ENTREPRENEURSHIP

The Concept Of Entrepreneurship

By definition, entrepreneurship is the practise of starting a new business/venture or reviving an
existing organisation. Entrepreneurial actions vary depending on the nature of business.
Entrepreneurs seek funding from venture capitalists and NGOs. Usually, such investors expect higher
returns on their investments. The very reason they invested in the venture of a greenhorn is because
they intend to make as much as possible out of the venture.
It is being increasingly recognized that entrepreneurship is the key to building and sustaining the
growth of any economy. The success of Silicon Valley is a case in point. It demonstrates the success
of start up ventures. Many entrepreneurs have chased their dreams and with innovative ideas,
succeeded in the face of adversities. The local economy and the national economy have benefited
from their ventures both in the short term and long term.
In the recent times, we have seen the emergence of entrepreneurs from developing countries such
as China, Ireland, Israel and India daring to pursue their innovative ideas and dreams to logical
conclusion. In many cases, they succeeded in their ventures. They have created business
opportunities for many others such as financiers, accountants, lawyers and restaurateurs, among
others.
The success of a few entrepreneurs should not blind us to the fact that for every success there are
three failures. Lack of experience and direction has been the major undoing of young entrepreneurs.
But, that should not hinder either the entrepreneur or the financier from starting new ventures. If they
focus on the core requirements of the business, the chances of failure can be greatly reduced. We
must remember that what we see today in the world of technology is the result of such
entrepreneurship.
Below are some of the quotes from all time famous entrepreneurs destined for people who are
ready to pursue their dreams.

Henry Ford (Ford Motor Company): Whether you think you can or think you cant youre right.
1. Gabrielle (Coco) Chanel (House of Chanel): Synthesize to success by attacking weakness.
2. Jean Paul Getty(Oil Tycoon): Test the Limits- Big Wins demand Big Risks
3. Buckminster Fuller(Dymaxion): Chase a Vision, Never Money
4. Sam Moore Walton(Wal-Mart): If it Arent Broke, Break it
5. Huge Marston Hefner(Playboy): Start with the Answer-Reality or Fantasy
6. Henry Ray(Ross) Perot(EDS): Believe and the world will follow you-Anywhere
7. Martha Kostyra Stewart(Living Omnimedia): Passionate perfection is the path to power
8. Donald Trump: To be Big, Think Big-Real Big
9. Jeffrey Bezos(Amazon.com): Avoid Instant Gratification

Entrepreneurship And Economy

Entrepreneurs contribution to the economy is of immense value. He or she is indispensable to
the economic growth of the country. His or her products are valuable to the overall development of
the society. People need their products. They simply cannot do without them. Ours is a consumer
society now. Even in the developing countries consumerism is gaining ground. Developed countries
anyway thrive on consumerism. Naturally, the role of an entrepreneur is of much significance in
generating products valuable for the comforts and luxurious living of the people of a particular
country.
An economy is much dependent upon the performance level of its entrepreneur. He or she plays a
vital role in the growth of the national income as well as raising the per capita income of the people.

How does an entrepreneur stimulate the economy?

1.

Investment-

Then entrepreneur has to invest in what is required for the economy. Economic

progress will much depend upon his or her contributions. Any entrepreneur will invest in products
and services which the people need. His or her invest will ensure a better life for the people. More
goods and services will be at their disposal.
2. Employment-

An entrepreneur by setting up various businesses and establishments is generating

employment in the country. People need jobs. This is a major contribution that an employer can
make to provide income to an employee who can meet his or her needs.

3.

Diversity in products and services- An entrepreneur can provide various types of goods and
services to the consumer. The latter has much to choose from. A consumer after all would like to
have a good bargain, and if his or her choices are more than he or she can get these products or
services at reasonable rates. Also personal desires are met if there are products and services to choose
from. A person may like a particular type of tie and he can perhaps locate it in his local market. His
desire to purchase a tie of his choice is thus met.

4.

International trade- An entrepreneur promotes international trade by selling his or her products abroad.
Any entrepreneur would like a wider market. If there are more consumers to purchase his or her products, the
higher his profits.

5.

Contributes to gross national product- An entrepreneur makes much contribution to the national
exchequer and to the national economy as a whole. The GNP of the country is calculated based upon the total
number of products and services available in a respective country. The more products and services available
the higher the GNP. It indicates the economy prosperity of the country.

The Entrepreneurial Process

This section examines two broad dimension of the entrepreneurial process: opportunity
recognition and information search, and resource acquisition and business strategies.

