane of thinking and action. Leaders and teams in organisations will have
to overcome their established mind-sets, regulated themselves, develop new work and
34 Dyna';'lcs of Entrepreneurial Development

organisational cultures and build up their tolerance for the ambiguous, the uncertain
and the unpredictable. The key to mastering change will lie in innovation in all aspects
of organisational working.
The TOP Programme
Top means different things in different countries companies, businesses and even
divisions. The Top initiative is cultural change.
The Top movement is based on simple model: Productivity, innovation, and new
markets are the pillars; the base is the corporate culture; and the Top of the temple
is customer orientation and profitability.

to stay • Fit for future'.

Fig. 3.1

The Top innovation initiative is made up of eight modules: mobilisation and

communication, idea initiatives, teaching of ope'rational skills, cooperation with non-
industrial research, patent initiatives, white space projects and strategic innovation
projects. Top is an integral part of human resources and management motivation
exercise as well as the R & D drive.
In India, the evolution of the Top Programme aims to increase its competitiveness,
increase its global presence, and ensure that the enterprise stays ahead of opportunities
in the local market. The Top Programme ensures reduction in process costs and
improvement in productivity. Naturally, the Top initiative will be crucial in this effort.
What perhaps makes the Top programme so easy to adopt and implement its flexibility
- what could otherwise become disjointed management concepts or practices are
united in Top's common temple model.
Individual Leaders
It is leaders that achieve e~cellence and not the organisations. Otherwise, the
varying performance of organisations from time to time cannot be explained. This
achievement does not happen by itself. It is achieved by approprlate strategy and effort.
It is the individual executive who with their efforts, unlike others, achieve the targets.
Achievement comes out of strategic thinking and corporate culture building.
Capital without vision in implementation or mere functioning is not sufficient as has
been proved time and again in the case of public enterprises. Great leaders with vision
and objectives started these enterprises. They saw the need for the same and the
The Entrepreneurial Culture 35

purpose it could serve. But, during implementation, that vision was lost and they
became dull and aimless in many cases.
Converting this vision into an opportunity and thereafter into achievement
demands more than theoretical formulae and quick fix. The leaders who achieved this
are the ones who do things first, sometimes even before others dream of them.
Fortunately leaders are made, not born.
Corporate Values
Balancing the spirit of the entrepreneur with the reality of big business take more
than a single simple pOlicyor strategy. What is required is a flexible, dynamic structure
that pays heed to the importance of the people within and is based on a value set that
is clear and agreeable to all.
Lotus Employee Handbook, therefore, devotes a full page to our corporate
values, placing importance on the attributes of honesty, ethics, fairness and integrity,
as well as on teamwork, cooperation, creativity and initiative and on having a sense
of humour.
Be a leader, not just a manager: Leadership begins with setting examples in terms
of personal characteristics, like honesty and fairness.
Be a facilitator: Manaqement should demonstrate a commitment to communi-
cation throughout the organisation. This means being accessible, and listening to
people in the lower realms of the organisation.
Be deliberate: When calling and conducting meetings (the greatest time-waster
in companies), be result-oriented. Use firm agendas and strive for specific objectives.
Be explid: In assigning responsibility, get people to take responsibility for small
tasks as well as for a big projects.
Be decisive: Ifsomeone isn't working out, and you have exhausted all possibilities,
break quickly and cleanly. Indecision can be bad for everyone.
If these attributes are combined with sincerity and integrity, the result should be
a business culture that stimulates innovation and esprit de corp at every corporate level,
whether developing a new product, building a new headquarters, or contributing to
the neighbouring community.
For people in communications and creative business it is major breakthrough,
because1tputs a powerful weapon into the hands of the people who develop concepts:
theabilityto execute those concepts so they can be evaluated and appreciated by peers .
and by clients. The dream is to make information accessible and understandable to
morepeople by bringing the benefits of computing closer and closer to the individual.
EntrepreneUrial Vs Administrative Culture
Administrative culture is the corporate organisational culture which focuses on
existingopportunities, organisational structure, HRS and control procedures. Whereas,
entrepreneurial culture is govemedby perception of opportunity, vision, social values,
burning ambition and will to do something during his time. Entrepreneurs are
committed to their ideas, vision and values.
36 Dynamics of Entrepreneurial Development

According to Stevenson organisations must often contain both entrepreneurial

and administrative cultures. So, an able entrepreneur should imbibe administrative
culture for excellence and success.
CORPORATE. ADMINISTRATIVE AND OPERATING RESPONSES

Corporate Administrative . 'peratlng

response response response

Structure An added structure inde- A revised structure Expenditure around existing

pendent of the original structure
structure
Goals Clear ultimate goal will be Unclear goals will exist Goals apparent; perhaps day-
expressed until ambiguities are to-day survival
resolved, then general
principles will be estab-
lished
Sub-responses Sub-responses will follow Sub-responses will be Sub-responses often will be
from goals but cannot be translated from goals in mostly less than obvious, and
pre-determined in detail an uncertain and evolv- extreme actions sometimes will
ing manner be required
Expertise Management expertise will Management expertise Management expertise may be
have to be obtained by will be found by revis- challenged but will almost al-
specific means (a project ing behaviour of present ways be adequate
team, for example) incubents
Personnel Special or outside person- Mainly the same man- As set from the same person-
nel probably will be re- agers with different re- nel, perhaps supplemented
quired lationships; -outsiders with others .
possibly added
Atmosphere Clear mission, but needing Introspection and re- Clear tasks, ingenious solu-
learning and experiment duction tions, and expedient, high-pres-
. sure working conditions

(Managing Strategy in the Real World: Conclusions and Frameworks from Field Studies of Business Practice
by R. Jeffery Ellis, Lexington Books, USA, 1988, p. 29)

The best qualities of 'rnenkind are imagination, integrity, dedication, magnanimity,

humility, openness and creativity. These qualities are the basic ingredients of leadership
and un willingness to tap them in full measure possibly explains the leadership
inadequacies. The entrepreneur is also governed by these qualities.
Integrity is to conform to the moral and ethical standards in our thinking and
action. Today, the lack of integrity is being felt most acutely in every fabric of our
national life. The nation's integrity can be restored only if each one of us asserts his
or her inte~, both financial and intellectual.
Dedication has -been defined as a passionate belief in something. Intense and
abiding commitment has been the basis of great works of art, invention, discovery and
exploration and provides stimuli for individuals, corporations, governments and even
society to succeed. Absolute fidelity to someone or something makes us more humane.
Dedicated workers, whether they sell insurance or manage corporations, not only do
better work, but do it joyfully.
Magnanimity denotes nobility of mind and heart, graciousness and forgiveness
above revenge or rancour. To quote Solomon, "It is the glory of the man to pass by
 Table 3.1
COMPARISON BElWEEN THE ENTREPRENEURIAL CULTIJRE AND ADMINISTRATIVE CULTIJRE
Entrepreneurial Culture Administrative Culture
f=
Dimensions Cberecteristics Pressures Cherectetistics Pressures
[
!.
o
1. Strategic Driven by percep- Diminishing opportunities Driven by controlled Social contracts c
orientation tion of opportunity Rapidly changing technology, con-
sumer economics, social
resources Performance measurement criteria
Planning systems and cydes
[
values and political rules
2. Commitment to Revolutionary, with Action orientation Evolutionary, with Acknowledgment of multiple constituen-
seize opportuni- short duration Narrow decision windows long duration cies
ties Acceptance of Negotiation about strategic course
resources risks Risk reduction
Few decision constituencies Coordination with existing
resource base
3. Commitment of Many stages with Lack of predictable resource needs A single stage, with Need to reduce risk incentive
resources minimal exposure Lack of control over the environment complete compensation turnover in
at each stage Social demands for appropriate use commitment out managers
of resources of decision Capital budgeting systems
Foreign competition Formal planning systems.
Demands for more efficient resource
use
4. Control of Episodic use or rent Increased resource specialization Ownership or employ- Power, status and financial
resources of required resources Long resource life compared with ment of required re- rewards
need sources Coordination of &tivity
Risk of obsolescence Efficiency measures. Inertia and cost of
Risk Inherent in the identified oppor- change Industry structures.
tunity
Inflexibility of permanent
commitment to resources
5. Management Rat, with multiple Coordination of key noncontrolled Hierarchy Need for dearly defined
Structure Informal networks resources. Challenge to hierachy authority and responsibility
Employee's desire for independence Organizational culture. Reward
system. Management theory

Sourr:e: Howard H. Stevenson and David. E. Gumpert, "The Heart of Entrepreneurship," Harvard Business Review (March-April 1985).
1

I~
38 Dymunlcs of Entrepren,urIal Development

an offence." The magnanimous are distinguished by their self-possession, th~ know

who they are hence, they take more pride in what they do than in who they are. They-
receive compliments with a pinch of salt and accept criticism without rancour and learn.
from their own mistakes and take victory and defeat alike.
Openness means willingness to share and receptivity to ideas without fear or
favour, howsoever bizarre those may be. It also means tolerance for ambiguity and
change and a rejection of all pre-conceived notions, prejudices, biases and stereotypes.
An open-minded person harbours no prejudices on the basis of caste, colour, race,
religion, occupation or sex. However, this idea does not make a person uncritical but
inspires him to be adventurous and creative.
Creativity is something that we are all born with but most of us manage to lose
it by sheet complacency. Psychologists believe that every child under ten is not only
creative but original while most adults tend to grow into copy masters. To restore our
creativity we must inculcate a sense of wonder, shun preconceptions and visualise as
a child does.
More work in a field makes up specialist, notwithstanding this we must strive more
to become generalists in other matters too. This helps us to perceive between science
and aesthetics and ethics. Basically, all human pursuits are inter-related. The executive,
the surgeon, the insurance agent and even the priest need to know as much as they
can about everything else ifthey desire to understand anything better. The great scientist

I CREDO OF ENTREPRENEURS ·1
THE WORLD NEEDS
The World Today is looking for
Entrepreneurs who are honest
Entrepreneurs who are innovative
Entrepreneurs who are optimistic
Entrepreneurs who will stand for the right
Entrepreneurs who care for the society
Entrepreneurs who stand for values
Entrepreneurs with conscience
Entrepreneurs who neither brag nor run
Entrepreneurs who neither flag nor flinch
Entrepreneurs who know their place and fill in
Entrepreneurs who know their business and attend to it
Entrepreneurs who are not too crazy
Entrepreneurs who are not too lazy to work
- Enlrepreneuts who will prosper with society
Entrepreneurs who will lead and motivate
Entrepreneurs who always dream for change
Entrepreneurs who live for their principles
The Entrepreneurial Culture 39

Einstein said, "The most incomprehensible thing about the universe is that it is
comprehensible. "
Integrity, dedication, magnanimity, humility, openness and creativity or to be
more precise - Vision and Virtue - are all inherent in us. Let these virtues ftIlour
armoury to meet challenges of life and environment. Let virtues be our best defence
against our adversities.
Socio-Economic Origins of Entrepreneurship
The entrepreneurial activity at any time and place is governed by varying
combination of socio-economic, psychological, cultural and other factors. The empirical
studies have identified the following socio-economic factors:
,1. Cast/religion
2. Family background
3. Level of education
4. Level of perception
5. Occupational background
6. Migratory character
7. Entry into entrepreneurship
8. Nature of enterprise
9. Investment capacity
10. Ambition/motivation
The entrepreneurs who launched their enterprises during 60s predominantly
came from mercantile and allied backgrounds. However, a slight tilt in favo~r of
occupations which traditionallyhave been unconcerned with entrepreneurial activity,
viz.,general serviceman, technicians, business executives, doctors, lawyers and the like
was noticeable among entrepreneurs emerging for the first time after Independence.
The main springs of entrepreneurship have been the traditionally trading castes of
Hindu and Jain Banias from Gujarat, Rajasthan and Chettiars of Tamil Naidu. Besides, '
the new springs of entrepreneurship developed among other communities like
Brahmins all over the country, especially the South, Naidus of the South, Patels of
Gujarat, Kayasthas of West Bengal, Sikhs, Khatris and Aroras of Punjab making
entrepreneurship a widespread phenomenon.
More and more people with high academic attainments started joining the ranks
of industrialists, especially the professionals holding qualifications in engineering, law,
medicine, cost and chartered accounting. The newer entrepreneurs have a larger
proportion of their floatations in the traditional sector, but these professionals have by
and large preferred to make their investments in modern sector. The technicians in
particular among both old and new entrepreneurs have entered industries in the
modern sector having a bearing of their academic qualifications. The traditionally
tradingcommunities of Hindu and Jain Banias have, relied on modern sector more than
others. ,lh~erestingly, among the regional communities the South Indians have
preferred their promotions in traditional sector more than the Gujaratis and Marwaris
hav~. \' - '
40 Dynamics of Entrepren~t'\j~~~ ?~v~~~~
Barriers to Entrepreneurship ,
A large number of entrepreneurs particularly in the small enterprises fail due to
several problems and barriers. Karl H. Vesper has identified the following entrepreneur-
ship barriers:
1. Lack of a viable concept
2. Lack of market knowledge
3. Lack of technical skills
4. Lack of seed capital
5. Lack of business knowhow
6. Complacency - lack of motivation
7. Social stigma
8. Time presences and distractions
9. Legal constraints and regulations
10. Monopoly and protectionism
11. Inhibitions due to patents
Vasper lists certain entrepreneurial factors that help ,tGkr:gducethe effect of these
barriers. The following table depicts how this happens: ----
Table 3.2
,.
BARRIERS TO ENTREPRENEURSl-fIP

ENVIRONMENTAL HELPS BARRIERS

l. Market Contacts ~ A. Lack of Viable Concept
2. Local Incubator Companies ~ B. Lack of Market Familiarity
3.

4.

5.
Capable Local Manpower _

Technical Education
and Support
Supplier Assistance -
~1;fD.
/ / /
C. Lack of Technical Skills
Lack of Seedl Capital'

E. Lack of Business Personal

Personal Knowhow Pulls
Pulls and Credit -----'
6. Local Venture Capitalists F. Complacency. Non-motivation
7. Venture-Savvy Bankers G. Social Stigma
8. Capable Local Advisors H. Job "Lock-ins."
"Golden Handcuffs"
9. Entrepreneurial Education I. Time Pressure, Distractions
10. Successful Role Models J. Legal Constraints, Regulation
Red Tape
K. Protectionism Monopoly
L. Patent Inhibitions

Source: Karl H. Vesper, Entrepreneurship and National Policy (1983). Walter E. Heller International Institute
. for Small Business. . /" '/
, ,)""
 INTEGRATED-CONTEXTUAL MODEL
;l
I - .(----- , T--c---- ,
~
POLmCAL ORGANISATIONAL ECONOMIC SOCIO-Cut.tuRAL PSYCHOLOGICAL m
~
~'

GOVf ;;
I .
-- ..•..
::I
~
~'"
-.- - -- -- "", [
", , o
,
,

MULTINATIONAL
. "I
\

\
\
c

L- CORPORATIONS ~I I I
: ~
I ,

K-- .\MARKETINGl: MARKET I:

I I

l\\.
,-----
1
. AIDS
INDUSTRIAL
ADVISORY
SERVICES
---.J
Hi' I

I
I
EFFECTIVE
ENTREPRENEUR.:
I
HI.J
I
I

\ -I ~ff~~N I :I
. SERVICES .
COMPETITION :
I

\ ~~~ti~
.1 SERVICES I: I I
I
LOCAL
. BUS~S
I!
I
I
INDUSTRIAL ~ j
\ .1 RESEARCH -, .,
SERVICES ~'''''' ,.,,'
INTERAR.~
(TANGIBLE &c INTANGIBLE) •. ,
t
EXTERNAL INFLUENCE
:
1 • - --.
\

-- - -- --------
I
~ CONTACfS &c
ASSISTANCE
-- - -- ----- -- - ·1 OUTPUT]
Fig. 3..2 A Model of Factors InfiuenciAg the Emergence of EntrepreneullIhip
Soun:e: Adapted from Abdul Az!z Mahumud "Developing Effective Indlgenoua
Entrepreneurs", Mala~lan Mana$4!mentReview, April 1974, Vol. 9, I'lo. 1.
...
,j:o
42 Dynamics of Entrepreneurial Development

Ten Steps to Change Entrepreneurial Culture

Changing entrepreneurial culture doesn't require magic. What it needs is down-
to-earth action that will set a good example at the top. The following ten steps will help
an entrepreneur to create' a culture supportive of change:,
1. Start at the top. Lead the enterprise.
2. Attune to a culture of innovation.
3. Remove the hidden obstacles.
4. Create an integrated enterprise culture.
"5. Create a marketing culture.
6. Create a listening environment.
7. Absorb competing technologies and involve people.
8. Don't let product innovations fool you.
9. Be flexible and open for diversification a:nd new ideas.
I

10. Always be ready to change cultures.

No matter what culture yo~r firm has settled into profitably and comfortably,
change will eventually come along and jerk your business into a new environment. Be
ready for it by constantly scanning the market and the society for trends, opportunities,
and innovations, and don't be hesitant to use them when the time comes.
New Generation of Entrepreneurs'
As the economy opens up, it is inevitable that a whole new generation of
entrepreneurs should come to the fore. By early next century, those whom we haven't
heard of today would have emerged as players to reckon with on the industrial scene.
There are two reasons why this should happen. It is implicit in the very nature
of a free market system, which by virtue of competition ensures that the big don't
necessarily remain big. There is also the fact that India with its long entrepreneurial
hisfory is partiw~IY suited for such competition to evolve. Indeed, Indian entrepre-
neurs overseas do very well wherever they happen to be. However, in this country rules
and laws have ten ed to curb entrepreneurial ability. While we acknowledge that the
government's role must be ensure that business is conducted in a manner conducive
to social good, within the framework of social priorities, enterprise must be allowed
to flourish.
The other side of competitive coin is that failure too are inevitable and businesses
can collapse. If the failure is because the promoters have siphoned off funds from the
company, Iit is inexcusable. If it is the outcome of competitive',!. forces, we must accept
this as the cost we have to pay for a free market. .
History has shown that societies which are more open have advanced
technologically more rapidly. Political controls and free markets cannot co-exist. And
the example of Eastern Europe bears testimony to this. Since we have committed
ourselves,' already to the democratic system; we must take steps to encourage the
entrepreneurial drive and create an environment
, conducive to its growth.
 //
TIle Entrepr~neurlal C,ulture 43
, Hi..,' j , • " ••
Conclusion
An ideal entrepreneur is one who combines values in the market economy; that
profits do not somehow preclude ethical behaviour; that growth is possible even if
political patronage is. not used to vend rules arrd cut comers, and quite simply that
pursuit of wealth can be grateful and mannerly one. He takes with him the interest
of his people, his country, his natural resources, the ecology and sees that his enterprise
becomes a catalytic agent of development. There is thus a need of true entrepreneurs,
who do not need incentives, infrastructure, government support; but build their
enterprises, harness the resources and develop. They adopt a responsible value-driven
corporate philosophy for their enterprises and/or business activities. As such, there is
no dispute among economists and social thinkers about the urgent need for the
emergence of an entrepreneurial society as a forerunner of accelerated development
of the economy in an'integrated manner.
The ethos of entrepreneurial culture runs through the business society in the 21st
century. Indeed entrepreneurial culture lays a strong foundation for a vJell regulated,
sustainable and environmentally friendly society .

• • •
 "771esupply of entrepreneurship is limited firstly by the scarcity of the
requisite personal qualities, and secondly, by'the diHiculty of identifying
them when they are available .... "

CHAPTER 4 l..-- :o::J

THE CONCEPT OF
ENTREPRENEURSHIP
Pi

Introduction
Entrepreneurship is a process undertaken by an entrepreneur to augment his
business interests. It is an exercise involving innovation and creativity that will go
towards establishing his/her enterprise.
In this chapter, the concept of entrepreneurship and of its related issues are
analysed, discussed and deliberated.
One of the qualities of entrepreneurship is the ability to discover an investment
opportunity and to organise an enterprise, thereby contributing to real economic
growth. It involves taking of risks and making· the necessary investments under
conditions of uncertainty and innovating, planning, and taking decisions so as to
increase production in agriculture, business, industry etc.
Entrepreneurship is a composite skill, the resultant of a mix of many qualities and
traits - these include tangible factors as imagination, readiness to take risks, ability
to bring together and put to use other factors of production, capital, labour, land, as
also intangible factors such as the ability to mobilise scientific and technological
advances.
A practical approach is necessary to implement and manage a project by securing
the required licences, approvals and finance from governmental and financial agencies.
The personal incentive is to make profits from the successful management of the project.
A sense of cost consciousness is even more necessary for the long-term success of the
enterprise. However, both are different sides of the same coin. Entrepreneurship lies
more in the ability to minimise the use of resources and to put them to maximum
advantage. Without an awareness of quality and desire fqr excellence, consumer
acceptance cannot be achieved and sustained. Above all, entrepreneurship today is
the product of team work and the ability to create, build and work as a team. The
The Concept of Entrepreneurship 45

entrepreneur is the maestro of the business orchestra, wielding his baton to which the
band is played.
What is Entrepreneurship?
Entrepreneurship is the propensity of mind to take calculated risks with
confidence to achieve a pre-determined business or industrial objective. In substance,
it is the risk-taking ability of the individual, broadly coupled with correct decision-
making. When one witnesses a relatively larger number of individuals and that too,
generation after generation in a particular community, who engage themselves in the
industrial or commercial pursuits and appear to take risks and show enterprise, it is
acknowledged to be a commercial class. The commercial class is a myth just like that
ofthe so-called martial race. There are neither, for all time, martial races nor commercial
classes.Communities which in the course history once appeared to be martial in spirit
have in later period emerged as mercantile societies. Those who were once concerned
withand relished in trade, later in history seem to have taken to the profession of these
word. Today, it is quite evident to anyone that national communities which have
developed world-wide industrial and consequent commercial interests are militarily
powerful; nay, great industrial powers have today become super-military powers as
well. An enterprise finds manifestation in different ways. The capacity to take risk
independently and individually with a view to making profits and seizing and
opportunity to make more earnings in the market-oriented economy is the dominant
characteristic of modern entrepreneurship. An enterprise, ready for the pursuit of
business and responsive to profit by way of producing and/or marketing goods and
commodities to meet the expanding and diversifying actual and potential needs and
demands of the customers is what constitutes the entrepreneurial stuff. But this category
of enterprising citizens throws up a species of entrepreneurs who are mostly mercantile
in outlook and performance. In countries like India, a new species of entrepreneurs
is desirable because here the economic progress has to be brought about along with
social justice. Entrepreneurship in India therefore, has to sub-serve the national
objectives.The apparent conflict between social objectives and economic imperatives
has to be resolved first by the individual entrepreneur in his own mind and initiate
economic growth which includes industrial development as one of the instruments of
attaining the social objectives. A high sense of social responsibility is thus an essential
attribute of the emerging entrepreneurship in India.

Fig. 4.1 Concept of Entrepreneurship

Stimulation of Entrepreneurship
Entrepreneurship development is probably one of the most elusive, complicated
and perplexing issues in the promotion and growth of small enterprises. Recently: a
number of development agencies have been involved. However, in spite of all these
46 Dynamics of Entrepreneurial Development

efforts there have been only a few partially successful programmes, and there are many
Instances of colossal failures in this field.
The stimulation of entrepreneurship is a function of both internal and external
variables. The presence of certain personal qualities in an individual is a requisite. Some
of the findings about entrepreneurs in Nepal are as follows:
(a) Mainly there are two types of entrepreneurs: the Government and private
individuals.
(b) In a family-run business the entrepreneur is owner as well as manager.
Entrepreneurs are frequently found to have parents who were engaged in
business-related occupations. Membership in certain types of communities
(Newars, Marwadis, Gurung etc.) is highly correlated with entrepreneurship.
(c) Many people who migrated from the hills to the southern part of the country
\ .
(Terai), and returned have become entrepreneurs.
(d) In the family, a change is taking place. Now the educated young members
are becoming entrepreneurs rather than head of the family who generally is
old.
OPERATING DEFINITION OF POLICY ENTREPRENEURSHIP
Policy Innovativeness
Availability of Equity or Equity-like funds.
Efforts to assemble public or joint public-private equity funds locally.
Willingness of local developers to risk some of their resources on small or new
firms.
Creation of Incubator Facilities for new or young firms.
Availability and nature of small business technical assistance.
Small Business Targeting
Presence of an explicit small business component in the local development
organisation.
Amount of staff resources devoted to small firm concerns.
Percentage of capital funds channeled th-ough development organisations into
young ventures less than 3 years old.
Policy Commitment
Support of local governmental bodies for economic development
- public monies channeled into loan programs
- public monies supporting local development orqanisations
Characteristics of Public Support
level of funding
- stability and trends in public monies going to development matters
- year in which programs first used locally
Cooperation of country and municipal officials on economic development.
The Concept of Entrepreneurship 47

Working relations between economic developers and elected officials.

Working relations among economic developers,
Early Survey of Entrepreneurship
From the classical economists to the post-Keynesian analysts, the topic of the
entrepreneur has been surveyed and observations, theories and pronouncements
advanced. Not only were pure economists involved in this endeavour but also
prominent social theorists such as Marx, Weber, Sombard and Veblen.
In general, contemporary economists agree that the entrepreneur is a business
leader and that his role,in fostering economic growth and development is a pivotal one.
At present, however there is no consensus at to what constitutes the essential activity
which makes the entrepreneur a crucial figure. While some economists have identified
the basic entrepreneurial function as risk-taking, others have emphasised the
coordination of production resources, the provision of capital or the introduction of
production resources, the provision of capital or the introduction of Innovations.
Professor James R. amps of the International Institute of Entreprenology, Honolulu,
Hawaii, in his paper entitled "Entreprenology, the Critical Factor in National
Development", has this to say:
'In all crisis situation, there is one critical factor. There is one factor in each
situation that can be cited as being the straw that broke the camel's back! In listing
some of,today' s possible critical factors, such familiar words and phrases limited natural
resources ... food ... energy all would emerge. A question may phrased thus. What is
the critical factor?' -
Over-population? '
Food shortage?
National resources shortage?
Energy shortage?
Lack of technology?
"Many factors have been proposed ... and yet is it possible that the most critical
factor has not been recognised? What is this factor that has either been stifled or totally
ignored? It is a relatively untapped source ... that of qualified individuals with peculiarly
unique aptitudes for innovation, for change; aptitudes, in other words, for using present-
day technology in ways yet unheard of or perhaps even unthought of. The critical factor
is a dire shortage of the appropriate economic innovator and implementor. .. the
Entreprenologists. "
In the words of A. H. Cole, entrepreneurship is the purposeful activity of an
individual or a group of associated individual undertaken to initiate, maintain or
organise a profit-oriented business unit for the production or distribution of economic
goods and services.
McClelland describes the innovative characteristics of entrepreneurial role.
Entrepreneurial role, by definition involves doing things in a new and better way. A
businessman who simply behaves in a traditional way is not an entrepreneur. Moreover,
entrepreneurial role calls for decision-making under uncertainty. Ifthere is no significant
 , .