Opportunity Recognition and Information Search

While opportunity recognition (Kirzner, 1973) and information search are often considered to be
the first critical steps in the entrepreneurial process (Christensen, Madsen and Peterson, 1994; Shane
and Venkataraman, 2000), limited empirical research has been conducted surrounding this process.
Venkataraman (1997) argues that one of the most neglected questions in entrepreneurship research is
where opportunities come from. Why, When and How certain individuals exploit opportunities
appears to be a function of the joint characteristics of the opportunity and the nature of the individual
(Shane and Venkataraman, 2000). Venkataraman (1997) highlighted three main areas of different
between individuals that may help us understand why certain individuals recognize opportunities
while do not: knowledge (and information) differences; cognitive differences; and behavioural
differences.
The ability to make the connection between specific knowledge and a commercial opportunity
requires a set of skills, aptitudes, insights and circumstances that are neither uniformly nor widely
distributed (Venkataraman, 1997). The extent to which individuals recognize opportunities and
search for relevant information can depend on the make -up of the various dimensions / aspects of an
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individuals human capital. Kirzner (1973) asserted that the entrepreneur identifies opportunities by
being alert to and noticing opportunities that the market presents. The process of search and
opportunity recognition can be influenced by the cognitive behaviours of entrepreneurs. Search
behaviour can be bounded by the decision-makers knowledge of how to process information as well
as the ability to gather an appropriate amount of information (Woo, Folta, and Cooper, 1992).
Entrepreneurs with limited experience may use simplified decision models to guide their search,
while the opposite may be the case with experienced entrepreneur (Gaglio, 1997). Experience may
not Strictly enhance opportunity recognition ability. Habitual entrepreneurs associated with liabilities
(e.g., over-confidence, subject to blind spots, illusion of control, etc.), resulting from their prior
business ownership experience, may also exhibit limited and narrow information search. Cooper,
Folta and Woo (1995) found, however, that novice entrepreneurs sought more information than
entrepreneurs with more entrepreneurial experience, but they searched less in unfamiliar
surroundings. Further, entrepreneurs having high levels of confidence sought less information. Some
experienced entrepreneurs may simply have had a
Fortuitous prior business ownership experience and may subsequently have little idea about
identifying additional profitable projects. Over time, however habitual entrepreneurs are likely to
acquire information and contacts that provides them with a flow of information relating to
opportunities. Consequently, habitual entrepreneurs may need to be less proactive compared with
novice entrepreneurs. Having earned a reputation as a successful entrepreneur, financiers,
advisers, other entrepreneurs and business contacts may send proposals to previously successful
habitual entrepreneurs.
The ability of entrepreneurs to learn from previous business ownership experiences can influence
the quantity and quality of information subsequently collected (Gaglio,1997). Previous
entrepreneurial experience may provide a framework pr mental schema for processing information.
In addition, it allows informed and experienced entrepreneurs to identify and take advantage of
disequilibrium profit opportunities (Kaish and Gilad, 1991). This entrepreneurial learning goes
beyond acquiring new information by connecting and making inferences from various pieces of
information that have not previously been connected. These inferences build from individual history
and experience and often represent out-of-the-box thinking. Heuristics may be crucial to making
these new links and interpretations.
Some people habitually activate their mental schema for processing information and can notice it
in the midst of an otherwise overwhelming amount of stimuli (Gaglio, 1997). This may explain why
the pursuit of one set of ideas and opportunities invariably leads entrepreneurs to additional
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innovative opportunities that had not been previously recognized (Ronstadt, 1988). McGrath (1999)
has argued that entrepreneurs have access to numerous
shadow options (i.e., opportunities that have not been recognized). Over time, valuable
information regarding the real option can be made available or suitable venture opportunities
emerge. Although McGrath focused on the ability to learn from entrepreneurial failure, shadow
options may also arise with more successful entrepreneurs.
There are limited evidence surroundings the search behaviour of habitual entrepreneurs. Most
notably, it is not clear whether ideas, projects and deals go to habitual entrepreneurs or whether
habitual entrepreneurs initiate them. Case studies of habitual entrepreneurs have revealed that
habitual start-up entrepreneurs were likely to be more proactive than habitual buy-out / buy-in
entrepreneurs with regard to the search processes they adopted in subsequent ventures (Wright
Robbie and Ennew, 1997; Ucbasaram, Wright, Robbie and Westhrad, 1999).
Low and MacMillan (1988) suggested that networks are an important aspect of the context and
process of entrepreneurship. Subsequent studies have found networking alloes entrepreneurs to
enlarge their knowledge of opportunities. To gain access to critical resources and to deal with
business obstacles (Johannisson, Alexanderson, Nowicki, and Senneseth, 1994; Sapienza, Manigart
and vermeir 1996; Hills, Lumpkin and Singh, 1997; Floyd and Wooidridge. 1999). Business owned
by teams of partners generally have wider social and business networks (Cooper, Gimeno-Gascon
and Woo, 1994) and more diversified skill and competences bases to draw upon (Slevin,and
Covin,1992). The creation of formal networks in the form of innovative milieu (Such as a Science
park) (Felsenstein, 1994; Westhead and Batstone,1999) can provide a context for entrepreneurs (and
their firms) to acquire knowledge and experience (Thrift,1996). However it is not clear how effective
these sponsored networks are in quipping entrepreneurs and firms with the ability to select effective
strategies to secure scarce resources outside a sponsored environment. Additional research is
therefore warranted focusing upon this theme (Flynn,!993; Westhead and Storey, 1995 ; westhead
and Bats tone,1999). Once the opportunity has been identified and information relevant to the
venture has been obtained, the next step for the entrepreneurs(or the team of entrepreneurs) is to
acquire new resources or effectively manage existing resources, in order to exploit the opportunity.
Research developments in these aspects of the entrepreneurial processes are discussed in the
following section.