48 Dynamics of Entrepreneurial Development

uncertainty and the action involves applying known and predictable results, then
entrepreneurship is not at all involved.
McClelland, like others, identified two characteristics of entrepreneurship. First,
doing things in a "new and better way." . This is synonymous with the innovative
characteristics given by Schumpeter, and secondly, decision-making under uncertainty,
i.e., -riskas identified by Cantillon McClelland more explicitly emphasised the need for
achievement orientation as the most directly relevant factor for explaining economic
behaviour. This motive is defined as a tendency to strive for success in situations
involved and of one's performance in relation to the same standard of excellence.
In other words, entrepreneurship means the function of creating'something new,
organising and coordinating and undertaking risk and handling economic uncertainty.
Higgins defines the term, "Entrepreneurship" as the function of seeing investment and I

production opportunity, organising and enterprise to undertake a new production

process, raising capital, hiring labour, arranging for the supply of raw materials and
selecting top managers for the day-to-day operation of the enterprise.

ACCEPTING
CHALLENGES

DECISION-MAKING ORGANISATION

RISK-TAKING SKILFUL
MANAGEMENT

INNOVATION MAKING THE

ENTERPRISE
A SUCCESS

Fig. 4.2 Characteristics of Entrepreneurship

According to Peter Drucker, "Entrepreneurship is neither a science nor an art.

It is a practice. 't has a knowledge base. Knowledge in entrepreneurship is a means
tc an end. lnr'eed, what constitutes knowledge in practice is largely defined by the ends,
that is, by the practice."
Innovation and entrepreneurship are thus needed in society as much as in the
economy, in pl'!,lir:'~(Jvice institutions as much as in business. It is precisely because
innovatir- .uid entrepreneurship are not "root and branch" but "one step at a time",
a prod; ct here, a policy there, a public service yonder; because they are not planned
but f.xused on this opportunity and that need; because they are tentative and will
disappear if they do not produce the expected and needed results. I other words, they
are pragmatic rather than dogmatic and modest rather than grandiose - that they
promise to keep any society, economy, industry, public service, or business flexible and
self-renewing.
The Concept of Entrepreneurship 49

Thus, entrepreneurship is a complex phenomenon. "Some think of entrepreneurs

primarily asinnovators, some chiefly as managers of enterprise, some as bearers of
risks,and others place major emphasis on their function as mobilisers and aIIocators
of capital." In the Indian context, however, an entrepreneur may at best be defined
as a person (or a group of persons) responsible for the existence of a new business
enterprise.
Entrepreneurship is an attitude of mind which calls for calculated risks; a true
entrepreneur is one who can see possibilities in a given situation where others see none
and has the patience to work out the idea into a scheme to which financial support
canbe provided. The stimulation of entrepreneurship is a function of both internal and
external variables. In developing countries, there is no dearth of ideas but there is a
real scarcity of men with the right blend of vision and practical sense to become
successfulentrepreneurs. The objective of the programme is to identify such people
and to provide them with the support needed to make them a success. They then
become "demonstration models" to the community; and once a right climate is
generated, entrepreneurship becomes a way of life.
Industrial growth in a country is achieved through a "mix" of the large and small
industry;the entrepreneurship for the former comes through, the large companies often
in collaboration with the multinationals. Simultaneously, economic growth also
depends upon the level of development and use of information system in the country.
In fact, the small-scale industry sector is considered as an ideal nursery for the
rapidgrowth and development of entrepreneurship. But alas, there are only a handful
of entrepreneurs in the true sense of the term in this sector. The men who will set up
smallindustry units have to come from within the country and the community; they
are "locals" in a true sense and their success, therefore, has a much greater impact
on generating the right climate for successful entrepreneurship.
Programmes for developing entrepreneurship must recognise that, ultimately, the
changethey seek to induce is attitudinal - it is more than just providing information,
landor money. It is to provide new goals so that a motivated young person is no longer
contentto take up a secure job which willassure him a modest income but seeks bigger
challengesin setting up and running his own business. The risks are greater but so are
therewards both in monetary sense and psychologically, in the feeling of confidence
and pride it generates in the person. It is through the efforts of such persons that a
smallindustry can become a dynamic sector of the economy and hence, the effort made
todevelop such persons is well worth the investment in terms of labour and cash. The
needofthe hour is the growth of entrepreneurship to accelerate the process of economic
growth.According to Drucker, the entrepreneurial management. In a way, the society
needsinnovation and entrepreneurship in a normal, steady and on ongoing basis. Just
asmanagement has become the specific organ of all contemporary institutions and the
integratingorgan of our society of organisations, so innovation and entrepreneurship
haveto become an integral life sustaining activity in our organisations, our economy,
our society.
This requires of executives in all institutions to make innovation and entrepre-
neurshipa normal, ongoing, everyday activity, a practice in their own work and in that.
50 Dynamics of Entrepreneurial Development

of their organisation. Entrepreneurship is the cornerstone of the emerging economic

scene in the world.
The entrepreneur usually lacks managerial and technical know-how, as well as
marketing, production and personnel management skills. These are needed so that
even if the entrepreneur can operate on only a small-scale basis, the operation will be
economically viable.
Technological advances in the environment create new needs for the entrepre-
neur as far as adaptation and adjustment are concerned. The entrepreneur may need
to learn how to adjust to the new technological environment, or to take a set of advance
technologies and bring this to his own level in this sector. Either way, constant re-
exami~ation is needed for possible utilization and improvement of existing technolo-
gies.
Finally, the socio-cultural environment also creates a very important climate for
the survival of this sector. Small enterprises need the following conditions to keep them
alive.
(1) tolerance for changes in the society and culture; (2) social mobility;
(3) tolerance of profit making; and (4) tolerance of private ownership.
Japanese Experience
The Japanese have very successfully integrated their culture with their business
and have achieved great success. Some of the values they have brought into their
management are life long employment, worker participation, quality circles, loyalty and
pride in the organisation. Similarly, whatever is good in Indian culture should be
reflected and reinforced in the business culture also. In the absence of this, India cannot
design its own unique form of management, suitable for its values, and achieve
excellence.
Some of these values could be mutual respect among the management and
workers, commitment to nation building similar to the spirt it shown during the
Independence movement and pride in whatever one does. A sense of equity and pride
in one's own profession will be an antidote for the old caste based professions and
their unequal values. Similarly, the ancient philosophical tenets like equality before God
could be extended to mutual consideration and respect in the workplace also. This
requires a conscious acceptance of these values by the managers and its constant
practice. Strong corporate culture suitable for one's own traditional values like strong
family cultures have to come frqm within or be cultivated by individual leaders to
maximise the achievements. " _
----- -
Culture building is achieved by sel~cting .the ideals, motivating through retaining
and encouraging such ideals in employees. It requires refining of the human resources
development tools and consistency in recognising the achievements.
Strategy and culture - each contribute to the success of any organinsation.
Brilliant strategies bring great business successes and strong cultures survive great
upheavals. In the absence of one, the other is useless. The Indian situation badly needs
both.
The Concept of Entrepreneurship 51

An Ideal Entrepreneur
An ideal entrepreneur is one who combines values in the market economy; that
profits do not somehow preclude ethical behaviour; that growth· is possible even if
political patronage is not used to bend rules and cut comers, and quite simply that
pursuit of wealth can be a mannerly one. He takes with him the interest of his people,
his country, his natural resources, the ecology and sees that his enterprise becomes
a catalytic agent of development. There is thus a need of true entrepreneurs, who do
not need incentives, infrastructure, government support; but build their enterprises,
harness the resources and develop. They adopt a responsible value-driven corporate
philosophy for their enterprises and/or business activities. As such, there is no dispute
among economists and social thinkers about the urgent need for the emergence of an
entrepreneurial society as a forerunner of accelerated development of the economy in
an integrated manner. The success of an entrepreneur in any enterprise depends on
the degree of his vision, leadership, cqmpetitiveness, talent, self-reliance, connections,
communication and resourcefulness.
Entrepreneurship is not confined to industry and is needed in all activities. Its
flowering in agriculture among the cultivators, small and large, is seen by all today.
The smiling farm of today in many parts of the country is a proof of such
entrepreneurship. The need for entrepreneurship is even greater in management of
-government, more so as it is the largest entrepreneur.
India has a proud record of entrepreneurship. Its present status in the industrial
world is its proof. It has now to prepare itself for entrepreneurship of a different order.
Tremendous advances of science and technology will have to be harnessed, requiring
on the part of the people and the government a more mature and finer approach to
match the level reached in the advanced c~ies. Philips, Sony, Honda, Ford provide
the signposts of entrepreneurship today or allttoemulate. Some of these have come
up only in recent years and from sm . ·6egtrinings. In India, too, one sees glimpses
of such entrepreneurship.
- good as well as not so good.
Conclusion J (
r __, \D \. \ b
ICICI's ex rfen~e tells a great de~1 about entrepreneurship
3: lA~gr

Z I
Entrepreneurship is an attitude f rru w 'ich can"faKe risks but calculated ones;
a true entrepreneur is one who can s e ssibilities in a given situation where other

-
see none and has the patience to work ut h '~a into a cherne to which financial
-
support can be provided. It is one of the catalytic activities fostering initiative, promoting
and maintaining economic activities fostering initiative, and distribution of wealth. The
stimulation of entrepreneurship is a function of both internal and external variables.
In developing countries, there is no. dearth of ideas but there is a real scarcity of men
with the right blend of vision and practical sense to become successful entrepreneurs.
The objective of the programme is to identify such people and to provide them with
the support needed to make them a success. They then become "demonstration
models" to the community; and once a right climate is generated, entrepreneurship
becomes a way of life.
Industrial growth in a country is achieve through a "mix" of the large and small
industry; the entrepreneurship for the f?rmer comes through the large companies often
52 Dynamics of Entrepreneurial Development

in collaboration with the multinationals. Simultaneously, economic growth also

depends upon the level of development and use of inf6rmation system in the country.
In fact, the small-scale industry sector is considered as an ideal nursery for the
rapid growth and development of entrepreneurship. But, alas, there are only a handful
of entrepreneurs in the true sense of the term in this sector. The men who will set up
small industry units have to come from within the country and the community; they
are "locals" in a true sense and their success, therefore, has a much greater impact
on generating the right climate for successful entrepreneurship.
Programmes for developing entrepreneurship must recognise that ultimately, the
_change they seek to include is attitudinal; it is more than just providing information,
land or money. It is to provide new goals so that a motivated young person is no longer
content to take up a secure job which willassure him a modest income but seeks bigger
challenges in setting up and running his own business. The risks are greater but.so are
the rewards, both in monetary sense and psychologically, in the feeling of confidence
and pride it generates in the person. It is through the efforts of such persons that a
small industry can become such dynamic sector of the economy and, hence, the effort
made to develop such persons is well worth the money and labour. The need of the
hour is the growth of entrepreneurship in the country to accelerate the process of
economic growth. According to Peter Drucker, the entrepteneurial strategy is as
important as purposeful innovation and entrepreneurial management. In a way, the
society needs innovation and entrepreneurship in a normal, steady and an ongoing
basis. Just as management has become the specific organ of all contemporary
institutions, and the integrating organ of our society of organisations, so innovation and
entrepreneurship have to become an integral life, sustaining activity in our organisa-
tions, our economy, our society.
This requires of executives in all institutions to make innovation and entrepre-
neurship a normal, ongoing everyday activity, a practice in their own work and in that
of their organisation. Entrepreneurship is the cornerstone of the emerging economic
scene in the world.
ANNEXURE-l
POLICY OPTIONS TO PROMOTE ENTREPRENEURSHIP
The OEeD recently conducted an indepth study of the policies that foster entrepreneurship
in five countries - Australia, The Netherlands, Spain, Sweden, and the United States. The
followingpresents some of its broad policy guidelines that can be applied to developing countries
as well. Each country needs to examine how these could best be applied within its own situation.
Broad Policy Guidelines
Examine the overall institutional framework within which economic activity takes place
in order to establish whether it provides maximum scope for entrepreneurship to flourish. In
particular:
• Identify and dismantle remaining barriers to competition which limit the incentives
of enterprises to innovate and perform more dynamically. Promote competition in
all sectors of the economy, including the provision of public services. Provide effective
protection of intellectual property.
 The Co~spt of Entrepreneurship 53
; J.,

• Allow scope for flexible employment contracts to be negotiated, with remuneration

arrangements and working conditions that arc well adapted to the needs of dynamic
enterprises. Relax employment protection measures that inhibit restructuring or
discourage entrepreneurs from taking on new workers.
• Examine the costs of complying with government-imposed administrative or
regulatory requirements and identify where reductions could be made, either by
removing the requirements to comply or by reducing the administrative burden
involved (including through better coordination among var~ous government agencies).
• Examine the overall effects of the tax system on entrepreneurship, and identify
features that discourage entrepreneurs or the financing of entrepreneurial activity.
Ensure that the tax system is transparent and that compliance is straight forward.
• Review and simplify the registration procedures required to create a business. Ensure
that firms are able to close quickly should they wish to do so.
• Ensure that personal bankruptcy legislation provides an appropriate balance between
encouraging risk-taking and, protecting creditors.
• Re-examine the effects that social insurance provisions may have on encouraging
or discouraging would-be entrepreneurs.
-Ensure that specific programs designed to foster entrepreneurship operate as part
of an "integrated and coherent strategy that complements the framework conditions.
In particular:
• Avoid policies that stem from a too-narrow definition of entrepreneurship (e.g., that
entrepreneurship is only about start-ups or only about high-technology) and which
may divert attention from getting the broader economic policy settings right.
• Widen the target population for entrepreneurship programs, where possible, to attract
the participation of women, the young and minorities,
• Undertake regular and comprehensive evaluation of programs, and ensure that
•• evaluation findings are acted on.
Improve the effectiveness of entrepreneurship programs by drawing on the knowledge
-' Q{ local level of government. In particular:
• Ensure that resources for programs to foster entrepreneurship are decentralised where
appropriate in order to better tailor programs to the specific needs of an area and
its business.
• P~ovide regular opportunities to exchange information at a national level on the
experiences of local' authorities in designing and implementing entrepreneurship
pr6qrams.
• Seek to identify and implement low-cost and effective programs with minimal
distortionary effects on market incentives. For example:
• Promote public awareness of entrepreneurship and examine the role the education
sv~uld play in developing entrepreneurial skills and attitudes.
• Increase-epportunities for the unemployed to create their own jobs trough self-
employment schemes.
• Facilitate ngtworking among firms in order to foster a culture of mutual cooperation
and risk-tajWlg. I

• Promote the-entrepreneurial non-profit sector by contracting-out where possible the

delivery of public .service that meet pressing demands in economic and social
development. ,'
OECD, Fos(eringJffll(epf:i!nearshjp, 1998. PR.' ~8-30. Used w,ith permission of OECD .

• •
 "Embarldng upon 'new combinations' of the factors of production -
wblcb be succlncUy terms Innovation - the entrepreneur activates the
economy to a new level of development. The ~oncept of Innovation and
Its corollary development embraces five /unctions: (1) Introduction of a
new good, (2) Introduction of a new method of production, (3) opening
of a new market, (4) conquest of!J new source of supply of raw materials
and (5) carrying out of a new organisation of any Industry ••..,.

CHAPTER 5

THEORIES OF ENTREPRENEURSHIP

Introduction
The concept and theories of entrepreneurship evolved over more than two
centuries have undergone major changes. Yet the concept of entrepreneurship is not
clear. As the concept of entrepreneurship is complex in its content, it is influenced by
not only economical aspects, but also by sociological, political, psychological, ethical,
religious and cultural values. The concept also bears testimony to courage, creativity,
determination, networking, hard working etc. Over the years the social scientists have
interpreted the phenomenon of entrepreneurship 'differently in accordance with their
perception and economic environment.
A coordinated and comprehensive theory of entrepreneurship is yet to come.
Meanwhile let us understand the important theories of entrepreneurship propounded
by social thinkers during the last two centuries.
The distinctive features of entrepreneurship over the years are:
1. Innovation,
2. A function of high achievement,
3. Organisation building,
4. Group level activities,
5. Managerial skills and leadership,
6. Gap filling,
7. Status with drawal,
8. Entrepreneurial supply, and
9. Entrepreneurship - an emerging class
Entrepreneurship as a process has and is undergoing changes in keeping with
the continued 6 changes in different fields. In keeping with these changes, different
theories of entrepreneurship have been evolved by different thinkers at different times.
It is a continuously evolving process of change. ,
Theories of Entrepreneurship 55

Entrepreneurship in Developing Countries

Among the many definitions of the entrepreneur, that which distinguishes him
as a person who undertakes to organise, manage and assume the risk of running a
factory is the one generally adopted in the region. Small enterprises, like entrepreneur-
ship, cannot be defined specifically. The concept is variously understood in different
countries depending on the prevailing economic and social conditions. Generally, the
definition is based on two criteria: quantitative, which includes the size of the company
in terms of number of workers, consumption of energy, capitalisation or value of sales;
and qualitative, which refers to the organisation and management of the enterprise,
methods of production or influence on the market.
Entrepreneurship Stimulants
A variety of social, economic, political and cultural factors are stimulating
entrepreneurial activity and cousequently generating economic development. These
stimulants are as follows:
1. An increasing focus on capital formation. Availability of capital is a stimulant
to an entrepreneur to start a new firm and/or give birth to a new idea.
2. The ability to transform scientific and technical developments through new
institutional development.
3. The supportive government programmes.
4. Availability of required training and inputs.
5. A collaborative relationship between business and research and their direct
attempts to transfer technology to the market place will be an opportunity
for entrepreneurs who commercialise their ideas.
6. Finally, an endeavour to create an environment conducive to innovation will
provide a much-needed stimulant to entrepreneurial activities.
Entrepreneurship and Economic Growth
Economic development of any region is an outcome of purposeful human activity.
Men assume various roles in the development process, namely, as organiser of human
capital, natural material resources, worker and consumer. He stands at the centre of
the whole process of economic development. According to Schumpeter, economic
development consists of "employing resources in a different way", bringing in a new
combination of means of production. The entrepreneur looks for ideas and puts them
into effect for economic development.
According to Baumol, entrepreneur is a Schumpeterian innovator and something
more than a leader. The entrepreneur, according to him, occupies a crucial place in
the process of economic development.
Joseph A. Schumpeter (1934) for the firsttime put the human agent at the centre
ofthe process of economic development and assigned a criticalrole to entrepreneurship
in his theory of economic development. According to Schumpeter "Entrepreneurship
isessentially a creative activity or it is an innovative function. The process of innovation
may be in the form of (a) Introduction of new product, (b) Use of new method of
production, (c) Opening of new market, (d) The conquest of new source of supplying
 56 Dynadtlc:aof Entrepreneurial ~t

INVENtORS

BUSINE$AND
GOVERNMeI1T ":'fdWr; / ;' .
EMPLDYEES \~.un'"
i.. •..,;-~
,
••.

STUDENTS AND
FACULTY

Fig. 5.1 Innovation Centre

raw material or (e) A new form of organisation." Hence he depicted an entrepreneur

not only a premier agent of production who brings together all factors of production
but also provides a sound management and control for the survival as well as the growth
of the production unit.
Schurnpeterfurther says that economic growth depends on the rate of applied
\technical progress (i.e., innovation) and rate of technical progress in the economic field
which in' turn depends on the supply of entrepreneurs in the society. Thus the
entrepreneur is the agent of change in society.
In the Schumpeterian model, entrepreneur is an innovator, and the existence of
"innovative entrepreneurs" depends on the necessary social and economic overheads.
These economic and social overheads are very poor in backward regions which cause
a short supply of entrepreneurs. In this connection, we can refer to David McClelland
who explained the development of entrepreneurship in terms of human motivation to
achieve or need for achievement (n Ach), His hypothesis is that a society with a
generally high level of achievement will produce more energetic entrepreneurs, who
in turn will accelerate the process of economic development.
In the Indian context, entrepreneurship has yet :another. dimension. An
entrepreneur may not necessarily be in innovator "but an "imitator" who would copy
the organisation, technology, products of innovators from other developed regions. His
role as an imitator is likely to be guided and controlled by various constraints and
 The?~ "'E~~preneurshlp 57
, j4t, •• ,. ". (, " 1'. ~
conditions p.eculiar to his area of operation and the factors under which he conducts
his minimal modest industrial activity,
Other social scientists, notably Max Weber, have talked of the importance of
entrepreneurship and expressed the view that creative and entrepreneurial enerqies are
generated by the adoption of exogeneously supplied beliefs which in turn produce
inten~efefforts in occupational pursuits and accumulation of productive assets leading
to the rytanufactureof good? and service. According to him, entrepreneurs are a product
of the J1Iarticularsocial conditions in which they live and it is social conditions in which
they live and it is the society which shapes the personality of individual e~trepreneurs.
John Kunkel believes that the behavioural pattern of individuals is important for
development and such a pattern can be influenced by external stimulus so as to alter
itin the manner we want it. In other words, ifwe want more people in society to behave
as entrepreneurs, we can bring about such behaviour on their part by appropriate
alterations in the social environment so as to influence them to take to entrepreneurial
pursuits\ like webtr, Cocharan and Young underscore the importance of the role
society plays in s aping the entrepreneurial personality and consider the scarce
ingredients which re essential in the emergence of potential entrepreneurs cultural
values, role expectations, social tensions and inter-group relations in society.
Entrepreneurs ar~ an important source of economic development. It becomes
imperative that thefe exists a motivational training programme including measures to
modify the environment to stimulate entrepreneurial behaviour among individuals.
There are thinkers who believe that the "Schumpeterian entrepreneurs are needed in
underdeveloped countries for rapid economic development" is only through entrepre-
neurs that substantial development can be brought about.
Entrepreneurship and Economic Systems
\ Entrepreneurship includes the existence of the spirit- of venturing into new r

enterprises through innovations, creation and translation of such spirit into reality in
the various fields of industry and commerce by individuals with entrepreneurial qualities
, and :vith an intense desire for accomplishment or achievement in this field.
Entrepreneurship plays an important role in the- economic l'stem, which
determines the nature and scope of this field. Economic systems grow a d take shape
under the influence of industrial policy, economic policy, and the scid-political and
cultural'ideas of the people. Entrepreneurship gives a fillipto new orqanisational forms
and the economy has to adjust to these demands. However, changes in the structure
of the economy bring about economic reforms which determine othe. factors affecting
the economy. Economic systems is a basic structure of capitalism, socialism and mixed
economy in which a certain level of entrepreneurship is found. -
Capitalism: Capitalism has 'freedom' as its landmark. Free enterprise, freedom
to save or to invest, free and healthy competition, lack of the dominance of central
plan and consumer's sovereignty are the main features that distinguish capitalismfrom
other economic systems. Ina~ee enterprise ~~ont;)iry,the problem of what to produce
is solJecl by' the price mechan\~m. The g~Qds,~r~I,?QU~~,t,~~~ ~old in the market at
a price which is freelydeterminedby the eqpality b~twe~lI'l:~anp for"and supply of
 58 Dynamics of Entr~p~,neurial Development
I ', •••••• - ' ' "J
goods with reference to the cost of production. It is for this reason tHat entrepreneurship
fully commands a price and market mechanism. On the basis of n!is,.the entrepreneur
also has the controls of the production and distribution of goods by mobilising the
resources to maximise his profit. Profit motive is the main aim of the entrepreneur in
a free market mechanism under capitalism. He also distributes the goods according
I "to-the different market conditions both in domestic and oVfZrseasmarkets and therefore,
we find he is a competitor or monopolist or a monopolistic competitor in the home
market. Besides he is a cut-throat competitor in the overseas market where he allocated
the amount of goods and determines the price according to his capacity to unload goods
- a special case of discriminating monopoly.
I

Socialism: Private entrepreneurship does not contribute much to an e5=onomic

system but it becomes the responsibility of the economic and financial experts in the
Central Authority to strategise the exploitation of resources and organise an equitable
distribution of goods without any profit:motive but for the social good.
Entrepreneurship exists in the form of a body consisting of the representatives
n'ominated by the government to frame the plans for the prop~r mobilisation of
resources, their allocation andre-allocation so that most.of the resources channelised
towards ihdustries of national importance. It is therefore, for entrepreneur who has a
complete control over the resources, the production of the goods according to the needs
of the people and their distribution in the internal vis-a-vis external market. As socialism
is contrary to capitalism or mixed economy, all such responsibilities are not shared by
the private entrepreneur and hence his role under socialism is negligible.
M~ Economy: The entrepreneurs also play an important role in the
production and distribution of goods in a mixed economy. The basic characteristics
of this economy is that the government undertakes the production of mostly capital-
goods while the production of consumer goods is left to the private enterprises and
hence they are equally responsible for the uplift of the people because they produce
not only luxuries and comforts but also goods of basic requirements of the people. Like
a capitalist economy, mixed economy also tries to solve the basic problems with the
help of the price mechanism. But where the price mechanism failsto achieve the desired
result, the state tries to intervene in order to find a better solution to the various
problems. When the problem of production is not solved satisfactorily by the private
entrepreneur, the state tries to increase the production of essential goods and
discourages that of less essential or non-essential goods. Itdoes so by producing defence
goods itself as also some basic goods like iron, steel and cement etc. and also by
encouraging the. private producers to increase the production of essentials like food,
clothing, housing etc. In a mixed economy, the government does a good deal to
encourage the-production of most essential goods and in case their production stilllags
behind, it may itself undertake their production and increase it by giying it top priority
in its eocnomic programme.
In a mixed economy. the government also tries to remove the evil of monopoly
capitalism through restrictions. It may curb the growth, of monopolies and initiate
':workable competition which is essential for the optimum use of the available resources.
I' ,
Theor.l\'9f. trepr~n~tushIP J 59

Mixed ~c~no~y ',~~'to solve the problem of distribution of goods and services in a
better way than the Capitalist economy. The government tries to level up the incomes
of the poor people and level down those of the rich people. This is done by fiscal
measures, 'fixation of minimum wages and salaries and improvements in the .\
environment by the people. ,
, '
The role played.by an entrepreneur is significantly important in a mixed economy
as it permits the growth of both the public and the private sector. Irrthe rl,rivatesector,
profit motive acts as an incentive to the entrepreneur and market mechanism plays
its own role. This establishes the role of entrepreneur in the mixed economy.
\ Entrepreneurship has great importance in various economic systems. It is all the
more important under capitalism and mixed economy where not only the responsi-
bilitiesof entrepreneur in production and distribution are recognised but the objective
of growth of business and profit maximisation is also attained. Therefore, the
importance of entrepreneurship stands beyond challenge in eVery economic system
except under socialism where it appears in a different form. Yet, entrepreneurship
prevails i~ all economic systems in one form or the other.
Theories of Ehtr~preneurship' .
Theories of Erltrepreneurship are broadly classified into economic, psychological,
soclologicaland cultural.
The static approach of the emerging Neo-c1assical school did not readily
accommodate a concept with such dynamic connotations as entrepreneur. Alfred
Marshall,for example, laid much more stress on the routine activities pf management
and superintendence th.an he did on the innovative activity of the entrepreneur.
The phenomenon of entrepreneurship development has been viewed, explained
and interpreted differently by social scientists. Among those who have stressed on the
routineactivities of management and superintendence than he did on the innovative
activityof the entrepreneur. \
The phenomenon of entrepreneurship development has been viewed, explained
and interpreted differently by social scientists. Among those who have stressed on the
psychologicalaspects as contributing to entrepreneurial success are Joseph Schumpeter,
McClelland,Hagen and Kunkal.
1 Entrepreneurship is inhibited by the social system, which denies opportunities for
creative-facilities:"The forces of custom, the rigidity of status and the district of new
ideas and of the exercise of intellectual curiosity, combine to ~reate an atmosphere+
inimicalto experiment and innovation." The theories of-Weber and Cochran in this__
contextare mainly sociological in nature. -
I . Briefly, the concepts of entrepreneur and-entrepreneurship have been investi-
gated from economic, social, political, cultl.nal arid managerial points. The develop-
'men'tof this understandlnq is summarised in Table 5.1..'
, .' " t I
60 Dynamics of Entrepllimeurlal Development

TABLE 5.1
DEVELOPMENT OF ENTREPRENEURSHIP THEORY AND
TERM ENTREPRENEUR .
17th. century: Person bearing risks of profitJIossin a fixed ~riee~oss contract
with government. •
1725: Richard Cantillon: Person bearing risks is different from one supplying capital.
1797: Beaudeau: Person bearing risks, planning.] supervising, organising, and
-' owning.
1803: Jean Baptiste Say: Separated profits of entrepreneur frcm profits of capital. '-
1876: Francis Walker: / Distinguished between those who supplied funds and received
interest and those who received profit from managerial
capabilities.
1934: Joseph Schurnpeter: Entrepreneur is an innovator and develops untried techno-
logy. i
1958: Haggen: An entrepreneur is an economic man who tries to maximise
his profits by innovations.' r I .
1961: David McClelland: Entrepreneur is an energetic moderate risk taker.
1964: Peter Drucker: Entrepreneur maximizes opportunities through systematic
innovations.
1975: Albert Shapero: Entrepreneur takes initiative, organises some social- economic
mechanisms, and accepts risk of failure.
1980: Karl Vesper: Entrepreneur seen differently be economists, psychologists,
business persons, and politicians.
1983: Gifford Pinchot: Intrapreneur is an entrepreneur within an already established
organisation.
1985: Robert Hisrich: Entrepreneur is the process of creating something different
with value by devoting the necessary time and effort,
assuming the accompanying financial, psychological, and
social risks and receiving the results - rewards of monetary
and personal satisfaction.
~990: Vasant Desai: The entrepreneur brings in overall change through innovation
for the maximum social good. Human values remain sacred
and inspire him to serve society. He has firm belief in social
betterment and he carries out this responsibility with convic-
tion. In the process, he accelerates personal, economic as well
as human development. The entrepreneur is a visionary and
an integrated man with outstanding leadership qualities. With
a desire to excel, the entrepreneur gives top priority to
Research and Development. He always works for the well-
being of the society. More importantly, entrepreneurial
activities encompasses all fields/sectors and fosters a spirit of
enterprise for the welfare of mankind.
The followingtheories of entrepreneurship enunciated by the social scientists from
time to time are briefly discussed in the following pages.
.
1. An Economic ,Theory
2. Leibenstein's X-efficiency Theory
3. Dynamic Entrepreneurship InnQv'atio'nTheory
4. Harvard School Theory
\
Theories of Entrepreneurship 6i
5. Theory of High Achievement
6. Theory ofChange
7. Theory of Profit
8. Theory of Adjustment of Price
9. Theory of Market
10. Theory of Social Change
11. Theory of Entrepreneurial Supply
12. Theory of Personal Resourcefulness
13. Theory of Cultural Values
An Economic Theory
Mark Casson, in his book The Entrepreneur - An Economic Theory, presented
a functional definition of the entrepreneur and considered why the entrepreneurial
function is so valuable. He emphasised that the demand for entrepreneurship stems
from the need to adjust to change, and that the supply of entrepreneurship is limited
firstly,by the scarcity of the requisite personal qualities, and secondly, by the difficulty
of identifying them when they are available. He suggested that there are four main
qualities which are crucial for a successful entrepreneur of which one - imagination
- is almost entirely innate. The other three qualities may be enhanced. The problems
encountered in screening for these qualities, and in enhancing the ones that are
deficient, have a number of important implications for the development of a successful
entrepreneurialcareer.
Leihenstein's X-efficiency Theory
This theory, originally developed for another purpose, has recently been applied
to analyse the role of the entrepreneur. Basically, X-efficiency is the degree of
inefficiencyin the use of resources within the firm: it measures the extent to which the
firm fails to realise its productive potential.
For a given set of inputs, productive potential is identified with the point on Neo-
classicalproduction frontiers. X-efficiency arises either because the firm's resources are
used in the wrong way or because they are wasted, that is, not used at all.
Leibenstein identifies two main roles for the entrepreneur. The first role is input
completion, which involves making available inputs that improve the efficiency of
existingproduction methods or facilitate the introduction of new ones. The role of the
entrepreneur is to improve the flow of information in the market.
The second role, gap filling,is closely asking to the arbitrage function emphasised
by Kirzner. Leibenstein provides a very vivid description of gap filling,visualising the
economy as a net made up of nodes and pathways.
Dynamic Entrepreneurship Innovation Theory
A dynamic theory of entrepreneurship was first advocated by Schumpeter (1949)
who considered entrepreneurship as the catalyst that disrupts the stationary circularflow
of the economy and thereby initiates and sustains the process of development.
Embarkingupon 'new combinations' of thefactors of production - which he succinctly
62 Dynamics of Entrepreneurial Development

terms, innovation - the entrepreneur activates the economy to a new level of

development. The concept of innovation and its corollary development embraces five
functions: (1) introduction of a new good, (2) introduction of a new method of
production, (3) opening of a new market, (4) conquest of a new source of supply "Of
raw materials and (5) carrying out of a new organisation of any industry. Schumpeter
represents a synthesis of different notions of entrepreneurship. His concept of
innovation included the elements of risk taking, superintendence and co-ordination.
However, Schumpeter stressed the fact that these attributes unaccompanied by the
ability to innovate would not be sufficient to account for entrepreneurship.
Harvard School Theory
According to the Harvard School (Cole, 1949) entrepreneurship comprises any
purposeful activity that initiate, maintain or develop a profit-oriented business in
interaction with the internal situation of the business or with the economic, political
and social circumstances surrounding the business. This approach emphasised two
types of activities: the organisation or coordination activity, and the sensitivity to the
environmental characteristics that affect decision making. Another exposition of the
Harvard tradition is that of Leibenstein (1968) who ernphasised activities such as
searching and evaluating economic opportunities, mobilising resources necessary f~
the production process, connecting different markets and creating or expandinq fhe
firm.
Despite its stress on the human factor in the production sestem, the Harvard
tradition never explicitly challenged the equilibrium-obsessed orthodox economic
theory. This was challenged by the neo-Austrian School who argued that disequilibrium,
rather than equilibrium, was the likely scenario and as such, entrepreneurs operate
under fairly uncertain circumstances. The essence of entrepreneurship consists in the
alertness of market participants to profit opportunities. A typical entrepreneur,
according to Kizner (1979) is the arbitrageur, the person who discovers opportunity
at low prices and sells the same items at high prices because of inter-temporal and inter-
spatial demands.
Theory of High Achievement
McClelland identified two characteristics of entrepreneurship, namely, doing
things in a new and better way and 'decision-making under uncertainty.' He stressed
the need for achievement or achievement orientation as the most directly relevant factor
for explaining economic behaviour. This motive is defined as the tendency to strive
for success in situations involving an evaluation of one's performance in relation to
some standard of excellence. People having high need for achievement are more likely
to succeed as entrepreneurs. McClelland explains the entrepreneur's interest in profits
in terms of a need for achievement. People with high achievement (N-Ach) are not
influenced by money rewards as compared to people with low achievement. The latter
type are prepared to work harder for money or such other external or such other
external incentives. On the contrary, profit is merely a measure of success. and
competency for people with high achievement ~eed.
Theories of Entrepreneurship 63

Theory of Change
Young conducted the Thematic Appreciation Test (tAT) on a group of
entrepreneurs. The test revealed the tendency to describe the situation as a problem
to be solved, an awareness of pragmatic effort required, confidence in their own ability
to solve the problem and a tendency to take the viewpoint of each individual in turn
and analyse the situation as he might se~ it before suggesting an outcome.
Young's theory is a theory of change based on society's Incorporation of reactive
subgroups. A .group becomes reactive when the following three conditions coincide:
(i) When a group experiences low status recognition;
(ii) 'When denied of access to important social networks; and
[iii) When the group has better institutional resources than other groups in the
society at the same level.
Theory of Profit
Knight identifies the entrepreneur as a recipient of pure profit. Pure profit,
according to him, with regard to the entrepreneur, is bearing the costs of uncertainty.
He identifies' uncertainty with a situation where the probabilities of alternative outcomes
cannot be determined either by a priori reasoning or by statistical inference. A priori
reasoning is simply irrelevant to economic situation involving a unique event.
Knight argues that business uncertainty can be reduced through 'consolidation.'
Consolidation is to uncerainty what insurance is to risk; it is a method of reducing total
uncerainty by pooling individual instances. The elasticity of the supply of self confidence
is the single most important determinant of the level of profit and the number of
entrepreneurs.
Theory of Adjustment of Price
For Kirzner, the adjustment of price is the main role of the entrepreneur. If the
wrong price prevails in the market, then an opportunity for profit is created somewhere
in the market if a frustrated buyer or seller is willing, respectively, to pay a higher price
or accept a lower one. Then, again, if different prices prevail in the same market, there
is scope for profitable arbitrage between the two segments of the market.
According to Kirzner, alertness to disequilibrium is the distinguishing characteristic
of an entrepreneur. Alertness enables some individuals to intervene in the market by
changing the price while other individuals simply respond by changing their buying and
selling plans in lieu of the new price.
Kirzner further maintains that the primary role of economic theory is to explain
behaviour in terms of purposeful human action, and to consider to what extent
purposeful human actions can interact to produce unexpected outcomes. To pursue
the analysis of entrepreneurship further would be to go beyond the limits of the agenda
ofthis piece. Anyone who believes that the entrepreneurs is predictable has an incentive
to himself intervene in the market process, and so become an entrepreneur.
To Kirzner, this provides a satisfactory basis for asserting the inherent
upredictability of the entrepreneur. It suggests that no predictor can be anything but
an entrepreneur, and so makes a predictive theory of entrepreneurship impossible.
64 Dynamics of Entrepreneurial Development

Theory of Market Equilibrium

Hayek's main contribution to entrepreneurial theory is to point out that the
absence of entrepreneurs in Neo-classical economics is intimately associated with the
assumption of market equilibrium. According to Hayek, the equilibrium postulate is
equivalent to a postulate of full information; not full information in the sense of a
complete information theory about every conceivable thing, but full information in the
sense that no further information is needed in order to modify anyone's decisi?ns.
For him, the empirical content of economics relates to the process of adjustment
towards an equilibrium. This process involves the acquisition and communication of
knowledge. He visualises a world in which there is a continuous process of discovery.
Markets help people to communicate their discoveries to others and learn of discoveries,
thereby moving towards a sale of equilibrium.
Hagen's Theory of Social Change
Everett Hagen, in his work "Theory of Social Change: How Economic Growth
Begins (1964), meditates on its psychological explanation. His creative personality is
an individual characterised by a high need for achievement, order and autonomy: He
views the entrepreneur as a creative problem solver interested in things in the pr-actical
and technological realm, and driven by a duty to achieve.
Hagen considers the withdrawal of status, of respect, as the trigger mechanism
for changes in personality formation. Status withdrawal occurs when members of some
social group perceive that their purposes and values in life are not respected by the
groups in the society they respect, and whose esteem they value. Hagen postulates four
types of events which can produce status withdrawal -
• Displacement of a traditional elite group from its previous status by another
traditional supply physical force.
• Denigration of valued symbols through some change in the attitude of the
superior group.
• Inconsistency of status symbols with a changing distribution of economic
power.
• Non-acceptance of expected status on migration to a new society.
Theory of Entrepreneurial Supply
Another theory of entreprneurial supply is the Behaviouristic Model propounded
and elaborated by John Kunkal in 1965. His behavioural model is concerned with the
overtly expressed activities of individuals and their relations to both past and present,
and surrounding social structures and physical conditions.
The determinants of an individual's activities are to be found largely in the
conditioning procedures, both deliberate and accidental, to which he has been
subjected in theepast, and in the sets of reinforcing and discriminating stimuli which
have become part of his behavioural claims and are part of the present social context.
The selected elements of social environment are amenable to change. Kunkel's
theory is based upon experimental psychology, identifying sociological variables as the
determinants of entrepreneurial supply.
Theories of Entrepreneunhlp 65

Theory of Personal ResoUrcefulness

The root of entrepreneurial process can be traced to the initiative taken by some
individuals to go beyond the existing way of life. The emphasis is on initiative rather
than reaction, although events in the environment may have provided the trigger for
the person to express initiative. This aspect seems to have been subsumed within
'innovation' which has been studied more as the 'change' or 'newness' associated with
the term rather 'proactiveness.' This tendency to take initiative has been approached
from different directions at various stages in the development of theory in
entrepreneurship. For instance, Bygrave and Hofer (1991) talk of the importance of
human volition, Carland et al. (1984) define an entrepreneur as one who 'establishes'
an organisation, or Schumpeter (1949) talks of the agent who consciously disturbs the
stationary process to take it in a new direction. They all reflect on the primacy of
individual initiative. Studies of entrepreneurial traits related to this aspect of behaviour,
such as internal focus of control (Brechaus, 1982), capability to take personal risks
(Gasse, 1985) and positive approach to work and problems, without excessive fear of
failure, seeming from strong belief in favourable future (Kuratko & Hodgetts, 1989)
- all lend to a strong sense of personal resourcefulness (Kanungo & Misra, 1992)
through which entrepreneurs take up and deal with non-routine tasks and situations.
Hence, 'personal resourcefulness' in the context of this paper is the belief in one's own
capability for initiating actions directed towards creation and growth of enterprises.
Suchinitiating process requires cognitively mediated self regulations of internal feelings
and emotions, thought and actions as suggested by Kanungo and Misra (1992).
Theoryof Cultural Values
The key elements in Thomas Cochran's theory are cultural values, role
expectations and social sanctions. In his theory on the process of economic
development, entrepreneurs are not seen as being deviant or super normal individuals
but rather as representing society's modal personality. This modal personality is
mouldedby prevailing child-rearing practices and schooling common to a given culture.
Theperformance of a businessman, according to him, will generally the influenced by
threefactors: (1) his own attitude towards his occupation; (2) the role expectations held
by the sanctioning groups; and (3) the operational requirements of the job. The
determinantsfor the firsttwo factors are the society's values. Changes over time in such
variablesas population, technology, and institutional drift will impinge on the role
structureby creating new operational needs.
Development in any walk of life has always depended, to some degree, on
individualqualities of entrepreneurship. The success of planned efforts made by some
countries in developing local entrepreneurs demolished the contention that aI1
entrepreneur is a rare character; that entrepreneurship is not restricted to those who
aregifted with certain qualities at birth. It can also be developed. It is precisely this
convictionthat has led to careful studies on entrepreneurship from economical,
psychologicaland socio-logical perspectives, as well as steps to identify and develop
entrepreneurship. As observed, every theorist has looked at the entrepreneur and
entrepreneurshipon the basis of his perception, and therefore, can, at best, provide
onlya limitedview of entrepreneurial phenomenon. No view is right or wrong, or more
 66 Dynamics of Entrepreneurial Development

or less; in fact, the various factors which cause the emergence of entrepreneurship are
integral and not additive. They are interlocking, mutually dependent and usually
reinforcing.
Factors Influencing Entrepreneurship
Peter Heydemann, the Science Counsellor in the U.S. Embassy here seems much
impressed with the role the small business play in the process of innovation in the U.S.
economy. He explained how "incubators" are used successfully in the United States
to encourage small entrepreneurs.
The problem is how best to help small entrepreneurs translate the results of
laboratory research into marketable products, to transform a. new scientific concept into
a commercial product. Simply put, "incubators" are very basic facilities offering shared
secretarial services, space for conducting a retail or manufacturing business, and a few
simple machine tools. But, and this is very important, incubators offer advice and
consultation on subjects with which the most budding entrepreneurs are unfamiliar:
business and finance planning, market development, government regulations.
Incubators have indeed greatly helped small manufacturers to develop new products.
Recent studies show that such. enterprises are the main source of innovation in the U.S.
industry.
Heydemann said that the idea of the incubator technology is "five or six years
old." This is because until recently it was felt that the U.S. industry would forever remain
in the forefront without any competition. But things changed rapidly. So, realising the
"the 600-plus national laboratories could not possibly service all the one-and-a-half
million or so small entrepreneurs," individual American states took it upon themselves
to help local industry through their technology support and development orqanisations,
Incubators are very often attached to state university systems as universities have
much of the technical and non-technical information that needs to be fed to the
entrepreneurs. Moreover, state universities have increasingly come to believe that apart
from their traditional role, they must also promote industrial activity in their areas of
operation.
State authorities in turn help byenablinq businessmen cut through red tape,
. provide low-interest loans to develop prototypes, undertake market research and
generally assist in bringing a new product to the consumer. "Some notion of the
magnitude of this support can be had from the fact that last year alone, the federal
and state governments together spent more than $2,000 million in encouraging small
business." Many private sector companies also provide incubator facilities, though at
a comparatively higher cost.
Another important aspect of incubators is that experts do not make any business
decisions for their clients. They only provide guidelines and advice on product
development, engineering, pilot production and in identifying markets.
Among the businesses in which incubators are making a significant contribution,
said Heydemann, "are light manufacturing in mature technologies, retail and wholesale
trade and, finally, research and development in emerging technologies."
Theories of Entrepreneurship __ ,67

The success rate of incubators has been salutary in the number of new jobs
created, the enlarged tax base for state revenues and in the export of manufactures.
In short, incubators are bringing new vigour and vitality to America's. industrial
renaissance and are once more giving the country a competitive edge. It remains to
be seen how useful it will be in the context of Indian entrepreneurs.
For Illustration
Mr. Ashok Birla (1939-1990) displayed a restless urge to get going, to get things
done. He was ever-sensitive to innovation with a quest for new ideas. His vigorous
energy combined with a certain gambler's instinct, led him to pursue every potentially
profitable venture. It was this zest to explore the unexplored which created an image
of an unabashed entrepreneur willing to invest in risky off-beat ventures.
Always ahead of his time, he sensed the coming of a financial revolution and
sought to be in its forefront by seeking to promote an offshore mutual fund - five years
before the Unit Trust of India floated its first country fund. Foreseeing the national
crunch in power generation, he introduced portable diesel-based gensets on which
farmersand small shopkeepers could depend to tide them over critical periods of power
shortages. -
After a short training stint under the supervision of his uncle, Mr. Basant Kumar
Birla,Mr. Ashok Birla built a cluster of companies into a dynamic Rs. 320-crore group.
The sales of Zenith Ltd., his flagship company, which was a mere Rs. 30 crore
in 1977-78 when Mr. Birla·took over, soared to Rs. 269 crore in 1989-90. Under Mr.
Birla'sleadership, the company changed from a single product manufacturer to a multi-
product, multi-dimensional conglomerate and became India's 74th largest company.
Earlier,just out of college, he had nurtured Bharat Commerce from a Rs. 2-crore
company into a Rs. 56-crore concern.
Mr. Rajan Pillai (1943-1997), London-based Indian engineer turned an
entrepreneur, had brought in one swoop with this a group of four lucrative biscuit and
snack food companies in Singapore, Hongkong, Malayasia and New Zealand under
Pillai'sbelt. The group's combined sales are approximately Rs. 640 crore and net fixed
assetsin excess of Rs. 200 crore, which include Britannica Industries, India 'and English
BiscuitManufacturers, Pakistan. Rajan Pillai was an international success.
In 1973, Rajan and his father, who was by then one of the biggest exporters of
cashew from India, decided that one member of the family should be abroad. Rajan
was the one chosen. Relying on some 'contacts', Pillai embarked for Singapore to
launch the 20th Century Foods, a salting operation using raw cashew nuts imported
mainly from Kerala. But before leaving India, Rajan made a clean break - he
redistributed amongst his six sisters and sole brother his inherited wealth, then
amounting to about Rs. 5 lakh and relinquished all rights to the family business.
The 20th Century Foods was set in a joint venture with the Inchcape group. A
foodprocessing factory in the nuts and nut-related industry was set up in 1973, in the
Jurong Industrial Estate, which was marshland in those days. Rajan secured financial
assistanceand land on easy lease terms from-the Singapore Economic Development
Board, being one of the first few to set up a factory there. Soon he started shipping .•..
68 Dynamics of Entrepreneurial Development

branded consumer products (cashews in cans and pouches) to the neighbouring

countries. Later, he extended the product line to peanuts, pistachio and almonds to
the markets to the Far East, Japan, the Pacific Rim and the Middle East, all in a span
of five years.
The products sold under the 'Ole' brand name found wide acceptance. But this
did not save the company from cash flow problems. The profits Rajan Pillai made went
into paying off the loans from the Citibank and the Bank of India in Singapore. Clearly,
working capital shortage and the bane of entrepreneurship threatened to wipe out the
young fortune-seeker.
Cash losses started mounting and the company went into a tailspin. But Pillai's
experience with the company laid the foundations for what was destined to be a
rewarding career. "20th Century Foods is largely responsible for what I am today", he
said. To combat the chronic shortage of capital, the young Pillai had started expanding
the factory by taking in some local Singaporians as shareholders. -
In spite of the trials and tribulations, the shift to Singapore was Pillai's big break.
Certainly he had not started with nothing in Singapore. On the contrary, by this time
he was in a successful family cashew and shipping business. But there were other
equally successfull and rich businessmen in Kerala in the export trade. But no one had
turned that base into an international, organised marketing and production company.
Pillai's success was due to the fact that he had clearly understood how business
was organised and conducted in the West. This was the reason why he was able to
capitalise on his base. In every instance, he had been able to merge his business into
a bigger operation and eventually to gain control of the larger entity. It is this that had
set him apart from most other Indian businessmen.
In 1978-79, Pillai convinced Standard Brands, a leading US public company and
the largest nut producer, to join him in his venture. Pillai sold 74 per cent of his stake
to Standard Brands. The company was renamed 20th Century Standard Brands and
he became the working chairman, as is almost a custom in the West when a
businessman merges his successful small company into a larger company. In 1980,
Nabisco Foods merged with Standard Brands. After the merger, Pillai had sold out his
balance holding. Once again, the new management retained Pillai as working
chairman. "The senior people quickly saw in him an aggressive entrepreneurial trader",
says an insider and in 1985 he was moved to London to head the Nabisco
Commodities, a trading company.
Modem Concept
The term "entrepreneur" in the modem sense came into usage in the late 18th
century with the advent of the Industrial Revolution in England. Itwas during this period
that people developed inventions and made an appreciable amount of discoveries in
a variety of productive occupations. Their innovative behaviour engaged them in doing
new and useful things or old things in an improved way. The invention of colour
photography and colour television, for example, were the responses of innovative
efforts of the individual who conceived the idea, developed it and pursued it to its
ultimate success. These innovators came to be known as entrepreneurs.
 Theories of Entrepreneurship 69

Critical Analysis
From the above theories we can see that Schum peter ana McClelland have given
primary importance to the individual. While Schumpeter has stressed on innovativeness
or creativity of the individual as an important determinant of enterpreneurship,
McCI,;\landstresses more on the internal factors, specifically, the need for achievement. -
Though not according any importance to culture per se, however, he has dealt with
one product of culture, viz., the need for achievement, extensively. Weber has touched
_upon the belief system which is part and parcel of culture and which has a great
influence in determining the individual's behaviour in every aspect of his life - be
it religious, social or economic. In Weber's view, certain belief system sanction
economic endeavours, while others do not. Hagen views economic development as
a process of technological change which is brought about by technological creativity
of individuals in society. Granting the significance of psychic factors,Young lays greater
emphasis on the nature of the groups,'groups' assistance and coordination. Like Weber
and McClelland, Cochran also speaks in different terms but explicitly, of cultural values
and social structure (which include role expectations and social sanction) as playing
a vital role in economic development. He identifies three important elements: (a)
individualattitudes towards economic activity; (b) social sanctions; and (c)skillsneeded
for the job (of a technical and social nature). While Young considers psychological
factorsand value system as passive, Kunkel argues that they do really matter and comes
close to Cochran view of social structure as contributing to entreprneurship
development. By and large, the underlying current and emphasis in all theories seems
to be the man and his personality, influenced, by the culture in a given society.

E
N
T
R
E
P
R
E
N
E
U PERCEPTION
R
ARRANGES
INITIAL
CAPITAL

... ' Fig. 5.2 ~Jow Chart of an Industrial Entrepreneur

70 DynamiCs of·-Entrepreneurial Development

Conclusion
Major theories and expositions from Cantillon to Kirzner view the entrepreneur
as performing various functional roles as risk taker, decision maker, organiser or
coordinator, innovator, employer of factors of production, gap seeker and input
completer, arbitrageur, etc. In spite of the diverse roles portrayed, certain common
themes could be identified. Allthe theories ascribe a functional role to the entrepreneur
in the productive process and entrepreneurial rewards are explained by the degree of
success attained by fulfilling that function, rather than by a purely proprietary claim
on income by virtue of mere asset ownership. Again, all the theories have been
grounded against the backdrop of a capitalist society and as such the functional roles
performed by the entrepreneur is determined within , the capitalist paradigms of
production and distribution.
The varied theories evolved over more than two centuries have thrown up the
concept of intrapreneur as a logical evolution of entrepreneurship in corporations. The
intrapreneur is a professional with entrepreneurial skills.The concept of enterpreneurship
will certainly undergo a change with the advancement of technology, information
technology in particular. The evolution of entrepreneurship is a continuous process .