Resources Acquisition and Business Strategies

Recent studies have attempted to examine entrepreneurs with respect to their resources
endowments and resource acquisition strategies. The owner(s) of a business is likely to be its key
resource (Storey, 1994; Westhead, 1995; Bate, 1998). Further, the owner(s) may be the key
constraint on resource acquisition (Brown and Kirchhoff, 1997). Resources and assets (both tangible
and intangible) are accumulated throughout entrepreneurial careers (Katz, 1994; Teece, Pisano and
Shuen, 1997) , foe example, human, social, physical, financial and organizational capital (Cooper,
Gimeno-Gascon and Woo,
1994; Greene and Brown, 1997; Hart, Greene and Brush, 1997). Numerous studies have attempted to
detect a link between the human capital of entrepreneurs and the probability of venture failure,
survival and / or success (Mosakowski, 1993; Chandler and Hanks, 1994; Westhead, 1995; Gimeno,
Folta, Cooper and Woo, 1997; Bates, 1998). Chandler and Hanks (1994) found that ventures with
higher levels and broader verities of resources tended to grow faster and were larger in size. Others
studies have examined how the relative importance of bundles of resources varies with the age of the
ventures (Brush, Greene, Hart and Edelman, 1997; Chandler and Hanks, 1998). Although resources
are crucial to the performance of a venture, resources alone are not sufficient to achieve a sustainable
competitive advantage. It follows that entrepreneurs must develop skills and select competitive
strategies to make better use of the resources that are accessible to them. Based on the resource-based
theory of the firm, Chandler and Hanks (1994) suggested that business should select their strategies
to generate rents based upon resource capabilities. They argue that when there is a fit between the
available resources and the ventures competitive strategies, firm performance should be enhanced.
Additional firm level studies are required to explore the relationship between entrepreneurship
resources (and their acquisition and management) and the competitive strategies pursued by
organisations (Zahra, Jennings and Kuratko, 1999).

The entrepreneurial process may lead to numerous outcomes. Most studies exploring the
outcomes of entrepreneurship have focussed on firm-level survival and / or financial performance.
Focusing on firm-level aspects, while important, may be insufficient to understand fully the
outcomes associated with the entrepreneurial phenomenon. It is possible to identify two additional
dimensions of the entrepreneurial outcome: performance of the entrepreneur and firm exit issues, It is
6

crucial, therefore, that any study exploring the outcome(s) of the entrepreneurial process is clear on
the unit of analysis is being used.

Types Of Entrepreneurs
Studies have made a distinction between nascent (i.e., individuals considering the establishment
of new business), novice ( i.e. ,individuals with no prior business ownership experience as a business
founder, an inheritor or a purchaser of a business), habitual (i.e., individuals with prior business
ownership experience), serial (i.e. individuals who have sold / closed their original business but at a
later date have inherited, established and / or

purchased another business), and portfolio

entrepreneurs (i.e., individuals who have retained their original business bur a later date have
inherited, established and / or purchased another business) (Westhead and Wright, 1998a; Wright,
Westhead and Sohl, 1998; Delmar and Davidsson, 2000).
NEED FOR PROMOTION OF ENTREPRENEURSHIP AND SMALL BUSINESS
Before we proceed to the need for promotion of small business (small scale industries), it
is necessary to have a clear distinction between small, medium and large scale industries.
Scale of Industry: On the basis of the capital invested and number of workers employed,
the industries may be classified into three categories. Small scale industry, medium scale industry
and large scale industry.
Industries