• • •
 "Entrepreneur Is a pert/OIl who dlscovertl new Ideas and buslnea
opportunities, brings togetherlunds to establish a buslnea, organlses
and manages Its' operations In order to provide economic goods and
services, lor the public. Entrepreneurs have strong convictions. IHIN
motif/atlon, the will to grow and prosper tremendously and also the
courage to go bankrupt 1/ they /all In their venture. But In majority 0/
cases they start with nothing but entrepreneiutal "billty and end fIIItb
positive results

CLASSIFICATION AND TYPES OF

ENTREPRENEURS

Introduction
In the previous chapter, we have analysed the concept of entrepreneurship and
its understanding over the centuries, particularly in the post industrial revolution. In
modem times entrepreneurial development has the thrust area of development
planners, economic thinkers and policy makers. What is more, the entrepreneur has
emerged as a kingpin of development. '
By and large, entrepreneurs are found in every economic system and in every
form of economic activity as well as in other social and cultural activities. They are
found amongst artisans, labourers, artists, importers, exporters, engineers, supervisors,
bankers, industry, professionals etc. They are also found among farmers, fishermen,
forestworkers, tribals and so on. Some writers have also identified entrepreneurs among
politicians, theqlogists, philosophers, bureaucrats.
This chapter attempts to analyse different types of entrepreneurs in business as
well as in different faculties of understanding. On the basis of his study of American
agriculture, Clarence Danhof classified entrepreneurs into four categories, namely,
innovative Entrepreneur, initiative Entrepreneur, fabian Entrepreneur and drone
Entrepreneur. The other classification is based on technology, economic activity and
market economy.
Economists' View
In economic analysis, entrepreneurial functions are supposed to be directed
towards the materialistic obiective of maximisation though, its foundations may be-of
a high order such as spiritual, patriotic, social, psychological or ethnic. Entrepreneurial
activityis a form-giving activity-giving form to the wishes of the society, to ideas, to
the efforts,1 'of factors and to the raw material to be processed through.
j

J.S~Mill has' listed three entrepreneurial functions:

 72 Dynamics of Entrepreneurial Developn,'enf

1. Superintendence
2. Control, and
3. Direction
J.B. Say.has stated that it is function of the entrepreneur to rationally combined \
the forces of production into a new producing organisation. J .5. Milllistssuperintendence,"
control and direction as entrepreneurial functions. Superintendence: to assemble the
means, turn out maximum at minimum cost and to supervise the work. Control. the
fIO\Vof g~, use of finance, utilisation of machinery and the activities of the
--subordinates. Direction: he is a goal.3>riented person; he has to keep the organisation
constantly on the path of his objective. His is an activity of producing in present what
the future will demand. Mill emphasises managerial and administrative functions.
Organisation and superintendence are major functions of an entrepreneur. Organisation
building capacity is the most critical skill expected of an entrepreneur.
Kirzener viewed the entrepreneur as a disequilibrating force. It is the alertness to
unnoticed opportunities which creates a tendency of the ever-circular flow of
equilibrium. Harvey Leibenstein states, "Entrepreneur is an individual or group of
individuals with four major characteristics. He connects different markets; he is capable
of making market deficiencies (gap-filling); he is input completer and he creates or
expands time-binding, input-transforming entities (firms).
Much has been said by this economist on Entrepreneurship. So it can be deleted.
Accordinq.to B.F. Hoselitz, "The primary function of entrepreneurship is the
investment of time, capital and energy in economically significant pursuits; the
emphasis is on decision-making on its various aspects." Another economist Harbinson
enumerates four functions: in entrepreneurship the undertaking or managing of risk and
handling of economic uncertainty; planning and innovation; coordination, administra-
tion ~nd control, routine supervision. Ability to build organisation is, perhaps,
Harbinson adds, the most precious of all entrepreneurial skills. Redlich's threefold
division of functions NO/are:
(1) capitalist - employing the factors and buying raw material, setting up the
organisation; (2) managerial- Innovation, supervision and coordination of productive
activities; and (3) entrepreneurial - decision-making. Benjamin Higgins lists seeing
opportunities for introduction of new techniques, new products and exploitation of new
resource and organising factors of production into an enterprise to avail of these
opportunities as they are essential for economic development.
'"' -S.C. Tandon discusses the functions of an entrepreneur in a developing economy
in the context of economic, legal, political and cultural environment. Accordingly, the
entrepreneur must possess (a) capacity ~o risk and have self-confidence; (b)
technological knowledge, alertness to take existing opportunities, willingness to accept
change and ability to initiate; (c) ability to marshall resources; and (d) ability of
organisation and administration. He has to have tact, patience, sagacity, power of
observation and ability of discriminating. He should have perseverance to overcome
obstruction and fear, have the capacity to pick and choose associates and subordinates
and wisely deiegate authority to inspire loyalty. He must be able to develop "himself'
 ":"

ClaSSlficat~,~:d.!~ ~f.Entr~preneurs ". .. 73

effectively.,Tan~on describes entrepreneur as an "ideal-type" rather than as "social-

type." Knight is said to have identified entrepreneurship with control and responsibility.
Economic functions describes above isolate the entrepreneur from the economic
environ, social milieu and political ethos in which he functions. Maximisation is-taken
as tl1e~
pole star in his voyag~. It seems to be conveniently assumed that he i abundantly
1
provided' with all the resources and the market readily absorbs what he puts into it.
R~alityis, however, full of bottlenecks and hurdles which are ignored in the above-
mentioned works. Small industry is a natural habitat of the entrepreneur where his role
is like that of a stoker who keeps the fire burning.
Sociologists' View
Sociologists consider the entrepreneur as a role performer corresponding to the
roleexpected by the society. Wishes of the society are exhibited through customs and
taboos, r~wards and restraints, ethnic values and child-rearing practices, nationalistic
attitudeand patriotic inculcations and protestant ethics. He is conditioned by the social
milieuto which he belongs. According to Peter.Marris, to assemble or reassemble from
what is available, very concrete kind of imagination, to see what others have missed,
sensitivity to business and social environment, zest in industrial development and
entrepreneurial.courage are the factors that make an entrepreneur. According to Flavia
Derossi,coordination ,
. at every stage - inception, maintenance and expansion - is
thefunction of ar entrepreneur. She feels an entrepreneur needs two qualities: (1) An
optimisticoutlo,ok that there is a possibility of change, the environment can be mastered
and he himselfcan introduce the required change. He finds difficulties challenging and
stimulating;he thrives on them. (2) In a sphere as dynamic as industry, new problems
are seized upon as , opportunities for testing one's own capabilities.
Psychologists' View
Among psychologists, Frank Young describes an entrepreneur as a change-agent.
K. L. Sharma maintains that entrepreneurs are men with qualities of leadership in
solving persistent professional problems; but those persons. likewise demonstrate
eaqerness to seize unusual opportunities. T. V. Rao and Udai Pareek describe
entrepreneurship as a creative and innovative response to environment. The
entrepreneur is goal-oriented rather than means-oriented. He must not only have a high
capacityof risk-taking but must also have a high capacity of risk-sustaining which call
for high degree of self-confidence.
Economists present him as a perceiver of otherwise unnoticed opportunity,
organisation builder, adapter of new profitable activity and beneficiary thereof.
Sociologists'present him as a personality moulded by various practices of social
enforcemenland values imbibed in him. Psychologically, entrepreneurship is a vigorous
application of the person's energies towards the long-cherished goals.
I . . .

TypesEntrepreneurs
,. , \ '

.' The entrepreneurs have been ~Ii6adly classified accordingto the type of business,
Useof professional skill, motivationj growth and stages of development. \The various
typesof entrepreneurs are shO"wn.in t!ile:Fig. 6.1.
I :'1 .
74 Dynamics «!.f Entrepreneurial Development
, Wil I,
1. Business entrepreneur .-
2. Trading entrepreneur
3. Industrial entrepreneur:
(i) Large,
(ii) Medium, '
(iii) Small, and
Jiv) Tiny
According to the
type of business rIL------t=== 4. Corporate entrepreneur
5 .. Agricultural entrepreneur:
(i) Plantation I
(ii) Horticulture
(iii) Dairy
(iv) Forestry
6. Retail entrepreneur
7. Service entrepreneur
1. Technical entrepreneur
According to the 2. Non-technical entrepreneur
use of technology 3. Professional entrepreneur
4. High-tech entrepreneur
5. Low-tech entrepreneur
1. Pure entrepreneur

I According to the11-
_ motivation I
-t--- 2. Induced entrepreneur
3. Motivated entrepreneur

~l According to the
. growth
4. Spontaneous entrepreneur
1. Growth entrepreneur
2. Super-growth entrepreneur

According to the stages

of development
L-_-t===
r
1. First generation entrepreneur
2. Modem entrepreneur
3. Classical entrepreneur
According to area 1. Urban entrepreneur
2. Rural entrepreneur
According to gender 1. Men entrepreneurs
and age 2. Women entrepreneur
(i) Young entrepreneurs
(ii) Old entrepreneurs
(iii) Middle-aged entrepreneurs
According to the 1. Small Scale entrepreneur
sale of operation 2. Large scale entrepreneur
1. Professional entrepreneurs
2. Non-Professional entrepreneurs
3. Modem entrepreneurs
4. Traditional entrepreneurs
5. Skilled entrepreneurs
6. Non-skilled entrepreneurs
r Others or unclassified I 7. Imitating entrepreneurs
, 8. Inherited entrepreneurs
9. Forc~d entrepreneurs
1
10. National entrepreneurs
1 11. International entrepreneurs
.\ \.
I I . 12. Bureaucratic entrepreneurs
\

1
13. Intrapreneur entrepreneurs
14. Immigrant entrepreneurs
Fig. 6.1 Types of Entrepreneurs
Cla•• lflcation and Types of Entrepreneun 75

The above classification of entrepreneurs is not exhaustive, for it aims at

highlighting the broad range of entrepreneurs found in business and profession. We
shall now discuss in brief, each type of entrepreneurs.
Entrepreneurs according to the Type of Business
Entrepreneurs are found in various types of business occupations of varying size.
. I
We may broadly classify them as follows: . .
n . '-
BuSiness Entrepreneur: Business entrepreneurs are individuals who Conceive an .
idea for a new product or service and then create a business to materialise their idea
into reality. They tap both production and marketing resources in their search to
develop a neW business opportunity. They may set up a big establishment or a small
business unit. They are called small business entrepreneurs when found in small
business units such as printing press, textile processing house, advertising agency,
readymade garments, or confectionery. In a majority of cases, entrepreneurs are found
in small tradi,ng and manufacturing business and entrepreneurship flourishes when the .
sizeof the business is small. I

Trading' Entrepreneur: Trading entrepreneur is one who undertakes I trading

activitiesand is not concerned with the manufacturing work. He identifies potential
markets,stimulates demand for his product line and creates a desire and interest among
buyersto go 'in for his product. He is engaged in both. domestic and overseas trade.
Britain, due ~o geographical limitations, has developed trade through trading,
entrepreneurs. These entrepreneurs demonstrate their ability in pushing many ideas
ahead to promote their business.
Industrial Entrepreneur: Industrial entrepreneur is essentially a manufacturer who
identifiesthe potential needs of customers and tailors a product or service to meet the
marketingneeds. He is a product-oriented man who starts in an industrial unit because
of the possibility of making some new product. The entrepreneur has the ability to
converteconomic resources and technology into a considerably profitable venture. He
isfound'in industrial units as the electronic industry, textile units, machine tools or video
cassette tape factory and the like.
Corporate Entrepreneur: Corporate entrepreneur is a person who demonstrates
his innovative skill in organising and managing corporate undertaking. A corporate
undertaking is a forrri of business organisation which is registered under some statute
orActwhich gives it a separate legal entity. A trust registered under the Trust Act, or
acompany registered under the Companies Act are example of corporate undertakings,
Acorporate entrepreneur is thus an individual who plans, develops and manages a
corporate body.
I
. Agricultural Entrepreneur: Agricultural entrepreneurs are those entrepreneurs .
I . I

who 'undertake agricultural activities as raising and marketing of crops; fertilisers and _
other' inputs of 'agriculture. They are rrt~ti~ated to raise agricultural through
~e<:h&~iS?tiOn,irriga'tion and application of/ t~8Jn01ogieS for dry land ,agriculture
produc~. They cover ~ broa~~p,ec~~of,~ a!MCpl~fc,U,?~or .and jl\c1~des its allied
occupations. , , ~ "'I,, '.,.' , i· I'·
76 Dynamics ofEntrep~ne~a, ••p~velopment
" r' , '/ ",.,.. . ',g: I $

Entrepreneurs in Technology
The application of new technology in various sectors of the national economy
is essential for the future growth of business. We may broadly classify these
entrepreneurs on the basis of the use of technology as follows:
Technical Entrepreneur: A technical entrepreneur Is essentially compared- to a
"craftsman." He develops improved quality of goods because of his craftsmanship. He
concentrates more on production than marketing. On not much sales generation by
and does not do various sales promotional techniques. He demonstrates his innovative
capabilities in matter of production of goods and rendering of services. The greatest
strength which the technical entrepreneur has is his skill in production techniques.
Non-technical Entrepreneur: Non-technical entrepreneurs are those who are not
concerned with the technical aspects of the product in Iwhich they deal. They are
concerned only with developing alternative marketing and distribution strategies to
promote their business. .
Professional Entrepreneur: Professional entrepreneur is a person who is interested
in establishing a business but does not have interest in managing or operating it once
it is established. fl. professional entrepreneur sells out the running business and starts
another venture with the sales proceeds. Such an entrepreneur is dynamic and he
c~nc~iv~s new ideas to develop alternative projects.
I
Entrepreneurs and Motivation
Motivation is the force that influences the efforts of the entrepreneur to achieve
his
,
objectives. An entrepreneur is motivated
I .
to achieve or prove his excellence in job
performance. He is also motivated to influence others by demonstrating his business
acumen.
Pure Entrepreneur: A pure entrepreneur is an individual who is motivated by
psychological and economic rewards. He undertakes an entrepreneurial activity for his
personal satisfaction in work, ego or status.
Induced Entrepreneur: Induced entrepreneur is one who is induced to take up
an entrepreneurial task due to the policy measures of the government that provides
assistance, incentives, concessions and necessary overhead facilities to start a /enture.
\
Most of the_induced entrepreneurs enter business due to financial, technical and several
other facilities provided to them by the state agencies to promote entrepreneurship.
A person with a sound project is provided package assistance to his project. Today,
import restriction and allocation of production quotas to small units have induced many
eople to start a small-scale industry.
'otiveted Entrepreneur: New entrepreneurs are motivated by the desire for selt- "
fulfilmen . hey come into being because of the possibility of making and marketing
some new product for the use of consumers. If the product is developed to a saleable
stage, the entrepreneur is further motivated by reward in terms of profit. '
~ Spontaneous Entrepreneur: The~e entrepreneurs start' their business their by
natural talents. They are persons with initiative, boldness and confidence in their ability
which motivate them to undertake enWpreneurial activity. Such entrepreneurs have
\
a strong conviction' and confldencem' their inborn ability. I'·
Classification and Types of Entrepreneurs 77

Growth and Entrepreneurs

The development of a new venture has a greater chance of success. The
entrepreneurs a new and open field of business. The customer's approval to the new
product gives them psychological satisfaction and enormous profit. The industrial units
are identifieq as units of high growth, medium growth and low growth industries and
as such we have "Growth Entrepreneur" and "Super-Growth Entrepreneur." .
Growth Entrepreneur: Growth entrepreneurs are those who necessarily take up
a high growth industry which has substantial growth prospects.
I '
Super-Growth Entrepreneur: Super-growth entrepreneurs are those who have
shown enormous growth of performance in their venture. The growth performance is
identified by the liquidity of funds, profitability and gearing.
Entrepreneur and Stages of Development _
Entrepreneurs may also be classified as the-first generation entrepreneur, modem
entrepreneur and classical entrepreneur depending upon the stage of development.
They are explained below:
First-Generation Entrepreneur: A first-generation entrepreneur is one who starts
an industrial unit by innovative skill.He is essentially an innovator, combining different
technologies to produce a marketable product or service.
Modern Entrepreneur: A modern entrepreneur is one who undertakes those
ventures which go well along with the changing demand in the market. They undertake
those ventures which suit the current marketing needs.
'ClassicalEntrepreneur: A classical entrepreneur is one who is concerned with the
customers and marketing needs through the development of a self-supporting venture.
He is a stereotype entrepreneur whose aim is to maximise his economic returns at a
level consistent with the survival of the firm with or without an element of growth.
Others
Innovating Entrepreneurs: Innovating entrepreneurship is characterised by
aggressive assemblage in information and analysis of results, deriving from' a novel
combination of factors, Men / women in this group are generally aggressive in
experimentation who exhibit cleverness in putting attractive possibilities into practice.
One need not invent but convert even old established products or services by changing
their utility, their value, their economic characteristics i~t6 something new, attractive
and utilitarian. Therein lies the key to their phenomenal success. Such an entrepreneur
isone who sees the opportunity for introducing a new technique of production process
or a new commodity or a new market or a new service or even the reorganisation of
an existing enterprise.
Innovating entrepreneurs are very commonly found in developed countries.
There is death 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,
78 Dynamics of Entrepreneurial Development

hope of money making, ability to recognise and exploit opportunities, etc. Innovative
entrepreneurs are creative and always bring in innovation in their work. </
Imitative Entrepreneurs: Imitative entrepreneurship is characterised by readiness
to adopt successful innovations by entrepreneurs. They imitate techniques and
technology innovated by others. Thy are adoptive and more flexible.
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 underestimated. 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 \mitative entrepreneur may
be a pedestrian figure, an adopter and imitator rather than a true innovator. He ismore
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 undeveloped countries.
Conclusion
It should be noted that private entrepreneurship has to harrnonise economic
opportunities with social and moral responsibility. As our wise people have said, unless
the pursuit of wealth is integrated with the pursuit of Dharma, there could be no lasting
prosperity and peace, whether within a country or among nations. The highly
developed countries have realised that aggressive entrepreneurship without an ethical
base can produce more harm than good, more misery than happiness and more
destruction than creation. Harmonised planning of economic and moral values is a
long-drawn-out process, but the goal has to be kept in mind constantly. One should
remain optimistic that entrepreneurship in India will develop on these lines - to
promote India's economic development on a sound basis, as an integral part of the
development of the economy. The burst of creativity and innovation in emerging
teleological industries holds promise for economic development and growth of
technology and business. When talent is linked with technology, people recognise and
then push viable ideas and the entrepreneurial process is under way.
In this time of rapid socio-economic development and technological change, the
entrepreneurial spirit can be of advantage bitonly if we learn to use it. The
entrepreneurs are the agents of change and our hope for the future.
 <'io}®:tt.*,,4;~;it0.'_1 CHAPTER 7 I;
.::--

ENTREPRENEURIAL TRAITS AND

MOTIVATION

Introduction
Entrepreneurial traits and motivation are an indispensible function of ,manage-
ment. Entrepreneur is human being who has his dignity, self-respect, values,
sentiments, /asplrations, dreams apart from economic status. Indeed, economic
betterment and social upliftment motivates a person to distinguish from others. The
entrepreneurs have some basic values and responsibilities.
In this chapter, we shall examine the entrepreneurial traits and motivation.
Creation of a Dream
Creating a dream intention gives entrepreneurs the energy and desire to become
involved in its implementation and to be willing to change. During the formulation of
the dream, everyone participates (including the leaders), and this allows people to start
seeing each other in a different light. How long they will maintain their commitment
depends upon (a) how well the organisation's leaders function in their new role of
facilitating needs or issues that are at variance with the dream, (b) how clearly the
leaders articulate and share information about the business needs, and (c) how well
the leaders openly acknowledge their willingness to change in whatever fashion to attain
the dream or intention.
The process of creating the dream, in other words, intention should be tailored
to the situation with the objective of having the entire organisation ultimately own the
dream. In a large organisation, there will be many dreams formulated by-interdepen-
dent parts of the organisation. At some point, these should be integrated into a total
organisational intention. We have found that creating a dream in a bottoms-up manner
where all organisational levels participate in some fashion is better than a tiered top-
down approach.
To illustrate the content of a typical dream, let us look at the leadership portion
of this from a Honeywell factory, which evolved as follows:
 · ',

80 Dynamics of Entrepreneurial Development

Leadership should be the ability of those leading work units (managers,

supervisors, engineers, technical support, and group leaders) to create an atmosphere
of ~cceptance, openness, and trust that will properly motivate members of the work
units.
I .
• Leadership incorporates Interpersonal Competence and Administrative
Competence.
Interpersonal competence, i.e., the ability to relate, to people in a considerate
and effective way:
Leadership should incorporate the following attribut1es.
, \

CM'e positive feedback for a good job.

Initiate confidence in employees.
Be fair and objective, not vindictive. I
Practise what is preached; do not ask for something that he or she would
not be willingto do.
Have a down-to-earth, person-to-person approach; act as part of a team.
Be compassionate and understanding; create an atmosphere of acceptance
and trust.
Listen actively.
- Clarify priorities.
Be available for discussion.
Link management with employees, employees with management, and
employees with each other. Communicate effectively to all people on all shifts
at all levels of the organisation.
Provide feedback for both good and bad work. ,
Talk openly and give straight answers about what is happening.
Encourage advancement.
Give direction to the work unit.
Be proud and supportive of employees.
Has a sense of vision - a dream that is blended with employees' dream.
Project a positive attitude.
Is courageous.
Sets a good example; is friendly, not moody.
Enjoys his or her work.
Keeps promises; plows through red tape.
Administrative competence is the ability to achieve organisational goals within
the bounds of the business constraints policies and procedures. This means that the
leader should,
Understand his or her job.
- Understand employee's jobs - by
Entrepreneurial Traits and Motivation 81

(a) Utilising people's skills effectively.

(b) Be concerned with employees' work and the workflow.
(c) Stand up for ~nd show confidence in employees.
Take immediab~acno-n--by _
(a) Giving priority to problems.
(b) Follow up on promises.
(c) Get tough when necessary;
(d) Take action to remove poor performers.
~) Assure that the next in command knows his role and has authority to
act.
(f) Provide proper human resources for all shifts all levels of organisation.

~t---+---t
SPIItrI"

Fig, 7.1 Ba.le Elements - Entrepreneurial Involvement

Entrepreneurial Initiative
Recent data on entrepreneurial initiative and self-employment reflect a few
problems.To overcome these problems it is essential to develop entrepreneurial skills
forwhich the entrepreneur has to initiate the process of development. This is a
challengingtask. This unprecedented, perpetual change with unlimited barriers make .
entrepreneurialinitiative in the future more significant and more dynamic.
This means that entrepreneurial initiative is a strategic process which embodies
calculatedstrategic choices. There are strategies open to the entrepreneur himself in
termsof industry choice and individual and resource-task fit, and there are strategies
opento the regulators and support ~gencies in terms of industrial policy tools, incentives
andexplicitstimulation of industrial sectors or branches. A conceptual framework that
containsboth dimensions will provide a convenient base for analysis and possible
policyaction.
82 DPo •••• lc:s of Entrepreneurlai Develo •••••••

Encouraging entrepreneurial initiative is.an issue applicable to both developed

and developing countries and the search for effective means is proceeding in earnest.
The analysis has dealt with a way of viewing the constraints embodied in the process
of creating a new business or manufacturing operation.
The slow pace of the propensity to enterprise is mainly due to the existence of
a tangible set of barriers prohibiting the process of entry into, continuity in, and an
eventual exit from a business venture of a would-be entrepreneur if it is a function of
forces that one may view as barriers limiting full-fledged business performance. There
may be entry barriers, survival barriers and exit barriers.
Entry barriers are those forces limiting access to identified business opportunities
and capitalisation on these opportunities. Survival barrier are constraints on the
conditions essential for the small business entity. Exit barriers are constraints limiting
the termination of small industrial ventures that have outlived their business viability
or the growth of such ventures to a different size category. -
The existing entry barriers are:
I. A cultural bias in identifying and managing the entrepreneurial development
process.
2. Limited industry-specific data and insufficient market information.
3. Litnited effectiveness of the infrastructural base.
4. Existence of visible and invisible obstacles to entry of a specific societal group
(e.g., women) into business.
5. Unorganised capital market and traditional feasibility assessment processes.
6. Unsympathetic and cumbersome government attitude.
7. Hostile environment.
8. Limited access to technology.
Observed survival barriers include the following:
1. A behavioural pattern that could impair basic managerial practices.
2. Constraining practices within the capital market.
3. The threatening shadow of changing technology.
4. Limited learning.
5. The cultural management of resources.
6. Failure of guidance agencies to guide.
7. Scarce information and limited dissemination of that information.
Identified exit barriers include:
1. The emotional commitment of the entrepreneur to his venture.
2. Specialised assets, sunk funds.
3. The increasing demand for managerial skills:
4. Fear of failure.
Entrepreneurial Traits and Motivation 83

Barriers, single or combined are said to have an impact on to strategic and long-
termplanning perspective of the small entrepreneur and could, equally, have an impact
on the government's promotional policies within the sector. Low entry and low survival
industries (or industrial branches) could provide policy-makers with an area for quick
and intensive intervention. At the other extreme, industries with high entry barriers and
high survival barriers, can probably be regarded as low priority areas that deserve a
differentkind of attention, i.e., barrier adjustment instead of enterprise development.
The relationship between entry and exit barriers could lead to a similar set of
conclusions. One of those conclusions is the advisability of the management of
enterpriseflow and the early identification of the potential for switching (a form of exit),
orplanned divestment. Again this can prove valuable for government policies for small
industrypromotion at the national and regional levels.
Characteristics of an Entrepreneur
. The characteristics of an entrepreneur that contribute to success are the result of
hisachievement motivation. The characteristics of achievement motivated persons as
identified by McClelland have been discussed in the chapter on "Future of
Entrepreneurship in India." A successful entrepreneur must be a person with technical
competence, initiative, good judgement, intelligence, leadership qualities, self-
confidence,energy, attitude, creativeness, fairness, honesty, tactfulness and emotional
stability.
1. Mental ability: Mental ability consists of intelligence and creative thinking. An
entrepreneur must be reasonably intelligent, and should have creative thinking and
mustbe able to engage in the analysis of various problems and situations in order to
dealwiththem. The entrepreneur should anticipate changes and must be able to study
the various situations under which decisions' have to be made.
2. Clear objectives: An entrepreneur should have-a clear objective as to the exact
nature of the goods to be produced and subsidiary activities to be undertaken. A
successfulentrepreneur may also have the objective to establish the product, to make
profitor to render -,sodal service.
3. Business secrecy: An entrepreneur must be able to guard business secrets.
Leakageof business secrets to trade competitors is a serious matter which should be
carefullyguarded against by an entrepreneur. An entrepreneur should be able to make
a proper selection of his assistants.
4. Human relations ability: The most important personality traits contributing to
thesuccessof an entrepreneur are emotional stability, personal relations, consideration
and tactfulness. An entrepreneur must maintain good relations with his customers if
heisto establish relations that willencourage them to continue to patronise his business.
Hemust also maintain good relations with his employees if he is to motivate them to
performtheir jobs at a high level of efficiency. An entrepreneur who maintains good
humanrelations with customers, employees, suppliers, creditors and the community
ismuchmore likelyto succeed in his business than the individual who does not practise
goodhuman relations.
c->:
Human relations ability can also be referred to as tactfulness.
.>
84 Dynamics of Entrepreneurial Development

ADMINISTRATNE ABIUlY

ORGANISATION SKILLS

INTELUGENCE

CREATIVIlY

INNOVATION

CLEAR OBJECTIVE

BUSINESS SECRECY

SOUND KNOWLEDGE

EMOTIONAL STABIUlY

PUBUC RELATIONS

EFFECTIVE COMMUNICATION

TECHNICAL KNOWLEDGE

Fig. 7.2 Characteristics of an Entrepreneur

5. Communication ability: Communication ability is the ability to communicate
effectively. Good communication also means that both the sender and the receiver
understand each other and are being understood. An entrepreneur who can effectively
communicate with customers, employees, suppliers and creditors will be more likely
to succeed than the entrepreneur who does not.
6. Technical knowledge: An entrepreneur must have a reasonable level of
technical knowledge. Technical knowledge is the one ability that most people are able
to acquire if they try hard enough.
An entrepreneur who has a high level of administrative ability, mental ability,
human relations ability, communication ability, and technical knowledge stands a much
better chance of success than his counterpart who possesses low levels of these basic
qualities. Brilliantmen with firstclass degrees from universities shy away from becoming
entrepreneurs because the one thing they cannot be taught is coping with human
emotions.
Robert D. Hisrich has identified a few more capabilities or personal characteristics
that an entrepreneur should possess. According to him, the entrepreneur must have
an adequate commitment, motivation, and skills to start and build a business. The
entrepreneur must determine if the management team has the necessary complemen-
tary skills necessary to succeed. Some key characteristics of a successful entrepreneur
are:
, Motivator: An entrepreneur must build a team, keep it motivated and provide
an environment for individual growth and career development.
Entrepreneurial Trait. and Motivation 85

Sell-confidence: Entrepreneurs must have belief in themselves and the ability tc

achieve their goals. .
Long-tenn involvement· An entrepreneur must be committed to the project with
a time horizon of five to seven years. No ninety-day wonders are allowed.
High energy level' Success of an entrepreneur demands the ability to work long
hours for sustained periods of time.

CHARACTERISTICS OF SMALL-SCALE ENlREPRENEURS

1. They are young men.

2. They are energetici zealous/enthusiastic.
3.' They have minimum basic education.
4. They are pleasant-mannered.
5. They are hard-working
6. They are determined.
7. They are systematic.
8. They are self-made men.
9. They are self-confident.
10. They are disciplined men.
11. They follow a planned approach.
12. They are trained/experienced.
13. They have entrepreneurial zeal.
14. They have meagre capital.
15. Their area of operation is small.
16. Generally they deal in one product.
17. They employ a few people.
18. Their turnover is small.
19. They are flexible.

I CHARACTERISTICS OF LARGE-SCALE ENTERPRISE

1. Promoted and professionally-managed through employed persons.
2. Large capital.
3. Capital contributed by a large section of shareholders.
4. Shares are registered in the share markets/stock exchanges.
5. Large assets.
6. Assets acquired on classified credit.
7. Engaged in diversified activities.
8. Promotes and pushes goods in the market.
9. Huge turnover/sales/profits.
10. Easy acc.ess to institutional finance.
11. They have greater leverage for development.
12. They are well acquainted with political and officialdom.
13. They are the trend setters.
14. They can create demand for their products through consumer
awareness programmes, education etc.
15. They are great visionaries, who foresee the need of the country well
I ahead of times.
; \
16. ';They are. responsible and have a value-driven, corporate philosophy.
86 Dynamics of Entreprenrurh~1 Development

Persistent problem-solver: An entrepreneur must have an inte?se desire to

complete a task or solve a problem. Creativity is an essential ingredie~t;
Initiative: An entrepreneur mult have initiative accepting personal'responsibtlity
for actions, and above all make good use of resources. I.
Goal setter: An entrepreneur must be able to set challenging but realistic goals.
Moderate risk-taker: An entrepreneur must be a moderate risk-taker and learn
from any failures. '
These personal traits go a long way in making an entrepreneur a successful man!
woman. But however, no entrepreneur possesses total strengths. In such cases, he
associates and/or acquires and thus strengthens his enterprise.
Qualities of an Entrepreneur
A true entrepreneur besides possessing functional qualities, must also possess the
broad personality which help in developing initiative and drive to accomplish great tasks
and face challenges squarely. -
James J. Berne has stressed the following qualities of a good entrepreneur:
1. He is an enterprising individual. He is energetic, hard working, resourceful,
aware of new opportunities, able to adjust himself to changing conditions with
ease and willing to assume risks involved in change.
2. He is interested in advancing technologically and in improving the quality
of his product or service. .
- 3. He is interested in expanding the scale of his operations by reinvesting his
earnings.
4. He visualises changes and adapts.
5. He is a firm believer in planning and systematic work.
6. He works for the society at large and for the good of his fellow-beings.
These qualities SUJTl up, what is usually implied from the phrase, the "spirit of
enterprise." It is difficult to conceivers of a first-rate industrial entrepreneur who is not
adaptable to change, anxious to grow larger and improve technologically.
Entrepreneurship appears as a personal quality which enables certain individuals
to. make decisions with far-reaching consequences. The personal qualities that
contribute to the success of an entrepreneur are as follows:
1. Motivation Towards Achievement: A successful entrepreneur should be a good
administrator. He should know the art of getting things done by other people without
hurting their feelings or self-respect. He should have a strong motivation towards the
achievement of a task and must be able to exert considerable efforts in getting things
done by others.
2. Creativity: Mental ability consists of intelligence, an analytical approach and
creative things. An entrepreneur should have creative thinking and be able to engage -
in the analysis of various problems and situations in order to deal with them. The
entrepreheur should anticipate changes and must be able to study various situations
in which decisions may have to be made.
Entrepreneurial Traits and Motivation 87

3. Clarify: An entrepreneur should have

clear objectives as to the exact nature of the
VISION
business, the nature of the goods to be produced
INNOVATION. and the subsidiary activities to be undertaken.
The qualities of an entrepreneur are given
ORGAN ISING
in Fig. 7.3.
ABIUTIES Kilbyhas rightly enumerated the following
activities for a successful entrepreneur in an
MOTIVATION underdeveloped economy:
PRIDE 1. Perception of market opportunities
(novel or imitative).
RISK-TAKING
2. Gaining command over scarce
DYNAMISM
resources.
3. Purchasing of inputs.
APTITUDE
4. Marketing of the product and re-
FOR CHANGE sponding effectively to competition.
5. Dealing with public bureaucracy as
regards concessions, licences, taxes,
etc. provided through the various
fiscal policies of the government.
6. Management of the human relations
within the enterprise.
7. Management of customer and sup-
plier relations.
8. Financial Management.
9. Production management, including
control through written records, su-
pervision, coordinating input flows
INTEWGENCE
with orders, maintenance.
KNOWLEDGE 10. Acquiring and overseeing assembly of
the plant.
INBUILT VALUES
11. Taking care for minimising inputs for
COMMITMENT a given production process.
12. Maintaining the production process
and improving the quality of the
product.
13. Introduction of new production tech-
INSTINCT niques and product lines.
Fig. 7.3 Qualities of a Successful
From the above discussion and definitions,
Entrepreneur. it can be stated that entrepreneurial activities
encompass those factors right from the perception
88 Dyn.ml~ of Entrepreneurial Develop_t

of the profitable opportunity to its translation into reality through establishing a

successful enterprise and further leading to its growth and development. Especially in
,an underdeveloped economy, the expectations from entrepreneurial units are much
more varied and related to many dimensions, including socio-economic objectives. This
is because this type of economy is characterised by a majority of low income strata
than the developed economy characterised by high income. '
Entrepreneurial Skills
To deal with entrepreneurial skills is to concern oneself with a wide coverage of
aspects of setting up an enterprise and its management. It is not confined to
visualisation, planning, setting-up and risk-taking. The skills with an entrepreneur
include his ability to deal with view situations, organisations and social and economic
forces as they emerge from time to time. The skillsto deal with a situation fore-visualised
or suddenly emerging must be an essential characteristic of an entrepreneur.
The small entrepreneur must have skill to positive response from administrators,
bankers, infrastructure institutions, clients and employees.

-l SKIUS I
---l The entrepreneur is
VISUALISATION I rarely a master of the
---1 PlANNING I management skills, and yet
is usually directly responsible
H RISK-TAKING I for all aspects of business.
Often he or she has to be the
H ABIUIY TO DEAL WITH SITUATIONS I general manager, production
manager, purchasing
---i ORGANISATION I manager, personnel
manager, controller and
EUCrr POSITIVE RESPONSE FROM research orgauiser for the
- ADMINISTRATORS, BANKERS, INFRASTRUCTURE business all rolled into one at
INSTITUTIONS, CUENTS AND EMPLOYEES
least during its early years.
The entrepreneur therefore
UNDERSTANDING OF MARKETING,
to have an understanding of
QUAUlY CONTROL, FINANCE, BANKING,
f-- COMMERCIAL LAW, GOVERNMENT
marketing, quality control,
REGULATIONS AND PROCEDURES, TAXATION finance, banking, commercial
AND, HUMAN RELAnONS law, government regulations
and procedures, and human
1\
H AWARENESS OF TECHNOLOGY,
EQUIPMENT AND MACHINERY

KNOWLEDGE OF THE PRODUCT,

"
TOOLS AND

-
relations as each of them has
a vital bearing on the health
of the enterprise.
Need for Skills
- PROCESSES, PACKAGING, ADVERTISING
AND MARKET POTENTIAL We often talk of trans-
fer of technology. As, a mat-
Fig. 7.4 Entrepreneuria'-Skill. ter of fact, the whole world is
 EntreprenemialTraits ,"otlvatlon .89

talking ~ ~ut 1t. There is hardly ~y international event at global and regional level
where this subject does not come up for discussion. The poor nations demand
technology and resources from industria:lised and rich countries and rightly so. The
developing countries would rather export semi-finished and finished products which
are value added than export raw materials. The development of entrepreneurial skill
must precedetransfer of technology if we do not desire to keep such technologies and
equipment serving such technologies idle. One has also to realise that the technologies
are developing very fast and also the skills to match with this dynamic growth. The
entrepr~neur has to be made aware of the imperative needs of updated technologies,
modern tools and equipments, processes and system and skills. In this task his whole
organisation, however small it may be has to join the exercise.
It is observed that in many least developed countries, sophisticated equipment
and machinery imported at heavy cost, often under pressure of international financial
institutionsor aid agreements are lyingunutilised for want of trained hands. It is obvious
that the accelerated development of human resources and appropriate training of
manpower must be concurrent with the transfer of technologies which are. relevant to
the needs of each 1 developing country. This will call for an inventory of existing
manpower, degree of their present skills, arrangements for proper imparting and skills
needed. This should have a relation to natural endowment and resources and their
optimum utilisation.
Types of Skill~
Types of skills vary according to location, products, clientele etc. In rural a.eas,
a small enterprise making g: ods for local :n'1sumption based on iocal raw materials
wouldneed relatively simpler skills. In urban areas, the product, '1rocesses, packaging,
advertising have to match with the growing sophistication of consumer goods,
preference of needs etc. They call for an intensification of effort to develop matched
skillsin all areas of entrepreneurial activity.
Skills for New Class of Entrepreneurs
Asstated earlier, entrepreneursh 'p tillrecently in most of the developing countries
has' »een confined to persons coming from the traditionally trade-oriented families. Now
there is emphasis on new classes of entrepreneurs. These would include women, .tribals
and young men from non-traditional families. For women entrepreneurs, special
I training facilities have to be provided owing to the special difficulties faced by them
as compared to men. For tribal entrepreneurs, care willhave to be taken that their basic
culture, crafts and skills are not materially affected.
Attributes of Entrepreneurs
The attempts to discover the secret of entrepreneurs' success has pre-occupied
writersand analysts from a variety of disciplines. Biographies of successful entrepre-
neurs and businessmen, for example, frequently reflect the tendencies of the subjects
of such studies in terms of simple virtues of thrift, hard work, and clean living. As an
altemative to the biographical models are those studies tha; 1'1 rrn the entrepreneur into
a superman, manipulating the complexities ot' an. uncertain world with a sure and
omnipotent touch. Thus emerges the notion of. the "genius entrepreneur" whose
, I'
 90· .'. ~.ml~ of'!~cepre,eurl.1 Development

success is in large measure caused by his unswerving dedication tg setting high goals
and to reaching for them. He has vision on which he bases his own objectives and
sets his own goals. And he does this not simply-on the basis of last year's results-jilus
some growth factor, but on the basis of his own perception, of his own capabilities and
to satisfy his own needs.
Among other distinguishing attributes of entrepreneurship are a willingness to
assume risks; a sense of acquisition or unceasing curiosity; insight into the relationship
between concepts, objectives, needs, and needs satisfaction; sound judgement as to
what is central and peripheral to attaining his objectives; imitative and creativity;
problem-solving ability, ability to marshall resources needed to achieve his objectives
and goals; and the administrative ability toorganise those resources to accomplish his
goals and satisfy his minor needs.
Motivation
Motivation is an indispensable function of management. When man is at work,
he cannot be forced to work like a machine. He is a human being who has his dignity,
self-respect, values, sentiments and aspirations apart from the economic status. Under
such circumstances the efficiency of the enterprise is related not merely to the efficiency
of sophisticated machines installed but more importantly upon the satisfaction and the
spontaneous desire of man to put hi~mind and heart into Jhe work. This spontaneous
urge to in'ifolve in work is not merely related to monetary awards or assignment of
position or the direction to perform the duty or even the fear of punishment but to the
mechanics and system of motivation.
Motivation encompasses complex aspects of human behaviour to which
contribution has been made by sociologists, social anthrapologists, psychologists and
business executives. This concept has its roots in motives within.a person which induce
him to behave in a particular manner. Generally speaking, the concept of motivation
is by and large psychological which "relates to thoseforces operating within the
individual employee or subordinate which impel him to act or not to ~ct in certain
ways" -
"Motivation refers to the way in which urges, drives, desires, aspirations, strivings
or needs direct, control of explain the behaviour of human beings. "
This is a deep-seated definition of Motivation. It includes three things:
(i) The urges, drives, desires, aspirations, strivings or needs of human being
influence human behaviour.
(ii} The factors which influence human behaviour - psychological, sociological,
economic or managerial.
(iii) The efficiency of such behaviour - this may be tested by the resultant action.
Whether this behaviour has directed, controlled or implemented the desired
action.
If the entrepreneur 'feels motivated his behaviour will bring about the desired
action.
Entrepreneurial,Traits and M~tivation 91
,'t ". " ' III! It,.~.,,· . _ .: ".

,
Here.tone reaches the most crucial point
-
in the Regional
-~ - or District Development
Strategy of the underdeveloped regions. The development agency, with all the
institutions concerned, will have to formulate a motivation programme. and by
continuous and ingenious methods, involve people in th-eprocess of development so i
that they acquire new attitudes and confidence to enter into new activities and to show
the propensity of enterprise. Appropriate values will have to be inculcated and risk-
taking ~apacity be cultivated. Unless this aspect is given its due weightage in the ~_
Development Plan, in spite of all the incentives, most of the projects will hardly make -
much progress. Development is the conseque~ce of motivated people.
Motivational factors constitute the inner urge present in an individual which
continuously demands from him to do something new and unique as also to perform
betterth~~ others. The motivational factors again are comprised of three basic elements
- entrepreneurial motivation, personal efficiency and coping capability. The.
achievement motivation is also termed. efficiency motivation. McClella~d and Winter:;:
have made considerable studies and concluded that what motivates a person to do .:
-.
something new or something to seek better is the inner urge which directs him towards -
such ends. This urge also force a person to use the resources efficiently than to be ;~
negligentof it. Also important is the power of motivation which is really the orge to -
have control over others and to direct their course of activities towards the ,end which '
one seeks to attain. These motivational factors induce the person to undertake
entrepreneurial activities which relate to creating a new business where there was none.
Thisalso means to excel the performance in carrying out any activity by striving through
persistent efforts unlike others who do not have sufficient capacity for hard work.
, - ,
What Makes an Entrepreneur?
This is a frequent question. What makes an entrepreneur is the combination of
various factors that have enabled the personality formation right from the childhood
as also the psychological urge that exists intensively in the person.
These psychological processes which lead men to set up their own successful
business enterprises begin in the very early life and have cumulative effect. The
influencesof early childhood and other social roles are determinant factors for the
formation of that personality which motivates an individual towards becorninqan
independent businessman or entrepreneur. \
In the qse of persons who take up jobs, it has always been found that they have'
securedsuccess in the established Organis+tions. These people do not have a rejection
towards the established institutions and neither do they attempt to rebel against the
traditiorjal path to success. On the other hand, an entrepreneur fails to achieve
educatibnal success through the established, organisations and this is because of the
generalrejection of the established organisations at all levels. People who tend to like
securityand not uncertainty get more satisfied by takinq up jobs which are less risk-
oriented and hence are not motivated towards building up their own industnel.,
enterprise. "I ~ ~ _ I

Men who establish new business are men who have' rigl'tt'from the childhood
faceda different set of environment in their family,'school and. other social situations.
I .' r ". r •
92 . Dynamics"~~ Enj~epre.~r"j Develop~ent

Research studies have indicated that successful entrepreneurs identify a crisis before
they venture into new Entrepreneurial activities. Even in their childhood most of them
pad threatening non-supportive and disgusting adult figures who had much say in their
social and economic life. Most of these have a childhood uf impoverishment and strefS.
Economic deprivation also works as a motivational factor towards creating something
on their own and free oneself from the clutches of oppressing forces which attempt
to kill their spirit of individualism. Thus it has been found that creating a successful
new business is not due to an isolated incidence in the life of an individual but it has
been as a result of. learned response to their total social, emotional and economic
environment.

The family plays an important role in developing the personality necessary for
turning into an entrepreneur later in life. In family situations where security and non-
risk bearing activities are encouraged right from childhood, the individual likes to be
more security-oriented rather than attempt on his own in areas where adventures and
uncertainty conditions prevail. Also in families where deep attachments and emotional
relationship are encouraged, it has been seen that the child growing under such
situations tends to takeup activities which are more security-oriented than risk-oriented.
Since in most of the' middle class families attachment and security-oriented activities
are encouraged despite seeking academic excellence, it itself does n~ help the person
to develop ffle urge to be independent and create a framework required for enjoying
autonomy.
As a result of this many bright graduates deviate from placing themselves in open
positions. On the contrary they choose to stay in the established organisations because
they have developed a favourable attitude towards the establishment. On the other
hand, the entrepreneurial personality would rather face the impersonal forces of the
'economy than cope with enter-personal relations of the established organisations. Due
to this characteristic of an entrepreneur, they tend to shift from job to job till they have
finally found a field of activity in which they will ultimately have a say and also enjoy
the happenings of events by their will, determination and efforts.
While people who take up jobs prefer to see success in the traditional and highly
structured roles in the established undertakings, entrepreneurs prefer to have a different
approach toward success and be unique in their own way. They find more satisfaction
in their creative faculties getting an opportunity to express themselves fully rather than
submitting themselves to structured and !fgid forces. The bright graduates may very
often lack creativity and be unable to break through the undifferentiated mask of
circumstance and make something of their own.
The entrepreneurs, on 'the other hand, find such situations extraordinarily
challenging and attempt with determination and persistence to tome out of this web
of oppressing factors, which tend to keep him in the rigid framework. Thus we find
entrepreneurial characteristics' are formed through a combination of various social,
economic and psychological factors, td which the person becomes subjected to right
from childhood .. These factors r~inforce in him to urge to excel others and seek
satisfaction in creating \,,'n his own a new enterprise instead of seeking a security-
Entrepreneur~1 Traits and Motivation 93
----
oriented job. In the absence of these reinforcing .:!!'~mentswhich go into the formation
of the entrepreneurial personality, however successful a person may be in his academic
lifeit does not guarantee-that he would become a successful entrepreneur. Something
more than mere academic excellence is a pre-requisite for becoming an entrepreneur
of success and repute. These requisites are embodied in the various qualities that the
entrepreneur must have basically within himself in order to establish himself a successful
entrepreneur. But many graduates do lack in these qualities.
- Table 7.1
Entrpreneurship: Sources of Supply and Motivation

Author Entrepreneurial Source of Motive Force or

Phenomenon Entrpreneurial TriggeringFactor
Supply
-----------+------------+~.~.-----------~~------------------
1. Schumpeter Individual Extraordinary indi- Innate urge to achieve
viduals success
2. Weber Status Groups Extraordinary indi- Religious beliefs
viduals Calninist ethic
3. McClelland Religiousand so- Individuals with high Child-rearing practices and
cial groups n-achievement, cre- climate
ative
4. Hagen Subordinated Individuals in the soci- 'Status withdrawal' and 'rela-
Groups ety driven by a duty to tive social blockage'
achieve
5. Cochran Individual Society's model, per- 'Social Acceptance' of entre-
sonality determined by preneurial role
its cultural values, role
expectations and sq-
cial sanctions
6. Young Homogenous Relative subgroups Deviant view of the world
(ethnic communities) strengthened' by group soli-
occupational group~, darity
or Politically-oriented
factior.s
7. Kunkel Group Operant conditioning Reinforcing stimuli and ave-
procedures in a soci- rage stimuli
ety
8. Hoselitz Group Culturally marginal Gaining social recognition
groups

Source: V. Lakshmana Rac: Industrial Entrepreneurship in India, pp. 85-86.

Challenge of Motivation
Since new employees and managers will be of a calibre selected with an eye on
the future, they will all be of a high competence level. It will be a challenge to keep
motivatingthem. It is conceivable that organisational structure will have to be looked
intoorder to meet motivational needs of people and "position" them in jobs with the
righttype of responsibility.
 94 Dynamics of Entrepreneurial Development

Introduction of high technology and work groups operating without the traditional
.band of supervisors or inspectors willbecome more common. Such 'semi-autonomous
work groups' willhave to be trained so that they are motivated to take care of equipment
and meet output targets and tougtlQ'uality. standards.
) This will also demand leadership attributes of a high order on the part of people .
manning such. decentralised operations.
V. Lakshmana Rao has aptly summarised the views of various experts on the
sources of entrepreneurial supply and motivation as presented in Table 7.1.
Conclusion
Apart from earning a Iivelihood and/or making profit, the entrepreneur is also
motivated to fulfillhis/her innate urge to achieve success in life, improve his/her social
standing, gaining social recognition, to provide something to society. The motivational
factor vary from place to place, time to time as well as entrepreneur to entrepreneur.
Yet motivation moulds the different entrepreneurial traits. The traits and motivation
are moulded by the socio, economic, political, cultural and psychological environment
and varies from country to country. . '
The study of entrepreneurial traits and motivation is useful in developing a profile
of a successful entrepreneur. It is indeed a positive approach in developing
entrepreneurship and enterprise in the country. Although, the entrepreneurial traits are
complex, the goal of entrepreneur is to build enterprises to earn profit and serve the
society.

• • •
 'The -objecth!ea/m.d at do~d 1M mllJdmlDD J?IOI!uctioIJ. ~
tIJ.tr/.butloD. and DO UDempJoymtlDt. With IDdia ~ ""II popuhd/OII. tIIJ.
CllDDOt be acblewd by bavIDg a big IDdIl6by 0DIy, or cottage I~
oDly." .