Ancillaries
Small Scale

Large Scale
Medium Scale

Modern Small Scale

Tiny Sector

Cottage Industries

Handloom

Khadi

Village Industries

Household Industries

Handicraft

Agricultural

Coir

Fig.4. Scale of Industry

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Industries having an investment in plant and machinery not exceeding Rs. 60 lakhs are called as
small scale industries. Within a small scale sector there is special category known as the tiny
sector. An industrial undertaking with an investment in fixed assets not exceeding the value of
Rs. 5 lakh and located in village or a town with a population of less than 50,000 is regarded as a
tiny unit.
Ancillary industry is also included in the category of small scale unit. An acillary unit is an
undertaking having an investment in fixed assets of upto 75 lakhs and engaged in the
manufacture of parts, components, subassemblies, tooling or rendering of service to other
industries. Generally 50 percent of the total output of such industries being meant for other
industries. The classification of industries into small scale and medium scale is a relative concept.
There may not be perfect line of demarcation between these types. However, an undertaking with
a fixed capital investments of up to Rs. 5 crores are normally exempted from licensing, thus the
industries with a fixed capital investments over 50 lakhs and upto 5 crores may be regarded as
medium scale industries. The industries with fixed capital investment over 5 crores are the large
scale industries. Fig. 43.4 shows the classification of industries on the basis of capital
investments.
Need for promotion of entrepreneurship and small scale industries. Entrepreneurship
promotes small business i.e. small scale industries. The small scale industries playa dynamic role
in accelerating thy rate of industrial growth and economic prosperity of the developing nation.
This is because they provide immediate employment opportunities. The small scale industries are
labour intensive and have a higher labour-capital ratio. They require comparatively less capital,
have a lesser gestation period and can be easily set up in rural areas and backward areas. They
need relatively smaller markets to be economical, offer method of ensuring more equitable
distribution of national income. Besides, they possess locational flexibility which serves as an
effective instrument for achieving a wide dispersal of industries. Further, small scale unit serves
as a means of bringing forth indigenous entrepreneurship and saving lying unutilised (dormant),
particularly in semi urban and rural areas.
The small scale industries has played-a significant role in achieving the following
objectives.
1. Employment generation.
2. To meet increased demand.
3. More equitable distribution of national income.
4. Balanced economic development.
5. Decentralization.
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6. Better utilisation of resources.

RISK TAKING (WHAT IS RISK SITUATION)

In operating a business capital is risked, it means its expenditure can result in loss. Risk
refers to the uncertainty which exists in the business because of some unfavorable or undesirable
events. Every project envolves certain amount of risk and uncertainty. Each variable entering the
project evaluation could be the source of uncertainty because it is not possible to predict or
anticipate perfectly the probable changes that may take place in respect of these variables.
Risk situation occurs when the actual result deviates from the estimated result. A risk
situation generally occurs when an entrepreneur is required to make a choice between two or
more alternatives whose possible outcomes are not known and only a limited information is
available for their evaluation in advance. A risk situation involves potential gain or potential loss.
The greater the possible loss, the greater the risk involved.
As the size of business expands, the problems and development require an entrepreneur
not to be afraid of making decision.
There are two types of uncertainties which could be the cause of risk situation1. Uncertainties relating to project itself and
2. Uncertainties relating to the environment in which it operates.

Uncertainty usually arises because it is impossible to predict the different variables and
consequently the magnitude of benefits and costs that may occur.
The important causes of uncertainty are:
1. Changes in the price of the materials, tools, components etc.
2. Changes in the price of finished products of the firm.
3. Change in technology or improper selection of technology which may involve the
replacement of old machines, equipments processes by new modem machines, equipments
and processes etc.
4. False estimation of rated capacity.
5. Length of construction and running in periods.
6. Changes in the environment like product obsolescence due to change in fashion or taste or
consumers preference.
7. Changes in environment because of the introduction of new substitute product by the
competitors.
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8. Non-availability of technically qualified persons. The extent of expertise is limited and

finding people to handle new jobs is extremely difficult.
Types of Risk Takers:
1. Low risk taker
2. Moderate risk taker
3. High risk taker.
The type of risk taker the person is depends to some degree on the extent to which he is
influenced by other people, his past experiments, present estimation and his expectation for
future, within a business there is a need to have risk takers of various types.
At worker level the enterprise needs people who are low risk takers so that they can do the
routine things and bring organisational stability. At the middle management level there is more
room for risk taking. Middle manager should have some freedom to be innovative and make
minor modification in procedures and functions. These persons may be considered as moderate
risk takers. Such risks are not insurable, if they materialise the entrepreneur has to bear the loss
himself. Entrepreneurs, at the top of the organisation structure, have t!-le capacity to formulate
creative ideas. To be successful in business, entrepreneurs must take risk to make the ideas
become reality.