CHAPTER 8

GIjIOWTH OF ENTREPRENEURS
"., .
Introduction
Industrialisation results from the interaction of technological change, specialisatiOO
and trade. Good transport, efficient communlcations, entrepreneurship and an
educated labour force help to promote the rapid development of industries. Well-
definedrules reduced the cost of transactions as Specialisation increases and economies
become more complex.
A stable institutional framework speeds up the process of development. ~en
governments seek to improve the working of markets rather than replace them,the
economy generally works better. A rapid and balanced economic development and
expansion of opportunities for employment as well as self-employment Me the basic
objectivesof developmental planning. Economic development is primarily related to
theimpulse of social change reflecting the developmental urge for self-respect, self-help
and self-reliance. Undevelopment or underdevelopment is primarily due to the lack of
such an impulse. - --
The rate of development appears to be directly proportionate to .the intensity of
the social impulse of change, displayed qualitatively in some sections, marking ~
departure from the traditional behaviour and conventional occupational pattern which
may be called social mobility. Where the social impulse has emerged, th~ first hurdle
inthe march of economic progress is overcome. The next task is to see that the impulse -
is sustained, if not quickened. Where it is conspicuously absent, efforts should be
concentrated for its emergence. This demands conscious and massive efforts on the
part of leaders of society in virtually all walks of life. A force must set in, so that new
techniques of production and correspondingly different types of institutions wiDmake
their appearance.
The process of re-structurisation of ecooomy and the society must give a visible
evidence. The society in a country must shed inertia and pulsate with a new vigour
and urge. Self-reliance, enterprise, innovation and attitudinal change are the attributes
of a development-oriented society. These propensities need cultivation, if economic
96 Dyftamlcs of Entrepreneurial Development

growth is to become a reality. Basically, the task is to change the stratified socio-
economic structure in the underdeveloped regions. This can only be achieved if a
change is brought about in social attitudes and behaviour. A developmental mind has
\
to 0:?cultivated in the society of underdeveloped areas, shedding lethargy, apathy and
traditional psychology. Further, a new industrial culture has to emerge in the backward
regions, reflecting the urge and willingness to observe the industrial discipline and
readiness to seek self-employment and gainful employment opportunities.
Role of Entrepreneurs
Entrepreneurs, on the other hand, as Schumpeter and many others have already
pointed out, are distinct from business owners and managers. They are essentially
strategic innovators, seeking profitabi ity with growth. Promoting entrepreneurship, in
that sense, is intrinsically different from promoting small-scale industries.
If small business in the developed countries has received special attention it is
due to innovation and creativity. Studies have shown that a large number of innovations
have come from small, rather than large, business. As these innovative firms entered
the market they made profits and created jobs. In the U.S. Presidents Jimmy Carter
and Gerald Ford emphasised that small business created 60 per cent of new jobs there.
And this employment generation was due to its better financial performance. Similarly,
the Bolton Committee, 1971, and the Wilson Committee, 1979, also concluded that
the small business in the U.K. had higher profitability than large business.
The studies on entrepreneurship also point out that, "most' of the risk in
entrepreneurial management lies not in misperception of opportunity, but in try~ng
to pursue opportunity without adequate resources. One of the fundamental errors of
large corporations, on the other hand, is overcommitrnent of resources."
Growth of Entrepreneurs
In terms of benefiting the people, the. development of small and medium-scale
industries and businesses offered many advantages. Most important perhaps, amid the
mounting unemployment, are the small and medium enterprises which generate more
jobs and often use labour-intensive methods of production. Industries and businesses
of smaller size also work towards promoting better income distribution and
development of entrepreneurship in addition to broader benefits as rural industrialisation
and increased export earnings.
One of the most potentially profitable areas of human resources development for
small and medium-sized enterprises is the .trainingof entrepreneurs and managers. Such
training programmes should be as well rounded as possible, covering not only the basics
of business, technology and so forth but also helping the trainees to identify their
aptitudes, motivating them, encouraging innovative thinking and helping to develop
personalities and attuudes geared for success. Indeed, small industries and business are
ideally suited for capitalising on entrepreneurial SkI Is, initiative and talent and thus
assisting in building a dynamic private sector in developing countries.
The growth of entrepreneurship in the post-planning period has been significant.
For example, between 1960 and 1995 the number of private companies went up from
26,000 to nearly 3,25,200. It will be seen that the maximum increase in the number
-Growthof Entrepreneurs 97

of factories was in the case of industries which by virtue of their being in the small/
medium-scale secter are less regulated than others. The increase in the number of
factoriesin industries like tobacco and related products, wood and wood products,
rubber and rubbc ~products, jeweUery, photographic and optical goods, watches and
clothes,medical, surgical and scientific equipments, sports equipments, cold storage,
etc. was more than forty times during the period 1959-1995.
The growth in the number of small entrepreneurs has been encouraging. The
small-scalesector has grown in volume from 16,000 units in 1950 to over 26lakh units
by the end of 1995. The range of items produced by the small-scale sector ranges from
consumer good to ni~1hprecision items.
Not only has the number of entrepreneurs grown over a period of time but also
the scope of entrepreneurship is ge1ting broad-based. Earlier for a large proportion of
firmsin India, the basic un it of entrepi eneurship was the extended family. This tendency
is now getting diluted. A study conducted a few years back by the Economic and
ScientificResearch Foun ::lation (ESRi= indicates that out of a sample of entrepreneurs
studied by them, around 1/5 0; them were managers and engineers before they turned
entrepreneurs. It was found that around 57 per cent of the new entrepreneurs in starting
small-scale units were motivated by the experience that they had gained from the
previous employment. Entrepreneurship in these cases was not necessarily in-born but
largelyacquired.
Though impressive in certain ways, the development accomplished so far, as
indicated before, is inadequate and far from satisfactory when set against the needs
as also the existing vast potential. In fact, according to Prof. Herbert Giersh, a noted
economist, there is no shortage of entr =preneurial talent anywhere in the world, but
the actual numbers depend on the demand conditions, i.e. the demand permitted,
induced or actively provoked by the socio-economic structure and the politico-
economic environment. According to him, a mixed capitalistic economy such as ours
offersscope for development of entrepreneurial talent not only in the private sector
but also in the government sector The main disadvantage is that bureaucracy tends
to limit the scope for entrepreneurial activity in the private sector.
Prospects
With the buoyancy achieved in the industrial production as evidenced by the
increase in the rate of growth during the current Plan period, expectations of better
capacity utilisation and a favourable investment climate reflected in the response of
the capital market to the various issues, the prospects of the industrial sector during
the Eighth Plan period are quite encouraging. The availability of sufficient investable
resources, development of financial services and the optimism engendered in the
corporate sector and also in the private investors at large would help the industrial sector
to move to a higher growth path.
A combination of fiscal and credit policy measures, growth centred programmes
recently launched for industrial development, rationalisation of import duty structure
on capital goods and measures of technology upgradation and excise duty relief for
weak but potentially viable sick units will give further fillip to the country's industrial
 98 Dynamics of Entrepreneurial Developmeat

development. The Government of India has signed Memoranda of Understanding with

important public sector undertaking so as to ensure that the performance targets
envisaged are achieved.
Promotion of savings and industrial investment through new saving schemes,
creation of new intermediaries and extension of fiscal concession were important
measures incorporated in the Budget of 1995-96. Removal of Section 115(1) of the
Income-tax Act and reduction in corporate tax rate are expected to have a favourable
impact on corporate profitability. Withdrawal of investment allowance is expected to
contribute to a more efficient use of capital. Policy measures were announced in May
1990 to further stimulate industrial investment. With these developments and looking
to investment proposals in the pipeline, institutions seemed optimistic about the growth
prospects. While the pressure on balance of payments continues to cause concern, the
economy can be expected to sustain the tempo of growth in the coming year in the
context of buoyancy in the key sectors. With this optimism, reflected in their pipeline
cases as well, the financial institutions look forward to yet another year of growth.
Conclusion
As industrialisation is important, organisations and society must develop
entrepreneurs, intrapreneurs, managers and skilled workers. Their skills should be
sharpened as they live in a competitive world. It is important to develop sound
institutions to sustain and broad-base entrepreneurship. The individual's ability to
perceive opportunities inherent in change and succeed is founded on the knowledge
of products and markets. The entrepreneur has to have a better idea of a product or
service and/or a better way to deliver that product or service to a paying customer.
If we wish to respond to the new economic and technological environment, we should
recast our educational system, broad-base the institutional infrastructure and provide
the much-needed support through a single window in each district. taluka or even a
town with development potential for Entrepreneurship is more than a word, it is a
mission. Rapid industrialisation needs full support from all concerned to bring about
economic progress.
Entrepreneurship has opened avenues of great scope in the Indian economy. Our
national economy is most suited to the growth of small business enterprise. Small
business units offer a more convenient means of nurturing and developing
entrepreneurship by providing the means of entry into business for new entrepreneurial
talents. It is a breeding ground for the first generation entrepreneurs.
Small business units provide enormous opportunities to the entrepreneurs in
different sectors of the national economy. An entrepreneur can start a new venture in
the industrial, agricultural or service sector. Small business sector is by far, the most
important sector of the national economy which accounts for about 55 per cent of the
total industry production in the country. This sector provided enormous opportunities
to the new entrepreneurs.
It holds a key to success in the prevailing socio-economic environment.
Small-scale industries are labour-intensive and can play an important role in
solving the problem of unemployment. These industries provide industrial experience
and serve as a training ground for a large number of entrepreneurs.
 "Excellence d0e6n'l happen mlTllculou6ly but .dna- /rom PlIce ..tt/ng
level. of pertlonal eHectlJlfUle66and efJIclency. Gr..1 b".ln-., goJIWI'IJ-
menl IIIId non-proDI orgllll16lltion. owe their tp'Wlltneu 10 a Ie"
I
Individual. who ma.lered leltdenhlp .ldll. IIIId PlIBHd tho. _III. on
to othen. " - John GMdn••

; CHAPTER 9

NATURE AND IMPORTANCE OF

ENTREPRENEURS

Introduction
The world is rapidly changing; we should be able to change our attitudes and
approaches to prevent a country of India's size and potential to exist on the periphery
ofthe world's economy. The process of development includes creation of appropriate
infrastructure and setting up and management of public utilities. Non-conventional
energy sources have to be developed on a commercial scale. Similarly, application of
modem scientific techniques in agriculture and horticulture has become imperative for
providing a sound base for a more rapid growth of employment and incomes. There
isalso a need for rapid growth of distributed industries in a multi-directional way. Apart
fromland, labour and capital, there is greater need for entrepreneurs to strive for growth
on an ongoing basis. In this context an attempt has been made in this chapter to analyse
the nature and importance of entrepreneurs.
Entrepreneurial Qualities
The entrepreneurial qualities are to some extent innate. But not all of them are
entirely innate. Some can be enhanced by training, or simply by experience. For
example, analytical ability and computational skill can be enhanced by education at
school and university, while practical knowledge and foresight skills can be enhanced
by the general experience of everyday life. Entrepreneurial careers will be strongly
influenced by the desire to enhance qualities which are scarce, yet difficult to obtain
through delegation because of the problems involved in screening for them. Of the two
indispensable qualities of the entrepreneur, imagination is almost entirely innate, while
foresight, can be enhanced by a varied experience. Imagination and foresight are the
scarce qualities which are difficult to analyse and quantify. Delegation skill and
organisation skill, though not essential, are highly desirable whenever large-scale
decision-making is involved. These are qualities which can be enhanced through
experience.
100 Dynamics of Entrepreneurial Developmeitt

Entrepreneurial Functions
A successful entrepreneur recognises the commercial potential of a product or
service, design operating policies in marketing, production, product development and
the organisational structure. He carries out the whole set of activities of the business.
He has a high capacity for taking calculated risks and has faith in his own capabilities.
Accordfng to some economists, the functions of an entrepreneur incorporate co-·
ordination of the business management of the enterprise, risk-taking, controlling the
enterprise, innovation for change, motivation and other related activities. In reality, an
entrepreneur has to carry out a combination of these in keeping with time and
environment. Truly, he has to consider new ideas, demands and exploit the
opportunities, and thereby contribute to technical progress. He is thus a nucleus of high
growth of the enterprise.
An entrepreneur is expected to perform the following functions:
1. Assumption of Risk: The entrepreneur assumes all possible risks of business.
which emerges due to the possibility of changes in the tastes of consumers, techniques
of production and new inventions. Such risks are not insurable. If they meterialise, the
entrepreneur has to bear the loss himself. Thus, risk-bearing or uncertainty-bearing still
remains the most important function of an entrepreneur which he tries to reduce by
his initiative, skill and good judgment.
2. Business Decisions: The entrepreneur has to-decide the nature and type of
goods to be produced. He enters the particular industry which offers him the best
prospects and produces whatever commodities he thinks will pay him the most and
employs those methods of production which seem to him the most profitable. He effects
suitable changes in the size of the business, its location, techniques of production and
does everything that is needed for the development of his business.
3. Managerial Functions: The entrepreneur performs the managerial function
though they are different from entrepreneurial functions. He formulates production
plans, sees to the finance, deals with purchase of raw materials, provides production .
facilities, organises sales including management. In a large establishment, these
management functions are delegated to the paid managerial personnel.
The entrepreneurial functions can be performed by different categories of people
under different economic systems. In principle, the entrepreneur could be a planner
in a socialist economy. or even a priest' or king in a traditional society. In practice,
entrepreneurship is closely identified with private enterprise in a market economy.
An entrepreneur performs many useful functions. He undertakes a venture,
assumes risk and earns profit. He is the man having a strong motivation to achieve
success. He is self-confident in his entrepreneurial abilities. He exploits opportunities
wherever and whenever they arise.
The entrepreneur can identify opportunities to start a business either 'as a
manufacturer or as a distributor, for entrepreneurship exists in every field of economic
endeadvour. Manufacturing activities require a relatively high capital investment and
a greater degree of entrepreneurial abilities than distribution activities. Entrepreneurship
 Nature and Importance of Entreprenews 101

has also been developed in the trading sector. Britain, for example, has developed
trading entrepreneurship while Germany and Japan have developed industrial
entrepreneurship. A manufacturing entrepreneur demonstrates his entrepreneurial
talents by bringing out new products while a trading entrepreneur performs his
entrepreneurial functions in creating demand for the business in which he deals.

DECIDING PLANNING
THE PROJECT PRODUCTION

R1SK- MANAGING
TAKING ENTERPRISE

INNOVATION ---' EARNING PROFITS

Fig. 9.1 Entrepreneurial Functions

Decision-maker
Arther H. Cole described an entrepreneur as a decision-maker and attributed the
followingfunctions to him: .
1. The determination of those objective; of the enterprise and the change C C

those objectives as conditions rr quired or made advantageous;

2. The development of errorqenisatto.i, including efficient relations with
subordinates and all employees;
3. Securing adequate financial resources, and mz.intaininq good relations with
the existing and potential investors; .
4. The requisition of efficient technological equipment and the revision of it as
new machinery appeared;
5. The development of a market for the products and the devising of new
products to meet or anticipate consumer's demand; and
6. The maintenance of good relations with public authorities and with the
society at large.
Modem writers on this subject have outlined the following three broad functions
of an entrepreneur:
1. Innovation,
2. Risk-taking, and
3. Organisation and management of business so as to have leadership and
control over it.
Innovation means "doing new things or the doing of things that are already being_
done in a new way." It includes new processes of production, introduction of new
products, cr~ation of new markets, discovery of a new and better form of industrial
organisation. Risk-bearing means making provisions for capital in order to enable the
entrepreneur'is to reduce uncertainty in his plan of investment and expansion of the
"enterprise. 'Thus innovations may occur in the following forms: \ --'
 102 Dynamics of Entrepreneurial Development

1. Introduction of a new good, that is, one which consumers are not yet familiar
with or of a new quality of a good.
2. Introduction of a new method of production, that is one not yet tested by
experience in the concerned unit of manufacture, which needs to be founded
upon a discovery scientifically new and which can also exist in a new way
,..of handling a community commercially.
3. Opening of a new market, that is, a market into which the particular branch
of manufacture of the country in question has not previously entered,
irrespective of whether or not this market has existed before.
4. Turn into good account a new source of supply of raw material or half-
manufactured goods, irrespective of whether this source already exists or
whether it has first to be created.
5. Carrying out of the new organisation of any industry, like the creation of a
monopoly position (for example, through trustification) or the breaking of a
monopoly position.
Before coming to other functions, it is necessary to clarify how innovation differs
from the two other notions with which it is sometimes confused: research and invention.
The aim of research is to produce knowledge, that of innovation to produce
objects which are practical and can be sold. Since it is inspired by different objectives,
innovation can be completely independent of research. It is not based on the same
skills. Even the relevant information required on markets, on patents and on
management has little to do with research. Innovation may be based on the application
of knowledge produced by research but it may also be purely empirical: indeed practice
often precedes theory and innovation may open the way to res_earch(the steam engine
for thermodynamics, or the computer for programming). Moreover, many innovations
are not based on research but on ingenuous combinations of existing materials and
components.
Invention too is different from innovation. An invention becomes an innovation
only when it is embodied in a product which can be successfully marketed. History
abounds in examples of bankrupt inventors whose brainchild projects took hold years
later. The innovator, on the other hand, is the person who comes on the scene at the
right moment to find the missing elements in an invention which will make it eminently
marketable. Thus it is always difficult to identify the true innovator. Several individuals
or organisations may simultaneously claim the authorship of ideas or inventions which
have given rise to innovation.'
Innovation cannot be confined to a simplistic scheme. Facts show that small and
medium firms, at least in some countries, can make a very significant contribution to
technical prosperity. For instance, it is es~mated that firms of less than 1000 workers '
and individual inventors were responsible. for more than 40 per cent of the major
innovations appearing in the United States irtthe early 1970s. This innovation potential
can be explained by the advantages enjoyed by small firms over large ones.
It is now well recognised that entrepreneurs can be rooted out through
• appropriately designed entrepreneurship development .programmes which envisages
 i
Nature and Importance of EntrepreneurS 103

theapproach: developing achievement motivation and sharpening of entrepreneurial

traits,four strategies - project planning and development and guidance on industrial
opportunities, incentives and facilities and rules and regulations, and developing
managerialand operating capabilities. Various techniques and approaches have been
developedand adopted to achieve these objectives, keeping in view the target-groups
and/ortarget areas. The structuring of the programmes and training methodology also
necessitateconsideration of the specific target-groups and target areas. Methodology
forselectionof the prospective entrepreneurs as well as support services after training
have a significant impact on the success of the entrepreneurs' development
programmes.
Entrepreneur vs. Entrepreneurship
"The term entrepreneur" is often used interchangeably with "entrepreneurship."
But,conceptually, they are different, yet they are just like the two sides of a coin. Their
differencesare as follows:

Entrepreneur Entrepreneurship

Refers to a Person Refers to a process

VisuaJiser Vision
Creator Creation
Organiser - Organisation .
Innovator Innovation
! Technician Technology
Initiator Initiative
Decision-maker Decision
Planner Planning
Leader Leadership
Motivator Motivation
Programmer Action
Risk-taker Risk-taking
Communicator Communication
Administrator Administration

Entrepreneurship management is basically concerned with the development and

co-ordinationof entrepreneurial functions. In a way, entrepreneur precedes entrepre-
neurship.
Experience shows that entrepreneurship as an economic function is not a single:
Pointbut rather a range of behaviour. There are six critical dimensions that distinguishi
[entrepreneurialbehaviour from more administratively-oriented behaviour: (1) strategic
orientation; (2) commitment to opportunity; (3) the resource commitment process;
(4) the concept of control over resources; (5) .the concept of management; and
(6)compensation policy.
104 Dynamics of Entrepreneurial Developmt

Desired' future state

involves growth or change
Yes No
Yes Entrepreneur Satisfied
manager
Self-perceived
wwer to
achieve goal Frustrated
No potential Bureaucratic
entrepreneur functionary
-
Fig. 9.2 Manager's Opportunity Matrix
Opportunity Matrix
A matrix defining entrepreneurship is shown in Fig 9.2. One-can see how t
present position influences whether one is entrepreneurial or not. It stands clear tl:
particular skills,talents, and attitudes towards risk influence the perception as to wheth
an outcome is feasible. Training, knowledge, and self-confidence contribute to SUi
perceptions.
The importance of this figure cannot be overemphasized since individuals pia
themselves in their particular box for rational. reasons relating to their own live
however, for the firms desiring to build the entrepreneurial spirit, action is require

Entrepreneurial Decision
Entrepreneurial decisions occur despite recession, inflation, high interest rate
lack of infrastructure, economic uncertainty etc. Each of these derisions is a person
human process, which although unique, has some common characteristics. T~
impulsive motive to change his/her life style and create something new and an inm
urge to do something worthy are the forces behind these decisions. At times, perhat
even more stimulation for change comes from a negative force - disruption. At time
the available opportunities force a decision on individuals to take up entrepreneurs
work. Like all processes, it entails movement from something non-existent to somethin
new.
What causes this change in the work environment of disruption to result in a ne
company being formed instead of something else? The decision to start of ne
company occurs when an individual perceives that it is both desirable and possibk
The perception that starting a I')eW company is desirable results from a
individual's culture, sub-culture, teachers, family, and peers. A culture that values a
individual who successfully creates a new business will spawn more compan
formations than one that does not. For example, India's economic scene places a hig
value on being your own boss, individual opportunity, being a success, and makin
money - all aspects of entrepreneurship. What is more, many different sub-culture
that shape value system are operating within a cultural framework which SUPPOI
and even promote entrepreneurship. '. \
 Natureand Importance of Entrepreneurs 105
; if; q' ,~,'- .../....

!,--------1,1 MEETING
TEAM '1-------.
I l
, I ISSUES I , TEAM PROBLEM

, • Identify • Select Problem

• Clarify • Apply Problem Solving
, • Prioritize • Techniques
'. Document I • Develop Solution
• Assign Actio~ • Present to Management
• Unresolvable Issues • Keep Status of Issue On
• To Bridge Team' • Action Register

~ BRIDGE TEAM I
• Identify Resdurces J '

• Assign Action
• Resolve Issue
• Communicate to Team Leader-

Fig. 9.3 Team Process

Change from present life style From new enterprise

Work environment 1·.•4-- ..••

~I Desirable
Disruption 1. Cultural
2. Subcultural
3. Family
4. Teachers
5. Peers
Possible
1. Government
2. Background
I'
3. Marketing
4. Financing
5. Role Models
Fig. 9.4 Decision for a Potential Entrepreneur

Conclusion
Entrepreneurs play an important role in the development of society. For example,
the use of Jeans in America has created the demand for it throughout the world.
SimilarlyCoca Cola has been accepted as a social drink. The introduction of the
televisionhas provided the society a means of irifo~ation :'~d entert~inment. The
societyhas accepted the innovations of such entrepreneurs as Gillet, Wnght Brothers,
and Henry Ford. The inventions of thes~ great entrepreneurs of the history has
revolutionised the life style of people in, the soCieW, " , , '\ ',i '
" Modem business studies have a distinct e·Jit~ep~ehe~ric~J.aisdiPIirid,)ITheapproach
to the study of entrepreneurship is rp~lti~qi$ciplinatY..1tli~~ih~ on such' areas, as
106 D,namlcsof Entrepreneqrlal
DewioplMllt
.iI r, • , "J'
demography, economic anthropology, business history, politics, sociology, psychology,
marketing and finance. That is why entrepreneurship development becomes an integral
part of the overall economic, social and industrial development of a country . This is
,what makes the identification and management of entrepreneurial functions a highly
complex exercise.
Thus entrepreneurship, the de facto barometer of overall economic, social and
industrial growth has brought revolutionary changes in the society. It is the sine quo
non of a nation's progress. Which has facilitated large-scale production and distribution.
It has widened the area and scope of the marketing of goods and services. Perhaps
it is for these reasons that the s~a11 business sector has been given priority in our ,
national development programmes for entrepreneurship flourishes when the size of
business rernains relatively small and viable.
 "We have to Industrlallse our country and Introduce new technique. boill
In Industry and In agriculture. We can do It, In a way, by buying machine. .
and technical experience from' abroad and asking the experf6 to put up
the machines and work them here. Tbis has been the nonnal method.
This Is all right In the beginning 01 a process but II we WIInt to do H
steadily, we have to do It ourselves. We have to build up the skills IIDII
we have to build up the machines here. ,.
- Jawahar/.I NeJuu

CHAPTER 10

ENTREPRENEUR VS PROFESSIONAL
MANAGERS

Introduction
Entrepreneurs and professional managers are the two sides of the coin. Their
individual itineraries will, make the difference between success and failure for the
enterprise. An effective entrepreneurial strategy should be an integral part of an
enterprise's competitive positioning. The progressive development in the size of •
business and the separation of ownership and management in enterprises has made
management a distinct profession, Although both strive to achieve the similar goals they ~
are said to distinguish themselves in varied measures.
According to the Sachar Committee on Company Law "A professional manager
is an individual who (i) belongs to the profession of law, accountancy, medicine,
engineering or architecture, or (ii) is a member of a recognised professional body or
institutionalbody exercising supervisory jurisdiction over its members, off/iiJ is a holder
of a degree or diploma in management from any recognised university and possesses
not less than five years' experience in an executive capacity in a company, corporation
or in the government"; or possesses minimum of ten years' experience in the same
capacity.and in the same institutions mentioned in the third category.
Aprofessional manager is one who specialises in the work of planning, organ ising,
leading and controlling the efforts of others by the systematic used of classified
knowledge and principles. He subscribes to the standards of practice and code of ethics
established b'y a'recognised body. To be a professional manager he should (i) have
an insight of his job requirements; (ii) carry out continuous uPdating of his learning
to fulfilhis'job requirements; (iii) have a performance-oriented relationship with his
subordinates, ~uper-ordina~ft -cOlleaguesbased on mutual respect to facilitate team
wo~kfor collepve coatribution tp.the organisation; (iv) have a relationship based on
long-term m~tUc?l.be~r6t '~fpproac~ ,~~th fustomers, suppliers and other members of
,tv;
th~'l?':l~ljc;M,d "naJe,' ~QOl~~nicatioh with colleagues to improve the standard
contributionM~'!~~ J?f~g~' ~I,~ menagerial profession. '
108 Dynamics of En.~e~I~neral'.Develo~m'ent

Professional Manage~ent ,.
The progressive development in the size of business and ' the separation of
ownership and management in the corporate enterprises have contributed to the
emergence of management as a distinct profession. A management can be professional
not by hiring professional managers but by adopting the style of professional
management. Professional management organises managerial functions by setting
long-term objectives, formulating policies and strategies, developing formal commu-
nication network and evaluation system to deal with the emergence of business
problems.
The characteristics of professional management are as follows:
Body of Knowledge: Management theory has a philosophy of its own. It is
based on systematic and scientific studies. Precisely, the management of knowledge
is the passport to enter the world of entrepreneurship.
Management Tools: Tools of management such as accounting, business law,
psychology, statistics and data processing ave been developed to enhance the
practical utility of the science of management.
Specialisation: There is a growing tendency to select and appoint highly
qualified, trained and experienced persons to manage the business in each functional
area of management. This has created greater demand for professionals.
Separate Discipline: Management studies in many universities and institutions
of higher learning are recognised as a separate discipline. Seminars, special courses,
and training programmes have become essential in management areas like export
management, personnel management, production management, marketing manage-
ment, financial management, etc.
Code of Conduct: Business management is regarded as a social institution. It
has social responsibilities towards customers, employees and the society on the whole.
Consumer-oriented marketing concept is an important corporate code of conduct.
Pressure of consumerism, trade unionism, public opinion and legislation are definitely
inducing the management to evolve a code of ethics for consumer satisfactions and
holding a major market share.
Professional Association: In our country too, business management associa-
tions have been formed. They mainly aim at spreading the ethics of business
management and build up a sound public image of the managerial profession.
A professional manager is required to possess specific management knowledge
relating to (a) Technical processes, products, materials, equipment and procedures;
(b) Economic knowledge about the basic objective of the entrepreneurs and its position
in the economlc and social system within which it is operating; (c) Human knowledge
about employee motivation, moral and delegation of authority; and (d) Administrative
knowledge about application and analysis of data. This will facilitate him to .deal with
various problems of the organisation in an effective manner.
A person can become a professional manager by the acquisition of knowledge
through formal education. An owner-manager can achieve success due to his personal
and cultural traits. Many 'greal entrepreneurs are self-made, for they, were not
handicapped by their lack of formal education but came out as'successful entrepreneurs
 Entrepreneur vs Professional Managers 109

due to their skillarid intelligence. One Can easily identify such an entrepreneur manager
in any profession, may it be bidi or agarbatti manufacturing, polishing or grinding,'
retailing or wholesaling.
MANAGERS AND ENTREPRENEURS
Both managers and entrepreneurs are answerable for producing results. The
resultsare, of course, different. In their respective result areas, the buck stops with them.
While they can delegate, they are finally accountable. .
Both have to produce results through people working with them though they deal
withdifferent sets of people. They are not effective in the long run, if they are loners.
Both are decision-makers but the decisions are different as their tasks vary.
Both have to operate under constraints which are understandably different.
To be effective in their respective roles, both have to follow sound principles of
management like planning, staffing, delegation and control. The focus of these
management tools may vary depending upon the ultimate purpose.
Table 10.1 summarises the similarities, focusing on the different perspective
within e<;tchsimilarity.
Table 10.1
SIMILARITIES BElWEEN MANAGERS AND ENTREPRENEURS
Differing Focus
Areas of Similarity
Managers Entrepreneurs

To produce results Results of today, this month, this Results of tomorrow, next year and
year. Short-term and medium- coming five year's. Long-term and
\
\ term. very long-term.
\

Toproduce results Have usually to handle people Have to deal with people who can'
through people oriented to day-to-day conceptualise with aggregate
management of nitty-grity and pespectives.
nuts and bolts type - Men of - Strategists.
details.

To take decisions Operational and administrative Mostly strategic decisions, involving

decisions, which have a bearing growth through expansion,
on short-term and medium-term diversification, take-overs and
'results. mergers.

To co-operate under constraints The constraints are usually The constraints are usually
organisational, l.e., those within environmental which lie outside an
an organisation like machine organisation like the policy of
capacity, labour productivity, financial institutions, import policy,
routing and scheduling, licensing policy, infrastructural
information availability, financial constraints etc.
limitations etc.

To follow sound principles of The principles are-more oriented The principles are with reference to
management towards internal administration macro-social aspects like social
and control like delegation, responsibility, equal opportunity,
accountability, responsibility , employment, ethical advertisement
planning, budgeting, reporting practices, adherence to government
and information system. policies, etc.
110 Dynamics of Entrepreneurial Development

A successful organisation needs both entrepreneurship and management. The

entrepreneurial role may be played by the Chief Executive and his team of top-level
executives, the managerial role by the middle-level and joint-level executives.

A Management Tool
The efficiency of professional management lies in the managerial approach which
does not suffer from dogmatic, ideological and political trappings. It is an approach
which trackles the problem as a 'whole' and not in 'fractions.'
The professional manager brings into operation planning, organising, staffing,
motivating, controlling and coordinating the work of technocrats and professional
aspects to achieve pre-determined goals. The professional manager must possess a
desire to achieve, to expand, to build and to grow. His goal should be to produce the
best results in the shortest time and at least cost. The manager, who has had to benefit
of management education and has exposed to the managerial tools and techniques
of achieving the profit-cum-growth, will be in a position to deliver the goods to in
developing economy like ours.
o It is characteristic of an established profession that its members accept the
obligation to contribute to the advancement of standards and to the education of the
future aspirants. The more eminent the member, the more readily he recognises the
obligation. It is quite likely that his personal contribution to teaching may be small but
it willbe of high quality. This is the task facing the professional managers of the future.

Illustrations
Professional managers are the forerunners in the corporate sector. Two brief
profiles reflect on the varied aspects of these achievers and doers. They are young,
energetic, educated and possess the much needed drive.
Arvind Vijh, 29, is the group manager for chemicals and allied products at Birla
3M in Bangalore, a company he joined last year because he was taken up by the
American multinational's.plans to "manufacture a range of products which will make
it a force/to reckon with soon." An MBA from 11M,Calcutta, Vijh has had a rapid rise
since he began his career at the Indian Organic Chemicals in Mumbai as a management
trainee. After a six-month stint there, he moved to the ICI,first as a management trainee
and then as sales manager in charge of speciality chemicals. During his three and a
half years with the chemical and fertiliser giant, he claims to have first picked up the
ropes on "how to get into new business" -:- and this is what he intends doing
successfully in Birla 3M.
Her promotion six months ago has Arti Luniya one of the youngest branch
o

managers in the Steel Authority of India Ltd. (SAIL). "Creating a demand for steel,"
is how the 33-year old describes her job at the Howrah branch which sells about 10,000
tonnes of steel per month. Handling up to 50 customers a day, her work includes
distribution, planning and outdoing competitors .

.t
 EDtrepNaeur ViI. Pr~eulona1 Managen - III

Obtaining a degree in economies, she did a post.,graduate course in international

relations from Jawaharlal Nehru University, New Delhi. SAIL has been her first and
only employer. She joined SAIL as a management trainee and underwent rigorous
training in the various departments of the steel giant. "I do feel a sense of pride in being
the first lady branch manager," she admits .
.•he entrepreneur may be a manager but a paid manager cannot acquire the
position of an entrepreneur .
An entrepreneur has great motivation to manage his business successfully. He
iskeen towards developing business through innovation and is satisfied when his efforts
gi\{ehim positive results. He is the investor, risk-bearer, manager and controller. The
entrepreneur may appoint a manager and delegate some of his functions. However,
manager even after performing his assigned duties cannot substitute the entrepreneur.
The entrepreneur lays down a broad policy for business, assumes risk and makes
the business a concern. The main factors which distinguish an entrepreneur from a
professional manager as shown below:
Table 10.1
DISTINCTIVE FEATURES OF ENlREPRENEURS AND
PROFESSIONAL MANAGER
Entrepreneur Professional Manager

1. Perception of an/opportunity 1. Setting of objectives

2. Risk-taking 2. Policy formulation
3. TacticalPlanning 3. Strategic Planning
4. Interpersonalcommunication 4. Formal communication
5. Negotiating 5. Organising
6. Trouble-shooting 6. Motivating
7. Makingit a growing concern 7. Controlling
8. Innovator 8. Administrator
9. Motivator 9. Skilled, knowledgeable
10. Determined to. Cqnfident
11. Idealist 11. Specialist-
12. Committed 12. Loyal
13. Visionary 13. Planner
14. Planner 14. Implementer
\

Entrepreneur V8 Manqer: The entrepreneur is a person who is motivated to

satisfya 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 build up the process, but
equally important task for him is to manage the business. He performs entrepreneurial
vis-a-vismanagerial 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
perceivesand exploits opportunity, and the subsequent steps necessary for organisation
are pertinent, to management.
 112 Dynamics of EntrePreneurial Develop_t '
• ::.<...
The entrepreneur differs from the professional manager in that he und rtakes 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 thJ
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 10.2.
Table 10.2
DISTINCTIVE FEAnJRES OF TRADITIONAL MANAGERS AND
THE ENTREPRENEUR

Managers Entrepreneur

Primary Motives Want promotion and traditional corpo- Wants freedom, goal-oriented,
rate rewards. Power-motivated. self-reliant, and self-motivated.

Time Orientation Respond to quotas and Budgets, weekly, End goals of 5-10-Year.growth
monthly, quarterly, annual planning of business in view as guides.
horizons, the next promtion or transfer. : Takes action now to move the
next step along way.

Action Delegate action. Supervising and re- Gets hands dirty. May upset
porting take most of energy. employees by suddenly doing
their work.

Skills Professional training. Often business- Knows business intimately. More

school trained. Abstract analytical tools, business acumen than manage-
people-management, and political skills. rial or political skill. Often tech-
nically trained if in technical
business. May have former P &
L responsibility in corporation .

Courage and Sees others in charge of his or her .self-confident, optimistic, cou-
Destiny destiny. Can be forceful and ambitious, rageous.
but may be fearful of others' ability in
case of optimism.

Attention Primarily on events inside corporation. Primarily on technology· and

market place.

Risk Careful Uke moderate risk. Invests.

heavily, but expects to succeed.

Market Research Has market studies done to discover Creates needs. Creates products
needs and guide product that often can't be tested with
conceptualisation. market research - potential
customers don't yet understand
them. Talks to customers and
forms own ODinions.
Entrepreneur w. Prolealonal MlUiagerw 113
-
siatus Cares about status Symbols Happy sitting on an orange crate
(comer office, etc.) if job is getting done:

Failure and Strives to avoid mistakes and surprises. Deals with mistakes and failures
Mistakes Postpones recognising failure. as learning experiences.

Decisions Agrees with those in power. Delays Follows private vision. Decisive
t decision
until he gets a feel of what and action-oriented.
bosses want.

u.?lo they Serve Please others. Pleases self and customers.

Attitude TOWlUd Sees system as nurturing and protec- May rapidly advance in a sys-
thesjtstem tive, seeks position within it. tern, when frustrated, reject the
system and form his or her own.
-
Problem-soMng Works out problems within the system. Escapes problems in large and
Style formal structures by leaving and
starting over his own.
-
Family History Family memberS worked for large Entrepreneurial small-business,
organisations. professional, or agricultural back-
ground.

Relationship with Independent of mother, good relations Absent father or poor relations
Parents with father, but slightly dependent. with father.

Socio-eronomic Middle-class background. Lower-class background in some

Background early studies, middle-class in
more recent ones.

EduCIJtionaJ Highly educated. Less well educated in earlier

Level studies, some graduate work but
not Ph. U. in later ones.
-
Relationship with Hierarchy as basic relationship. Transactions and deal making
Others as basic relationship.

Entrepreneur and Enterprises

Entrepreneur is the fourth factor of enterprise. According to Noah Webster,
"entrepreneur is one who assumes the risk and management of business."

ENTREPRENEUR

Fig. 10. 'I.Four Facto •• of an Enterprise

 114 Dynamics of Entrepreneurlal Development

The enterprise is the basic unit of an economic organisation. It produces goods

and services worth more than the resources used. Thus, any effort for it to bear fruit
ultimately affect directly or indirectly individual enterprise. Enterprise is an undertaking
which involves activity, courage, and energy. It involves the willingness to assume risks
and decision making, in undertaking an economic activity. It also involves innovation.
Thus, entrepreneur and enterprise are inter-linked, enterprise being the offshoot of an
~ntrepreneur. Its success is dependent on the entrepreneur. Peter Drucker has observed,
"Innovation is the specific tool of entrepreneurs, the means by which' they exploit
change as an opportunity for a different business or a different service. It is capable
of being practised."
06apreneurs
Of late, a new breed of corporate entrepreneurs has come to the fore in large
organisations. They are called "intrapreneurs."@ey are entrepreneurs who catch hold
of a new idea for a product, service, or process and work to bring this idea to fruition
within the framework of the Organisation~fu.trapreneurs with their innovations and
dedicated effort are perceived as a valuabfe' asset by the organisation, inspiring oth~
~ serves as a champion to others in the Organisation) In America, a number of
intrapreneurs are leaving their jobs to start their own ventures. Many such intrapreneurs
have become exceedingly successful in their new ventures and, what is more, they are
,causing a threat to the companies they left a few years ago.
Entrepreneur vs. Administrator
Management in a small business organisation is performed quite differently from
the management process in large companies. In fact, the role of entrepreneurs is quite
different from the role of professional administrators in large organisations. A person
in effective control of a business unit underlines the adaptive nature of managerial
processes in a small firm. Entrepreneurship has connotations of enterprise, opportu-
nism, individuality, in contrast to the connotations of the terms "manager" and
"administration", which are associated with notions of organisation, planning,
professionalism, rationality and predictive management processes.
The administrator in a large firm is primarily concerned with those activities
relevant to predictive management processes, that is, with activities related to prediction
and control; On the other hand, the owner-manager of a small business organisation
needs primarily to perform activities relevant to adaptive management process,
activities that enable him to exploit the advantages he has in being a small enterprise,
An entrepreneur puts emphasis on the entrepreneurial activities of management
process, so he would hold attitudes related to entrepreneurial orientation, while the
administrator of a large organisation would hold attitudes. related to the administrative
orientation of the management process.
 Entrepreneur vs. Professional Managers 115

Table 10:.3
OWNER-MANAGER VS. PROFESSIONAL MANAGER
Owner Manager Professional Manager

1. Source of Traditional (ownership) Expertise

Authority Personal Office

2.' Basis of No diffusion between ownership and Control without ownership

Philosophy control
No conflict between personal and com- Conflict between individual and
pany objectives organisational goals
No distinction between person and role Very clear distinction between
the individual and the post he
occupies.
Integration of work and social values Values of the work-place di-
vorced from both individual
/ and social values.

Not subservient to economic Economic 'perfonnance' as ulti-

goa1s mate criterion.

3. Charaderistic Adoptive Predjctive

Skills Diagnostic Prognostic

Exploitation of change Control of change

opportunism

Tactical facility Strategic facility

Pragmatic use of Coordination and control

techniques. as aid to of specialists.
problem-solving

Social skills applied on a Manipulative skills applied

personal basis largely on an impersonal basis.

Consequences. mitigating Event shaping decision-

decision-making making

4. Organisation Informal relationship Formal relationship.

No divorce between the Divorce of planning from

planners and the doers doing.

Appointment and promotion Technical qualifications as

, often on the basis of birth of
personal friendship.
basis of appointment and
promotion.

Everyone prepared to muck- Precise definition of rights and

is as required. obligations, duties and responsi-
bilities.

Open system of commun i- Structured communications sys-

cations tem.

Source: Philip Clarke, SmaD Business: How !hey Survive and Succeed, David & Charles, Great Britain,
1973, pp. 109-111_ .
116 DpaamIa of Entrepreneurial Development

Owner-Manager vs. Professional-Manager

The owner-manager is identified with individuality, flair, strong motivation to
achieve success and the urge to grow while the professional manager conjures up a
picture of organising, planning, motivating and controlling. The ower-manager exhibits
a strong desire for independence, which he demonstrates through the building of an
organisation. The owner-manager assumes all business risks and stands to lose not only
his capital but reputation and prestige in the event of failure of business, whereas the
professional manager is not exposed to such risks.
The differences between on owner-manager and a professional manager are
much deeper which can be studied with respect to the function, business philosophy,
and the characteristic skills which each incorporates.

RESEARCH & DEVELOPMENT

CONTINUING BUSINESS EDUCATION
BUSINESS AND RESEARCH INSTITIITES

-CHAMBER OF COMMERCE
- STATE AND LOCAL
GOVERNMENT OFACES
- STATE LEGISLATNE
COMMITTEES

- SMAll.. BUSINESS - KEY INDIVIDUALS

OGANISATIONS - CONSULTANTS
- INCUBATORS -PROGRAMS
-SUPPUERS - QUAUlY FOR UFE
-CUSTOMERS -SOCIAL AND
- ACCOUNTING
CMC GROUPS
-LEGAL
- FINANCIAL BANKS
VENTURE CAPITAL

Fig. 10.2 The Entrepreneurial Network

The Entrepreneurial Network

Entrepreneurship is a dynamic process which requires links not only among and
between individuals but also among and between a variety of institutions. The stronger,
more complex and more diverse the web of relationships, the more the entrepreneur
is likelyto have access to opportunities, the greater are his chances of solving problems
expeditiously, and ultimately the greater the chances of success for the ne~ venture.
 11fE CEO OF 11fE fUIURE
To get·a broad perspective on the changing requirements for successful business leadership in the next century, an executive search fum in the
US conducted a multilingual survey of 1,500 senior executives, 870 of them CEOs in 20 countries. Those surveyed were asked to assess the dominant
characteristics that describe today's CEO and that will describe the ideal CEO of the year 2000. The results:
f
§.
I!.
~

WHAT TRAITS CEO'S WILL HAVE AND WILL NEED 1

i'
•
Traits or talents dominant now In CEO. and Important
[
Personal Behaviour
Conveys strong sense of vision
Links compensation
for the CEO of year 2000 In percentages

to performance
Now
75
66
2000
98
91
Knowledge and skills
Strategy formulation
Human resource management
Now
68
41
2000
78
53
I
Communicates frequently with employees -, 59 89 International economics and politics 10 19
Emphasises ethics 74 85 Science and technology 11 15
Plans for management succession 56 85 Computer literacy 3 7
Communicates frequently with customers 41 78 Marketing and sales 50 48
Reassigns or terminates unsatisfactory employees 34 71 Negotiation 34 24
Rewards loyalty 48 44 Accounting and finance 33 24
Makes all major decisions 39 21 Handling media and public speaking 16 13
Behaves conservatively 32 13 Production 21 9
t/hl ~ ...
.__ Lee lacocca SUfTl$ up the c/Janges he sees coming:
"lf a guy wants to be a chief executive 25 years or 50 years fromnow, he win have to be well rounded.
There will no more of 'is he a good lawyer, is he a good marketing guy, is he a good finance guy!
His education and experience will make him a total entrepreneur in a world that has really turned
into one huge market."
....•.....•
 \ .
UI Dpnamlc:aof Entrep•.• earlal Develop •••••
, ".1 \' rtr~ "
The entrepreneurial network, as depicted in 10.5, illustrates some 6f the potential
links and relationships that can promote and sustain 'new ventures in an economic area.
: I
Conclusion ' ",
Growth is a conscious, controllable factor which ~ust be planned and
coordinated. Entrepreneurship plays a crucial role in this growth I?rocess. In sum, I
realize the managing change may be my actual theme. I am reminded of something
that John Stuart Mill said more than 100 years ago: "Mankind is divided into those
who are still what they were and those who have changed: into the men 9f the present
age and the men of the past." Successfully managing the "unmanageable" requires
us to become those men who have changed. It requires flexibility, imagination and a
willingness' to accept change as an opportunity and a stimulus for development and
growth. Therefore, organisations, governments and society must encourage it.
Entrepreneurship perceives opportunities inherent in change, creates a desire for
pursuing them and creates an environment in which success is possible. The concept
of the entrepreneur should be understood in its broadest sense ~t he is a person who
acts as an agent of change for the good of the people. He not 6nly brings change in
economy but is respcnsible for social development also. At the same time, the
a
professional manager translates the entrepreneurial vision into reality by adopting
his professional efficiency and managerial skills. The entrepreneur and professional
managers are, therefore, a critical input of socio-economic development.
 "The stage Is set lor social take-oN /or women /rom II low development
path to an accelerated pac;e In achlefling higher level 01 sell-sustaining
economic growth .... Women entrepreneurs have to graduate /rom a state
01 dependence on subsidies/concessions to that 01 s_IIIg opportunities
as they emerge In an open economy. " ..

DEVELOPMENT OF .WOMEN
ENTREPRENEURS

Introduction
The emergence of entrepreneurs in a society depends to a great extent on the
economic, social, religious, cultural and psychological factor prevailing in the society.
In the advanced countries of the world, there is a phenomenal increase in the number
of self-employed women after the World War. In the United States, women own 25
per cent of all business, even though their sales on an average are less than two-fifths
of those of other small businesses. In Canada, one-third of small businesses are owned
by women and in France it is one-fifth. In the UK., since 1980, the number of self-
employed women has increased three times as fast as the number of self-employed
men.
Women entrepreneurs have been making a significant impact in all segments of
the economy in Canada, Great Britain, Germany, Australia and the U.S. The areas
chosen by women are retail trade, restaurants, hotels, education, cultural, cleaning,
insurance and manufacturing. They have made their mark in business for the following
reasons:
(i) They want new challenges and opportunities for self-fulfilment.
(ii) They want to prove their mettle in innovative and competitive jobs.
(iii) They want the change to control the balance between their family
responsibilities and their business lives. Dina Lavoie, a Professor of
Entrepreneurship, Montreal has observed that, women business owners hire
an average of two or three employees, whereas men are more likely to have
nine employees or more. Often, a micro-business fits a woman's life-style.
Expansion might mean a loss of control or disruption in the amount of time
she invests in other facets of her life. She may also want to oversee and control
every aspect of her business and may feel she will lose that opportunity if
she gr~ws, to 'the paint where she cannot."
!
120 Dynamics of Entrepreneurial Development

In a recent study, economist Catherine Swift, has mentioned that women face
tougher security requirements on their lines of credit than do men. However, she also'
explains that other identified differences such as higher interest-rates, lower credit
approval rates and espousal co-signature requirements are primarily attributable to the
fact that women operate younger and smaller firms that are known to meet with such
financin~ problems, whether they are owned by men or women.
The pereantage of business started and operated by women in the U.S. is less
than those started by men. However, the number is increasing at a rapid rate. For
example, the number of female sole proprietorships was 3,104,029 or 22 per cent of
all sole proprietorships, according to the Internal Revenue Service, whereas the Bureau
of Labour Statistics has indicated that between 1974 and 1984 the number of self-
employed women grew 74 per cent or six times faster than self-employed men.
Table 11.1
SURVEY ON WOMEN ENTREPRENEURS
Number of Women Entrepreneurs
Country
-Yea~ % Inaeases Employed Independent -
(in lakhs)
U,S.A. 1977-1983 56 3.3 5.4
Canada 1987 50 --- 4.3 1.3
Australia 1987 45 2.0 6.0
Germany 1987 25 0.6 0.8
Norway 1987 29 3.9 1.1
Sweden 1972·82 9 2.3 8.7
England 1986- 25 0.6 6.3
France 1987 25 0.8 6.5
Holland 1979-85 36 0.5 4.5

Women get independent jobs more easily in these countries. All people working
independently have been classified Of termed as entrepreneurs. The highest number
of women are found in laundries, dry Cleaning, hair-
dressing, private nurseries, hotels etc. According to
the table above, the highest number of self-em-
ployed women were in Sweden followed by En-
gland, France and the U.S.A.
Rita Singh: Woman Entrepreneur In the
Business World
Rita Singh, founder of the M'escos (Mid-east
Shipping Company) group, is one of the first woman
entrepreneurs to make it big in the business world.
Rita's is a rags to riches story. Starting from
scratch about 20 years ago, she now exports trendy
M'escos shoes, owns a fleet of state-of-the-art
helicopters and ships, and a Rs. 450-crore steel
plant.
Develo~:.'e~.O!I~~men En~epreneurs 121

~he M' escos group with an annual turnover of over Rs. 1500 crore, employs
,more than 7,000 people.
The only daughter ofa Punjabi college professor who migrated from Sargodha
in Pakistan to Nagpur after Partition.
With only a degree in science, she set up a small dairy farm with two buffaloes - ,
near the Hindon air station and a sulphur plant at Hapur. She sold off their small farm
and started exporting rice and tapioca. Then she went into shipping in a small way.
Within a year, her annual income crossed the Rs. 50 lakh mark. In the commg years,
she entered into steel, aviation shoes, etc.
What are the factors behind her success? "attribute my success to one Thing -
never run away from life. Face it boldly. Dare to be different."
" Why aren't there many women entrepreneurs in the big league? Singh feels that
.a false sense of security and fear of failure are the main stumbling blocks in the path
of success. "It hardly matters whether you are a man or a woman if you are insecure
inside. I have never been bothered about security.

Designing Dreams

Name Neeru Kumar

Education B.Sc. (Chemistry), Ahmedabad University, 1974; Gradu-
ate, National Institute of Design, Ahmedabad, 1980
Experience Designer, Fab India, 1980-81
T rack Record
I
Turnover has grown from zero in 1984 to Rs. 3 crore in
1994-95
Investment Rs 10,000
Employees 10
Work Style Hands-on
Work Philosophy Keep experimenting
Hobbies I Collecting old Indian textiles and antique furniture