Entrepreneurs are moderate risk takers. They enjoy the excitement of

challenge but they do not gambit. Entrepreneurs avoid low risk situations because there is a lack
of challenge and avoid high risk situations because they want to succeed. They like achievable
challenges. They do not tend to like situations where the outcome of a pursuit depends upon a
chance and not on their efforts. They like to influence the outcome of their pursuit by more
efforts and by having a sense of accomplishment.
Entrepreneurs get great satisfaction in accomplishing difficult but realistic tasks by
applying their own skills.
Low risk takers are afraid to take more risks because they want to be safe and avoid
failure. Such persons cannot succeed in business. Their earnings will be limited. Whereas high
risk takers arc just like gamblers they may enjoy a very large benefit or suffer from a heavy loss
and may g9 on the verge of bankruptcy.
As the size of the business expands, PIe problems and opportunities become more
numerous and complex. Business growth and development require an entrepreneur not to be
afraid of making decision and taking certain risks. He should take calculate risk and not afraid of
failure.
Sometimes a new product actually entering the market has a very short life span due to
market failures.
10

This also gives rise to risk situation. The reasons for failure of the new product may be
listed as :
1. Failure to recognize rapidly changing market-environment.
2. Absence of forma) product planning and development procedure.
3. Failure of the product to fulfill customers' needs due to ignorance about attitudes of
customers towards new products.
4. Technical or production problems.
5. Higher cost than estimated.
6. Inadequate market analysis and market appraisal.
7. Bad timing of introduction of new product.
8. Product problems and defects.
9. Failure to estimate strength of competition.
10. Too many new products entering the market.
Evaluation of Personal Risk: Different persons evaluate the risk differently. A man with
relevant knowledge skills and informations and having successful experience evaluates the risk
by considering all the constraints, difficulties likely to arise in future. He accepts the challenge
with greater degree of self confidence. Also, a person utilizing feedback for corrective measure
can reduce his risk and has greater chances of success.
An entrepreneur who enters into business with a high level of self-confidence is able to
evaluate his competencies and capabilities in a realistic manner. He can set realistic and
challenging goals. He is confident of achieving these goals.
For evaluating personal risk the entrepreneur has to scan the entire chain of & activitiesresearch and development, design, production, marketing, sales and post sales service,
government policies etc. and arrive at conclusion which will form the basics of the operations for
his project. It is also necessary that the entrepreneur should consider his own strength and
weaknesses, the facilitating factors, and constraints in the environment and the resources needed
to accomplish his task. An entrepreneur should exhibit positive and optimistic attitude towards the
possible risk situations and approach his task with a hope of success and not with a fear of failure.
It is very difficult to evaluate the risk perfectly due to changing environmental and rapid
technological development.
However, the positive outlook develops a drive in the entrepreneur to search for creative
ideas i.e. to attempt a new thing and innovate. He is able to visualise the hidden opportunities in
the environment and translate them into business realities.

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MARKET SURVEY
Introduction: During the planning stage of setting up an enterprise, the entrepreneur should
carry out a detailed market survey in order to gather information on the following points:
I. Raw material required, its sources of supply.
2. Machinery and equipment required for manufacturing the proposed product.
3. Existing competitors in the market for the same product.
4. Type of customers in the market.
5. Type financial and manpower requirements of the project etc,

Raw material information: The following information about the raw material should be
gathered:
I. List of major manufacturers/supplies of the raw materials needed.
2. Identification of materials and supplies to be imported.
3. Government policies and regulations regarding import of requisite raw materials.
4. Time required for getting the raw materials after ordering, terms of supply, payment
etc.
5. Trend of prices and availability in the first 2-3 years.
6. Possibility of getting quota of scarce raw materials through state Directorate of
Industries /DIC/Small Industries Development Corporations.
7. Percentage share of raw material cost in the cost of the finished product etc.
Machinery and Equipment Information:
1. List of manufacturers/suppliers of the machinery needed for the project.
2. Capacities and specifications of different brands of machineries available in the market.
3. Price of each machine/equipment and their accessories.
4. Availability of spare Parts of machinery with accessible distance.
5. Guarantee/ Warranty of performance given by manufacturers/ suppliers.
6. Normal repair and maintenance cost per year.
7. Terms and conditions of supply of machinery (ordering, payment, advance and delivery
etc.).
8. Place of inspection before delivery of machine/equipment.
9. Requirement of special type of transport and handling.
10. Floor space required for the machine.
11. Quality standards and output of each machine.
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Market Information: An entrepreneur should collect market information from the existing
manufacturers of the proposed product, their share in the market and the existing demand for the
proposed product. The following information may be collected from the market.
Existing Manufacturers (Competitors)
1. General factory layout and floor space occupied by the units of various sizes.
2. Range of products of the competitors, installed capacity and utilised capacity of their unit.
3. Price of the competitors product.
4. Future expansion plans of existing manufacturers.
5. Market area of existing competitors.
6. Technical skills, marketing skills, finance and other resources required to run the business
successfully.
7. Latest technology available and that used by the competitors.
Traders/Suppliers
1. Existing traders supplying the proposed product, their terms of business and commission
etc.
2. Market area and annual turnover of the suppliers.
3. Willingness of the traders to supply products of the concerned entrepreneur.
4. Level of stock maintained by the traders, their problems, if any, for stocking the goods.
5. Comments of the traders on business conditions and future of the proposed products.
6. Possibility of increased demand in future.
Consumers/Customers
I. The annual consumption and the requirement of the customers.
2. Present sources of supply for the proposed product.
3. Consumers preference in terms of models, grades, aesthetic aspects etc. for the proposed
products.
4. Customers reactions, suggestions, complaints etc. about the present product. .
5. Consumption pattern of the proposed products.
6. Technological changes necessary to improve the quality of the products and its effect on
demand.
7. Type of consumption pattern, fluctuating, regular, intermittent etc.