Spinning off Her Old Job into a New Business was really not on Neeru Kumar's
mind. Until, that is, the 1980 graduate of the National Institute of Design, Ahmedabad,
was handed a Rs. 1 lakh contract from Tata Exports to develop a fabric for soft
furnishings. "I started with their advance of Rs. 10,000," recalls Kumar. It allowed her
to set up a small unit, with overheads comprising a monthly rent of Rs 1,500 and a
daily wage bill of Rs. 25 for each of the two weavers she hired to craft woolen carpets.
Today, her enterprise, Tal, rakes in Rs. 3 crore annually, selling its products through
an exclusive retail outlet in the capital as well 'as upmarket stores in the UK, the U~.
and France.
Exclusive Accessories Business .' ' .
Make silk purse out of a thoroughbred's' e~tJI,
That's what ~u~ Rirdy, ilw
managing partner of the low-profile Christina, hasrpan,i:l~ed to do '(l'~erthe pas' decade,
 Development qtlWomen Entrepreneurs 121

~~~'~"':S~~s
grou~'with
more than 7,000 people.
an annual turnover of over Rs. 1500 crore, employs

The only daughter of a Punjabi college professor who migrated from Sargodha
in Pakistan to Nagpur after Partition.
With only a degree in science, she set up a small dairy farm with two buffaloes - ,
near the Hindon air station and a sulphur plant at Hapur. She sold off their small farm
and started exporting rice and tapioca. Then she went into shipping in a small way.
Within a year, her annual income crossed the Rs. 50 lakh mark. In the commg years,
she entered into steel, aviation shoes, etc.
What are the factors behind her success? "attribute my success to one Thing -
never run away from life. Face it boldly. Dare to be different."
I' Why aren't there many women entrepreneurs in the big league? Singh feels that
.a false sense of security and fear of failure are the main stumbling blocks in the path
of success. "It hardly matters whether you are a man or a woman if you are insecure
inside. I have never been bothered about security.

Designing Dreams

Name Neeru Kumar

Education B.Sc. (Chemistry), Ahmedabad University, 1974; Gradu-
ate, National Institute of Design, Ahmedabad, 1980
Experience Designer, Fab India, 1980-81
Track Record Turnover has grown from zero in 1984 to Rs. 3 crore in
I
1994-95
Investment Rs 10,000
Employees 10
Work Style Hands-on
Work Philosophy Keep experimenting
Hobbies" I Collecting old Indian textiles and antique furniture

Spinning off Her Old Job into a New Business was really not on Neeru Kumar's
mind. Until, that is, the 1980 graduate of the National Institute of Design, Ahmedabad,
was handed a Rs. 1 lakh contract from Tata Exports to develop a fabric for soft
furnishings. "I started with their advance of Rs. 10,000," recalls Kumar. It allowed her
to set up a small unit, with overheads comprising a monthly rent of Rs 1,500 and a
daily wage bill of Rs. 25 for each of the two weavers she hired to craft woolen carpets,
Today, her enterprise, Tal, rakes in Rs. 3 crore annually, selling its products through
an exclusive retail outlet in the capital as well 'as upmarket stores in the UK, the U~,
and France.
Exclusive Accessories Business
Make silk purse out of a thoroughbred's ~~~JI, That's what Ru~ Birdy, ii'f'
managing partner of the low-profile Christina, has"rtmnag,ed to do
(l'{er the pas; decade,
 122 o,.-Ica of Entre,rreneup,1J?evea;., e
•
Quite successfully too, with the sales of this tiny chain of accessories boutiques galloping
past the Rs. 1-crore mark last year. However, nine years ago, when Birdy first dabbled
with a line a of leather-and-silk accessories, she chose as the inspiration for her brand
name - ,?f all things - a horse.
With Christina accessories now emerging as the racegoer's delight, Birdy's gamble
, has more-than paid off. To be sure, she had an unfair advantage. Not only was Bird's
father a book-keeper at the Mahalaxmi Race Course in Mumbai, she practicelly grew
up on the turf. An ardent race-goer, it was only natural that Birdy would choose the
feminine version of Christoff - her favourite among the four racehorses her family
once owned - to christen her own start-up.
FACT FILE

Name Ruty Birdy

Education Presentation Convent, Kodaikanal, 1964; dropped out of
St. Xavier's College, Mumbai, in 1965
Work Experience Designer, Star Industries; setup Christina in 1987
Initial Investment Rs 40,000
Track Record Turnover has gown from Rs. 40 Iakh in 1989-90 to Rs 1.28
crore in 1994-95
Work Style Hands-on
Management Philosophy : Enjoy your work and treat your employees as family
Hobbies Reading, riding

Women Entrepreneurship in India

Out of total 940.98 million people in India, in the 1990s females comprise 437.10
million representing 46.5 per cent of the total population. There are 126.48 million
women workforce (representing 28.9 per cent of the female population), but as per
1991 census, only 1,85,900 women accounting for only 4.5 per cent of the total self-
employed persons in the country were recorded. Majority of them are engaged in the
unorganised sector like asriculture, agro-based industries, handicrafts, handlooms, and
cottage-based industries. Participation of women as industrial entrepreneurs, however,
is comparatively a recent phenomenon - commencing from 70s onwards. There were
more than 2,95,680 women entrepreneurs claiming 11.2 per' cent of the total 2.64
million entrepreneurs in India during 1995-96. This is almost double the percentage
of women (5.2%) among the total population of self-employed during 1981. Of this,
a majority were concentrated in low-paid, low-skilled, low-technology and low-
productivity jobs in the rural and unorganised sector, 90% (79.4 million) women
workers were in the rural areas as against only 10% (8.6 million) in urban areas. Only
2.5 million women workers were in the organised sector - a mere 12.4% of the total
employed.
During the Eighth Five Year Plan, the number of SSIs expected to rise from 1.7
million to 2.5 million, adding 0.8 million in the 5-year period or 1.60 lakh every year.
The rough estimate showed that amongst the SSI entrepreneurs approximately 9%
were women entrepreneurs. Their participation, however, is increasing. Considering the
trend, women participation in another five years was 20% more, raising the number
of womeljl entrepreneurs to about 5,00,000. Therefore, one could aim at developing
~evelopmeJo( ~'Women Entrepreneurs 123
. " ,1 ':\ II ,'" r' . '
at least 3,50,000 women entrepreneurs during Eighth Five Year Plan through training
and other developmental efforts. The present rate of 30% success in EDP training was
likely to go up to 45% with growing experience and improved techniques of training
and follow-up. Based on this assumption, for getting 3.5 lakh women entrepreneurs
it was necessary to train and support about 7.78 lakh entrepreneurs during the Eighth
Five Year plan. Besides the SSI women entrepreneurs, a large number of women
entrepreneurs particularly in district and rural areas were likely to be developed for small
business. Even assuming a very modest target of 335 women entrepreneurs per district,
the number of women entrepreneurs would have come to 1,42,375 per year. These
women were to be given training in self-employment/entrepreneurship of shorter
duration as well as some 'training in trade and skill areas. In order to mobilise such
percentage of women entrepreneurs, a number of activities such as motivational drive,
preparation of information material; conducting training; ~Yeation of women industrial
estates/areas/sheds., creation of common marketing exposition \.,'ntI'es; training of
trainers/promoters; and L!Seof mass media, etc. are required. Combiried effect of all
these !S bound tonaccelerate the process of women entrepreneurship ~~velopment.
Women Entrepreneurs in Several Industries
Today we find women in different types of industries, traditional a? wal] as non-
traditional, such as en~ineering, electronics, readymade garments, fabrics, ~bl~s,
handicrafts, doll-making, poultry, plastics, soap, ceramics, printing, toy ma~g,
nurseries, creches, drugs, textile designing. dairy, canning, knitting, jewellery desig~
solar cooker etc,. What motivates women to aspire for career in business is an interesting
thing to explore and analyse. According to Mclelland and Winter, motivation is a critical
factor that leads one towards entrepreneurship. This apart, the challenge and adventure
to do something new, liking for business and wanting to have an independent
occupation are some of the attractive leverage for women. These factors indicate a
relatively deeper commitment to entrepreneurial profession on the part of entrepreneur.
Responsibility thrust, due to death or incapacitation of a near relation, tax benefit for
self and for relations are the push factors. In addition, special qualifications attained
for running a concern, identifying the demand from the market, external motivation,
employment to needy and destitutes to set up an ancillary unit, business already in
the family are some of the factors which gave stimulus to women entrepreneurs to start
business.
Moderate Investment
Mostly women are interested in moderate returns. Knowing their other limitations,
they prefer smaller projects and thus select business opportunities requiring moderate
investment. Merely 10-12 per .cent of women set up their ventures with investment
above Rs. 10 lakh. Approximately, 7Q per cent of enterprises set-up by women range
between Rs. 1 lakh to Rs. 5 lakh investment.
-
There is a general belief that women have inclination towards simple products
involving low ,.;chnologies. The impression is that plc~\eS a'nd 9arments are the products
specially suitable for women. While the selection of opp~rtu'nitY ~ based on the motives
and special c'tmstraints for women, the enterprises ~~~t-Gp by women cover a wide range
124 Dynamics of Entrepl}ineurial Developmenf
.
cJ- ••• , I;

, ~

,
of activities and only 2 per cent are in food products and 13 per cent in traditional
I
business of garments/hosiery. Twenty per cent women opt for chemicals and another
12 per cent for engineering items.
OVERALL PRODUCT SELECTION BY WOr-fEN ENTREPRENEURS
LEATHER ./ TE>r.!LE/HOSi~.RY

GE~~Al ~~~:HEMICAlS
ELECTRONICS -.: '~:N: . -,"",'- 20%
7% <, PLA TICS
ENGINEERING 12% 15%
The selection of business venture is dependent on the background of the
entrepreneur:
Figure 11.1 gives the overall dis ribution of products for women entrepreneurs.
It is observed that educational b ckground and experience has little or no effect on
the choice of selection of business opportunity.
A lady with no technical qualification may be in the business of manufacturing
electrical bulbs or special chemicals. Sirnilarly, a lady with specialised knowledge of
computer software may be in printing business.
The general assumption that only technically qualified woman will go for technical
items and other prefer non-technical items does not seem to hold true, rather a close
higher correlation is found between the activities of the husband and the venture
selected by a woman.
Successful Women Entrepreneurs
Although the list of successful women entrepreneurs is quite long, a selected
representative women entrepreneurs are mentioned here. Amonq some accomplished
women entrepreneurs, Smt. Sumati Morarji of Shipping Corporation been seen as
beac n to women entrepreneurs. Smt. Sharayu Daftary of Automobile Radiators, Smt.
Yamutai Kirloskar of Mahila Udyog Limited, Smt. Vimal Pitre. manufacturer of surgical
instruments, Smt. Manik Vandrekar of leather crafts, Smt. Radanika Pradhan of Plastic
Industries, Smt. Gogate for Drugs, Smt. Swati Bhatija in engineering industries, Smt.
Prerang Thakore of Jayant Vitamins Limited, Smt. Nargis Wadia of Inter Publicity, Smt.
Neena Malhofra-In Exports, Smt. Rajani Aggarwal in engineering; Smt. Shahanaz
Hussain in beauty clinical cosmetics, Smt. Wadia in fabrics, Smt. Weheeda Rehman
in fast foods all stand out as successful women entrepreneurs. Other outstanding
women entrepreneurs - Smt. Priya Khanna, Smt. Savitri Debi, Smt.Raman Suri, Smt.
Madhura Chat apathy, Smt. Prabha Thakkar, Smt. Sunanda Pant.
1
What is more, since the inception of the National Awards to small Entrepreneurs
instituted in 1983. 10 women entrepreneurs have received special recognition awards.
T lEI: have attributed their success in their enterprise to hard work, perseverance,
ded.cario ,devotion, determination, integrity and ~onndence in themselves. However,
there ere still others striving to get their enterprises' e.slab~ished. Behind every successful
on: n entrepreneur there is a man and vice versa.
Development of Women Entrepreneurs 125

A Success Story
She certainly has been the most powerful woman of Indian origin living in the
United States. Roman Malkani was listed by the respected Washingtonian magazine
as one of the 100 most powerful women living in the US capital, along with the likes
of Jeane Kirkpatick, Carla Hills and Elizabeth Dole. And more importantly, her success
has been in an area which even in the US has traditionally been male-dominated: of
specialised high technology communication systems.
Malkani left India in 1967 when her father, a professor of engineering at Roarke
University, went on a Fulbright scholarship to the University of Virginia. In 1979, father
and daughter, who by then had a master's degree in computers, founded Information
System and Network Corporation (ISN) .,Roman, who took over full charge a year later,
has since turned the company into the largest woman-owned US government
contractor.
With a revenue of over $60 million (Rs. 105.21 crore) and an employee strength
of 580, ISN was listed by the chic US women's monthly Savt-yas the 43rd largest,
female-owned and run company in that country, and the only one in the top 60
involved in manufacturing telecommunication systems.
I
Lakshmi G. Menon, 47, could not resist a challenge. When the top slot at the
Madras-based Hindustan Teleprinters Limited (HTL) fell vacant, she applied for it. After
an interview with the Public Enterprises Selection Board, she was selected ~ to become
the first ever woman chief executive of a public sector organisation.
"I am an electronics person. I love to be in the thick of things, planning, specifying,
installing and manufacturing systems in the telecommunications arena," she said. The
electronics bug had bit her as a student at Trivandrum University. On graduating with
a B.Sc. in 1961, she headed for the Madras Institute of Technology, and in 1964
acquired a post-graduate diploma in electronic engineering.
Menon has been known to initiate a lot of enthusiasm to her job. And Hindustan
Teleprinters was in need of it. This company's performance at that time has been
dismal. Though sales increased to Rs. 27 crore in 1988 as against Rs. 19 crore in 1987-
88, net profit had come down to Rs. 184 crore. The company's electronic teleprinter
capacity still 50 per cent underutilised, and the original target turnover of Rs. 100 crore
expected to be achieved in 1989-90 was pruned down to Rs. 50 crore. But Menon
stood unfazed. "My primary concern is to decide on the best course of action for HTL,
which will diversify in the telecommunications field. A corporate plan is being
formulated," she said.
D. Jayalakshmi Devaraj
Smt. Jayalakshmi Devaraj was just like any other housewife till June, 1983, when
God took away her husband Mr. Devaraj, the founder of the Sri Vigneshwara Group
of Industries. Instead of closing down the companies in despair, she rose to the occasion
and took up the challenge of running the industry started by her husband.
The total sales turnover of the foundry has been recorded as Rs. 331akhs in 1984-
85 to nearly Rs. 50 lakhs in 1988-89. Smt. Jayalakshmi has been responsible for
providing employment to nearly 200 persons through her various concerns.
 126 Dynamics of Entrepreneurial Development

She was the winner of the CODISSIA Award 1989 for the. best woman
I
entrepreneur.
Women Intrapreneurs
Karthy Inamdar, a graduate of the Indian Institute of Management (11M),
Ahmedabad, started her career with a two-and-a-half year stint at Citibank in Mumbai.
Ther; she moved to Citibank, Delhi, had a family and went back to work for a year
before deciding to take a break in her career. Six years later, after raising two children
to schbol-going age, she joined American Express Bank in Delhi as a senior accounts
manager.
Another entrepreneur in Jamshedpur, Rekha Marsalamani, also an IIMgraduate
had opted dut of her job as assistant manager, management development, at Tata
Engineering and Locomotive Company (TELCO). For five years, she reared two
children before taking up a job as executive assistant to TELCO'S resident director
there.
Both women entrepreneurs symbolised a small but growing phenom, on:
I omen who quit relatively well-paid jobs to raise children, before returning to-the job
market. And it's a phenomenon that's cutting a broad swathe across industries as
diverse as computers, communications, advertising and banking.
As most professional women have confirmed it's easier to make a comeback in
sunrise professions like marketing, advertising, management and perhaps even
banking.
Professional Women
At Tata Steel in Jameshedpur, 33-year-old Rupa Manhanty is an example, who,
after eight years with the organisation and different responsibilities, has held the post
of the deputy manager, human resources planning. Her job is to chalk out a detailed
plan for career development of more than 4000 officers at Tata Steel.
With a bachelor's degree in statistics from Mumbai, Mahanty studied manage-
ment at 11M,Calcutta before joining Tata Steel in 1981. And she has struck a long record
with the company because "here we are neither discriminated against nor favoured,
but taken as we are."
"Aggressive marketing", according to her "is the name of the game." The
marketing manager of Poona Industrial Hotels Ltd. (PIH) has significantly contributed
to raising the sales of this Kirloskar company to Rs. 10 crore during her tenure.
As, an MBA from Pune University, she joined PIH as a trainee in 1984 and rose
to the managerial level in two years. PIH owns Blue Diamond, a five star hotel in Pune
and Hotel Pearl in Kolhapur and she has boosted her company's sales tremendously
when she initiated setting up a number of retail outlets - Banker's Basket - and also
the flight catering services at Pune airport. In addition, Uttamchandani opened offices
in Mumbai and Delhi for more business. She was involved in setting up a chain of
smaller hotels in the towns of interior Maharashtra.
Development of Women Entrepreneurs 127

Profile of a Woman Entrepreneur

Who is this Woman entrepreneur? What are her qualities?
She is a woman of commitment, who is not relevant, independently employed,
she has a close relationship with her father and, after obtaining an undergraduate and
subsequently a ,graduate degree in some area of liberal arts, marries, has children and
starts her first significant entrepreneurial venture in the service area in her late 30s or
early 40s. Her biggest problems at start-up and later in the venture reflect a lack of
business training and generally are in the financial area.
Table 11.2
PROFILE OF A WOMAN ENTREPRENEUR AND HER L' 'SINESS

First-born child of middle class parents

Father and/or mother in independent business
College-educ~ted
Married
Early 30s for the first significant venture
Previous experience in new venture
Desires independence
Motivated by desire for independence and job satisfaction
Small and young business
Self-confident
Moderate risk-taker
High tole ance fof ambiguity
High energy level
Biggest problems in start-up:
Lack of business training
Obtaining credit
Availability of Information
Obtaining seed capital
Marketing
Personnel management
Biggest problems in current operations:
Lack of experience in financial planning
Weak-collateral position
Cash flow management
Taxation

With education and training, the women have gained confidence to do all work,
which was the prerogative of man and do it excellently, rather-better than men. Over
the years, the educated women have become ambitious, acquired experience and basic
skills of competency and self-assurance.
 128 Dynamics of Entrepreneurial Development

Leadership Qualities
Some of the outstanding qualities of women entrepreneurs are as follows:

Accept challenges Adventurous

Ambitious Conscious
Drive Educated
Enthusiastic Determination to excel
>" Hard work Keenness to learn and imbibe new ideas
Patience Experienced
Industrious Intelligent
Motivator Perseverance
Skilful Studious
Unquenchable optimism.

Psycho-Social ,Barriers
Although some women entrepreneurs have excelled in their enterprise, the fear
of success haunt 'women in general. Some psycho-social factors impeding the growth
of woman entrepreneurship are as follows:
1. Poor self image of women
2. Inadequate motivation
3. Discriminating treatment
4. Faulty socialisation
5. Role conflict
6. Cultural values
7. Lack of courage and self-confidence
8. Inadequate encouragement
9. Lack of social acceptance
10. Unjust social-economic and cultural system
11. Lack of freedom of expression
12. Afraid of failures and criticism
13. Susceptible to negative attitudes
14. Non-persistent attitude
15. Low dignity of labour
16. Lacking in leadership qualities, i.e., planning, organ ising, controlling,
coordinating and directing.
The New Thrust
Earlier researches conducted indicate that several women are now willing to
become entrepreneurs due to various factors. These factors can be broadly classified
under two headings, namely, "Pull factors" and "push factors." Under the first category,
the women entrepreneurs choose a profession as a challenge and adventure with an
 Development of Women Entrepreneurs 129

urge to do something new, liking for business and to have an independent occupation.
The other category of women takes up business enterprises to get over financial
difficultiesand responsibility is thrust on them due to family circumstances. However,
the latter category forms a negligible percentage of the total women entrepreneurs.
The new thrust given to the process of economic development of the country by
the new dynamic readership has created an all-round enthusiasm and the new slogan
of "March towards the twenty-first century" had gained popularity. But in this new
enthusiasm a very vital sector of the society which can contribute substantially towards
the economic development of the country is not given enough attention - women
entrepreneurs. In fact the Harvard School experts feel that the basic quality of efficient
management is futuristic outlook and a capacity to nurture and plan for the future or
unknown. This comes naturally to women. Therefore they feel that successful managers
willbe those who combine this feminist attribute of nurturing and futuristic planning
with male aggressiveness. But this inherent management talent of woman and her
entrepreneurial skill go unrecognised and unaccounted as it does not show profit or
loss in monetary terms.
With the spread of education and new approaches/awareness, women entrepre-
neurs are achieving higher level of 3Es, namely, engineering, electronics and energy,
though the number of such units is not as large as it should be. But the very fact that
women are putting up units to manufacture solar cookers as in Gujarat, small foundries
in Maharashtra and TV. capacitors in the industrially backward area of Orissa show
that women if trained and given opportunities can venture in non-traditional industries.
Even the so-called socially tabooed industrial activity of wine-making and selling is
being done by women entrepreneurs in Mumbai. So today no field is unapproachable
to the trained and determined modem Indian women.
Basic Problems of Women

The basic .problern or difficulty of a woman entrepreneur is that she is a woman

- this pertains to her responsibility towards family, society and work. With joint families
breaking up, many women simply don't have the support of elders. Women have been
confronted by such dilemmas ever since they started leaving home for the work place.
On the other hand, the attitude of society towards her and constraints in which she
has to live and work are not very conducive. In spite of the constitutional equality, in
practice the attitude of men is not only tradition-bound but even of those who are
responsible for decision-making, planning and research is not of equality. They still
suffer from male reservations. This attitude of reservation creates difficulties and
problems at all levels, i.e., family support, training, banking, licensing and marketing.
Women in rural areas have to suffer still further. They have to face not only resistance
or reservation from men but also from elderly women who are ingrained in the attitude
of inequality. In rural areas joint families are still the norm. The overbearing presence
of elders restrain even young men from venturing out; so one can imagine how much
a young girl needs to put up to become economically independent. Though in rural
areas women are working along with men since times immemorial, their contribution
in monetary terms remains unaccounted, or if at all accounted, .it is given a very low
 130 Dynamics of Entrepreneurial Development

value. They are mostly engaged in low-paid, back-breaking agricultural activities or act
as helpers in handicrafts.
It is not that women do not have skillsor capacity but they are not properly trained
or initiated in craftsmanship because it is taken as a taboo - it is wasted because when
she gets married she takes away the skill with her. Therefore, a woman can only act
as a helper. She was not allowed to function independently. Training is basic for any
entrepreneurship. Facilities are available, many institutions have been imparting
training under various schemes but again social attitude do not appreciate this
independence and thus keep women away from them - both in urban and rural areas.
At the government level, the licensing authorities and labour officers and sales
tax inspectors ask all sorts of questions like what technical qualifications you have, how
willyou manage labourers, how willyou manage both house and business, does your
husband approve, etc.
Most important question is asked regarding strategies for marketing - both of
raw material and of finished goods. To market her product she has to be at the mercy
of middlemen who eat up a big chunk of profit. Besides the middlemen try to exploit
women entrepreneurs at both ends. They deny her discount or give the minimum
discount in the purchase of raw material and on the other hand, try to extract maximum
credit discount and commission on purchase of finished products from her.
If she decides to eliminate middlemen, it involves a lot of running about.
Secondly, in these days of stiff competition, a lot of money is required for using
advertisement. Ifthe product happens to be a consumer then it takes time to win people
away from other products and make this product popular. And then there is a tendency
to always question the quality of the product produced by women entrepreneurs,
though many agree that they are most sincere in maintaining the quality and time
schedule.
New Awareness
The new Industrial Policy of Government of India has specially highlighted the
need for special entrepreneurship programmes for women entrepreneurs in the nature
of product-process oriented courses - to enable them to start small-scale industries.
It further adds that the objective of this course is to give representation to women in
the field of small industry development with a view to uplifting their status in the
economic and social fields.
Due to the aforesaid fillip,growth of industrialisation, urbanisation, education and
.democratic system in the country, the tradition-bound Indian society has seen a major
technological change and the women are now seeking gainful employment in several
fields in increasing numbers. The women entrepreneurship movement has taken off
the ground and it is felt that the moment has crossed the stage of transition. It is only
during the last 15 years women have started becoming entrepreneurs and started
industries and business and they are yet to go a long way to be on par with men. The
fact however cannot be denied that women have to playa dual role as a housewife
and also as an income-earner. Thus arises a role conflict in many a woman, which
prevents them from taking a prompt decision in entering business. Despite the
 Development of Women Entrepreneurs 131
t

modernisati0l) and other factors mentioned above, the weight of tradition and the
responsibilitiei of the faunally tends to slow down this movement. Further, occupational
backgrounds of the families and the educational attainment of the husbands have a
direct bearing on the development of women entrepreneurship. The development of
kindergartens, day nurseries and creches and limiting the size of the family help the
women entrepreneurs to some extent to enter business in such a manner that their
husbands' prestige is enhanced.
Some of the major conclusions and recommendations made at a seminar on
"Women and Rural Entrepreneurship" held at Madura-Kamaraj University early in
September, 1990 were: Women are not weak, but very strong; the industrial and
business opportunities are many - electronics (printed circuit boards, floppy discs),
engineering (armature winding, machine manufacturing), plastic injection moulding,
film making, chemicals (golden paste and laboratory chemicals), food and allied
products (protein biscuits and cake mixture), rubber, pharmaceuticals, machinery and
equipment, energy, fuel etc.
A majority of women entrepreneurs are from the middle class famUiesbut have
low technical education, less family responsibilities (owing to the joint family system).
but desire to become entrepreneurs. This potential should be identified and trained.
Adequate infrastructural support by one single coordinating or nodal agency to
facilitateflow of adequate working capital, technology, electricity, land and marketing
for rural women entrepreneurs may be helpful and mobile training centres should be \
opened. Post-training follow-up is vital for the success of entrepreneur development
programmes.
Conclusion
Today, there is a greater awakening among women. Given an opportunity, they
willdeliver the results. In education, they have not only excelled but also become top
makers. Likewise, in office and industry, many have shown brilliant results. Even in
ruralIndia with education, women have shown better performance. Educating women
isabsolutely essential in straightening her personality. The need of the hour is to provide
an opportunity in a conducive atmosphere free from gender differences. The need for
awareness motivation to be an active member of the society and courage to correct
the faults of male counterparts are great challenges today. It is, therefore, encourage-
"'m~nt of the growing intensity of motivation amongst educated young women for
coming in the entrepreneurial stream and extend support with scientifically designed
package of the technical and financial assistance. The non-governmental organisations
have a bigger role in stimulating and nurturing the spirit of entrepreneurship amongst
women. Towards this end, an integrated approach is necessary for making the
movement of women entrepreneurship a success. For this purpose, both the
Government and non-Government agencies have to playa vital role.
 132 Dynamics of Entrepreneurial Development

ANNEXURE - 1
INTERNATIONAL CONNECTIONS
Two major international organisations for women business owners have been
created to assist women business owners in overcoming many of the challenges they
face in business. The oldest is Les Femmes Chefs d' Enterprises Mondiales (FCEM).
Created in France in 1946, it now represents approximately 30,000 women business
owners-in thirty countries. The F(':EM has NGO status with the United Nations and
consultative status with the European Union and the International Labour Organisation.
The other is the International Federation of Women Entrepreneurs (IFWE)which
was established as an offshoot of the World Associaiton of Small and Medium .
Enterprises (WASME)five years ago. IFWErepresents women business owners in more
than twenty countries and also has NGO status with the United Nations and consultative
status with the International Labour Organisation.
Both of these organisations hold annual congresses and meetings in different parts
of the world in order to bring women business owners together to meet, learn about
each others' businesses, identify new opportunities, and create friendships that willlead
to long-term relationships. The shift in recent years has definitely been away from
"socially" oriented "business" and action oriented meetings. Women have become
more serious about doing business together.
FCEM and IFWE are dveloping strategic plans which help bring them and their
members into the 21st century. Because they already are established internationally
recognized organisations with an infrastructure in place, they should use their
membership strength and influence to more aggressively represent the issues their
bers face. Both oiganisations participated in the recent OECD Conference on
W men Entrepreneurs in Small and Medium Enterprises, identifying these issues and
~ Il]ing to prepare policy recommendations to the OECD Secretariat.
-.L _ These organisations can play an important role in recruiting and assisting women
business owners from various countries at different stages of development and in
bringing attention to the great disparities that exist worldwide among women in
business. With chapters allover the world, these organisations have existing networks
which are ideal to promote cross-border trading and mentoring among their members,
mobilizing technology to create virtual markets, and promoting research and statistics
that underscore. the contributions of women business owners worldwide.
Other worldwide associations such as the International Alliance and the
International Business and Professional Women's Association.are also well known. All
of these organisations aim to bring together women in business to help them achieve
their business goals. Less formal business women's networks have also been created.
For example, the Can Asian Business Women's Network was established exclusively
to develop trade and interaction between women business owners in Asia and ..
Canada.To this end, it already organised trade-missions from Asia to Canada and from
Canada to Asia.
Other international efforts have been made to strengthen the representation of .
women in international commerce. The WomenLeaders' Network, which includes
 Development of Women Entrepreneurs 133

women from academia, the private sector, and women business associations, has called
on the leaders of the Asia Pacific Economic Cooperation (APEC) group to recognize
the impact of trade liebralisation on women's businesses and offered to be a source
of expertise to APEC. The July 1996 Global Women Entrepreneurs' Trade and
Investment Forum held in Ghana was another such effort (see page 10 for details).
In Latin America, initial meetings to establish a network of women business
. leaders were held in May 1997 in Brazil as a parallel event to the trade ministerial
conference on the proposed Free Trade Area of the Americas (FTAA). This network
willrepresent the business interests of women business owners in the countries of the
Western Hemisphere.
All of these networks are "virtual" organisations, making use of information
technology to perform their role. They recognize the need to unite behind a common
set of issues in order to show policymakers not only the impact women-owned business
have on the world economy, but why their organisations' policy positions should be
~~. .
134 Dynamics of Entrepreneurial Development

ANNEXURE - 2
EXAMPLES OF GOALS AND SUPPORTING ACTIVITIES
Some of the activities women's business organisations may undertake to
accomplish their goals are:
£.
To strengthen women entrepreneurs through public policy advocacy and
research ....
1. Organise public policy days or an annual roundtable discussion to educate
women on legislation that affects them. Legislators, government officials, and
representatives of women's business organisations would participate.
2. Inform policymakers on a monthly or a quarterly 'basis about the
organisation's activities, providing them with data on annual revenues
generated by women-owned businesses as a percentage of GNP and how
much these revenues contribute to the national tax base.
3. Develop a databank with local, regional, and national economic and political .
information to be used by the organisation's members.
To exp~nd services, such as training and crjdit, to women business owners
1. Train 200 women in negotiation leadership, and management skillsso they
can gain the tools and confidence to rkn their businesses.
2. Establish a savings and loan institution to provide credit to-women to start
fifty new businesses per year.
3. Help identify partners for women-owned businesses.
To empower women business leaders through networking
1. Hold an annual grade show to bring women entrepreneurs together with
potential partners or investors.
2. Organise monthly networking events for professional business women,
political officials, educators, and mass media representatives to meet each
other, develop professional contacts, and discuss common issues.
3. Set up a databank for women entrepreneurs to include information on
business opportunities, training programs, etc.
To promote women's entrepreneurship
1. Publish newsletters, profiles of women entrepreneurs, and data to highlight
their economic contribution to society.
2. Sponsor a contest to honour a leading business woman.
3. Develop a campaign targeted at the local media and schools to portray
successful women in business.

• • •