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Finance Information
1. Approximate financial requirements of proposed unit.
2. Prevailing rate of interest on term loans and working capital loan advanced to small scale
industries by various agencies.
3. Financial incentives available.
4. Fixed and working capital requirements for the proposed unit.
5. Self contribution of the entrepreneur.
6. Sources of term loan and working capital loan.
General Information
1. Requirement of personnel of different categories and skills.
2. Availability of adequate labour supply near the proposed site.
3. Prevailing wages and salary rates for different categories of personnel.
4. Possibility of getting the shed in industrial area and prevailing rents.
5. Possibility of acquiring an industrial plot in the area selected for the proposed product.
6. Cost of acquiring industrial plot/shed.
7. Availability of water, power and other utilities needed for the manufacture of the product.
8. Industrial waste disposal problems etc.
This information will help the potential entrepreneur for the preparation of techno economic
feasibility report. The entrepreneur should therefore prepare his market survey and collect the
information depending upon the nature of product, size of the product and competition involved.

14

ENTREPRENEURSHIP AND INDIA

Entrepreneurship is a critical element in the growth of an economy. It is estimated that there are
about 20 million entrepreneurs in the US. India ranked second in total Entrepreneurship Activity
(TEA) according to the Global Entrepreneurship Monitor Report for the year 2002. Subsequently,
India slipped in TEA rankings.
For its size India has lower number of start-up entrepreneurs. In spite of the shortcomings, it
ranked ninth in the survey of entrepreneurial countries by Global Entrepreneurship Monitor (GEM).
India ranks the highest among a group of countries in necessity-based entrepreneurship, which is
associated with developing countries. Conversely, it ranks fifth from bottom in opportunity-based
entrepreneurship.
Liberalization of economy started by the PV Narasimha Rao government in 1991 and the
Information Technology boom of the mid and late 90s have ushered in tremendous changes and set
for entrepreneurship is substantial. However, the society and government have not been encouraging
towards entrepreneurship in India.
One of the major hindrances faced by the Indian entrepreneur is that of capital. It is worth
nothing that there is greater willingness among people to invest capital in enterprises that is already
established than in start-ups. The number of venture capitalists or angel investors in India is very
low. Another factor that has been hindering entrepreneurship in India is the lack of mentors- very
few success stories which could inspire youngsters to become entrepreneurs.
By and large, the India society is averse to risk. People normally look for long-term and stable
employment, such as government and public sector jobs. There is an urgent need to overhaul the
physical infrastructure and lack of government support is major hindering entrepreneurship in India.
There are other factors that have been affecting entrepreneurship in India. The majority of young
people coming out of college are inclined towards the IT sector, starving other sectors of critical
talent. Most of the talent available in the country is considered to be mediocre and technical talent
is scarce. Another factor weighing against entrepreneurship in India is that it is not perceived to be
socially glamorous, though the concept is getting accepted slowly.
Indias economy has been growing at a scorching pace. Today, its economy ranks above that of
France, Italy and UK. Its GDP is the third largest in Asia. Among emerging nations, it has the second
largest economy. The liberalization of the economy in the 1990s has enabled a huge number of

15

people to become entrepreneurs. It is to Indias credit that its corporate and legal systems have been
operating with greater efficiency. Government needs to make efforts and encourage entrepreneurship
by providing training and also facilities, especially in the rural areas.
With a burgeoning middle class, India has a huge potential, which, if tapped, can be a vast market
for products and services. Entrepreneurs can prosper by catering to the requirements of this segment.
India, with its abundant pool of talent in the IT domain, management, manufacturing and
pharmaceuticals, has become the choicest destination for outsourcing of services from all over the
world. The scene for Indian entrepreneur is ideal. If he can seize the current opportunity, he can
succeed not only in India but also globally.
The Indian government has recently commissioned Entrepreneurship Development Institute of
India (EDI) to set up Entrepreneurship Development Centres (EDCs) in Cambodia, Laos, Myanmar
and Vietnam (CLMV) countries as a mark of Indias commitment to the initiative of ASEAN
integration. Vice-president Hamid Ansari recently inaugurated the Myanmar-India Entrepreneurship
Development Centre (MIEDC), Myanmars ministry of education at Yangon. Centres in the other
countries have already started functioning.
EDI, Gujarat, a national resource institution, focuses on entrepreneurship education, training and
research. Referring to EDIs various business-oriented and job-oriented courses, Manoj Mishra, an
associate senior faculty from EDI explains: Earlier, when entrepreneurs encountered problems in
their business, they blamed it on environment, polices red-tapism, faulty systems and so on.
Entrepreneurs rarely assessed their own competency and knowledge. Fortunately, mindsets have
broadened and entrepreneurs place major emphasis on their level of understanding, entrepreneurial
know-how and traits in dealing with issues. While this is what a business-oriented course looks at, a
job-oriented course aims to build competency and skills required to become a manager rather than an
employer.
In view of EDIs expertise in entrepreneurship, the University Grants Commission (UGC) had
assigned it with the task of developing a curriculum. The Gujarat Textbook Board assigned the task
of developing textbook in entrepreneurship for classes XI and XII which has been done, informed
Mishra.

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Niche Programmes
EDI has created six centres and is offering various programmes like postgraduate diploma in
management- business entrepreneurship (PGDM-BE), and open learning diploma in business
entrepreneurship to mention a few. Similarly, it is providing various international programmes like
inter-regional centre for entrepreneurship and investment training (IRC) and institutionalisation of
ED process in CLMV countries.
Elaborating on the diploma in management of NGOs, he says:The module has been developed in
such a way that students are imparted inputs on the managerial domain along with the perspective
domain.
EDI offer course for working professionals too. It conducts entrepreneurship development
programmes that aim at increasing the competency level of professionals so that they can accomplish
more within the same resources. Another programme is the one-year open learning programme in
entrepreneurship (distance learning), which targets those who cant make time for classroom
entrepreneurship teaching.
For entrepreneurs, EDI has conducted growth-cum-counselling programmes and performance
improvement programmes to enhance the business prospects of existing enterprises.
Also, their cluster development programmes aim to increase competitiveness of enterprises within
cluster. The progress of Indian economic development from 1947 to the present provides further
evidence that individual that does respond to incentives in their pursuit of self-survival and
accumulation of wealth. Further, the nature of this response depends on the economic climate,
particularly the role of the government. Indias economy struggled as long as it was based in a
system of government regulation with little interaction with economic forces outside the country. The
economic reforms of the early 1990s set the stage for substantial improvements in the Indian
economy. As was stated earlier, Indias economy grew at an average of 6.3 percent from 1992-2001
(Acharya, 2001). Further, its rate of inflation and fiscal deficit both decreased substantially (Bhalla,
2000). Improved exchange rate management led to improved financing of the current account deficit
and higher foreign exchange reserves. Finally, Indias GDP and per capita income both increased
substantially from 1990-1991 to 1998-1999. India can do more, however, to further advance its
economic development. Indeed, one of the more recent microeconomic approaches efforts have been
found to generate a wide range of economic benefits, including new business, new jobs, innovative
products and services, and increased wealth for future community investment (Kayne,1990). The

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following narrative explains in considerable depth how entrepreneurial activities have succeeded in
several countries and how it can now be used to further Indias economic development.
Given Indias economic progress in recent years the country may now be ready for the
implementation of microeconomic polices that will foster entrepreneurial activities. Fortunately, in
addition to the macroeconomic reforms mentioned earlier, India has taken other steps to lay the
foundation for the type of economic growth that can be fostered only by entrepreneurial activities
and appropriate economic policies that reflect individual rights and responsibilities. For example, in
recent years India has made several important structural changes, including the construction of
telecommunication networks and the implementation of a nationwide road-construction programme
(Solomon, 2003). Further, several thousand new economy business-the types of business especially
suited for entrepreneurship efforts- were started in 2003 alone. However, more than just
opportunities should lead India to consider entrepreneurial activities as a way to economic growth.
At least one major threat, a growing population, also should motivate it to consider entrepreneurial
effort as an economic policy. Specifically, the countrys population is expected to increase by 110 to
130 million people over the next 10 years, with approximately 80 to 100 million of those new
citizens seeking jobs that do not currently exist (Gupta, 2001). Entrepreneurial efforts can help to
provide those jobs. Recent research on entrepreneurship around the world indicates that the cultural
characteristics that can foster successful entrepreneurial activities and its related economic benefits
are a strong education base, the necessary financial support, opportunities for networking among
entrepreneurs, and a well-defined, minimal role for the government. In case of India specifically, an
emphasis upon entrepreneurial activities in the information technology sector also seems relevant.
The role that the government can play in encouragement of entrepreneurial efforts has already
been noted in the above narrative. Clearly, the government can develop policies concerning
education and financial support. Government policies on taxing and regulation of business also are
relevant here, given that such polices can either promote or hamper entrepreneurial efforts. And the
government can certainly help to provide networking opportunities among new and experienced
entrepreneurs. India can generate additional economic growth by fostering entrepreneurial activities
within its borders, particularly within its burgeoning middle class. Not only has entrepreneurship
been found to yield significant economic benefits in a wide variety of nations, but India specially has
reached a point in its development where it can achieve similar results through entrepreneurial

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efforts. Among other things, India is poised to generate new business start-ups in the high technology
area that can help it become a major competitor in the world economy. For example, it has a strong
education base suited to entrepreneurial activities, increased inflows of foreign capital aimed at its
growing at its growing information technology services sector, and a host of successful new business
start-ups. To pursue further the entrepreneurial approach to economic growth, India must now
provide opportunities for
[1] Education directed specifically at developing entrepreneurial skills
[2] Financing of entrepreneurial efforts
[3] Networking among potential entrepreneurs and their experienced counterparts
Obviously, the government can play a substantial role in helping to provide these types of
opportunities. It can also provide the appropriate tax and regulatory policies and help the citizens of
India to understand the link between entrepreneurial efforts and economic prosperity. However, its
role overall must be minimized so that influence of the free market and individual self-interest can be
fully realized.
Only time will if increased entrepreneurial activities in India will actually yield the economic
benefits found in so many other nations of the world. Should India decide to pursue that avenue of
economic development, then future research needs to examine the results of Indias entrepreneurial
programme. Perhaps more important, that research also needs to determine how Indias success in
entrepreneurial efforts might differ from those pursued in developed nations.

ENTREPRENEURSHIP AND INNOVATION

Entrepreneurship is the practice of starting new organizations or revitalization mature
organizations, particularly new business generally in response to identified opportunities.
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Entrepreneurial activities are substantially different depending on the type of organization that is
being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur
only part-time) to major undertaking creating many job opportunities. Lately more holistic
conceptualizations of entrepreneurship as a specific mindset (see also entrepreneurial mindset)
resulting in entrepreneurial initiatives e.g. in the form of social entrepreneurship, political
entrepreneurship, or knowledge entrepreneurship emerged.
A convenient definition of innovation from an organization perspective is given by Luecke and
Katz (2003), who wrote: Innovation... is generally understood as the successful introduction of
knowledge in original, relevant, valued new products, processes, or services. Innovation typically
involves creativity, but is not identical to it: innovation involves acting on the creative ideas to make
some specific and tangible difference in the domain in which the innovation occurs. For example,
Amabile et al. (1996) propose: All innovation begins with creative ideas... We define innovation as
the successful implementation of creative ideas within an organization. In this view, creativity by
individuals and teams is a starting point for innovation; the first is necessary but not sufficient
condition for the second. For innovation to occur, something more than the generation of a creative
idea or insight is required: the insight must be put into action to make a genuine difference, resulting
for example in new or altered business processes within the organization, or changes in the products
and services provided. A further characterization of innovation is as an organizational or
management process. For example, Davila et al. (2006), write: Innovation. Like many business
functions, is a management process that requires specific tools, rules, and discipline From this point
of view the emphasis is moved from the introduction of specific novel and useful ideas to the general
organizational processes and procedures for generating, considering, and acting on such insights
leading to significant organizational improvements in terms of improved or new

business products, services, or internal processes. Through these varieties of viewpoints, creativity is
typically seen as the basis for innovation, and innovation as the successful implementation of
creative ideas within an organization (c.f. Amabile et al. 1996 p.1155). From this point of view,
creativity may be displayed by individuals, but innovation occurs in the organization context only.
The conceptual relationship between entrepreneurship and innovation has been discussed in the
literature for many years. The economics of innovation, in particular, have attracted increased
attention in recent years (Grupp, 2001; Arora, Fosfuri, & Gambardella, 2002; Stoneman, 1995).
Sundbo (1998) summarised the basic theories of the economics of innovation: (i) the entrepreneur
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paradigm; (ii) the technology-economics paradigm; and (iii) the strategic paradigm. According to this
paradigm, only a person who founds a new company on the basis of a new idea can be called an
entrepreneur. Entrepreneurship is viewed as a creative act and an innovation. Entrepreneurship is
about creating something that did not previously exist. The creation adds value to the individual
and the community, and is based upon perceiving and capturing an opportunity (Johnson, 2001).
Bygrave and Hofer (in Legge & Hindle, 1997) regarded entrepreneurship as a change of state, a
dynamic process, and a unique event, Legge and Hindle (1997) believed that people who lead teams
and organization to introduce innovations are entrepreneurs. Entrepreneurs seek opportunities, and
innovations provide the instrument by which they might succeed. Corporate entrepreneurship often
refers to the introduction of a new idea, new products, a new organizational structure, a new
production process, or the establishment of a new organization by (or within) an existing
organization.

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